Wealth-creator™.

[ahinton]

The strange thing is that Mr Carr himself seems to believe he was wrong in what he did and has apologised for it (or perhaps it was just the getting caught doing it that he was apologising for), though according to your view he has nothing to feel guilty about for he was only doing what every taxpayer ought to do, minimising his tax liability. It's possible that what he felt guilty about was the appearance of a very wealthy person paying very little of his income in tax while many much poorer people are paying tax at 20%, simply because he could afford the expensive accountants that could advise him on how to do this, but I don't know.

You may well be right in whole or in part about what motivated Mr Carr to apologise for what he was doing, but let's remember that he didn't apologise - nor did he need to - for having broken the law, for he had not done so. He had no legal obligation to apologise and his only legal obligation to stop doing what he was doing would have been if and because the law had changed in such a way as to make what he was doing illegal and, provided he'd stopped doing it by the time that change occurred, he'd still have no reason to apologise. His decision to do so was, as I said, for what he'd done, not for breaking the law and that apology was his choice to make or not to make.

I differ with you fundamentally here - it is not just about law. It will always be possible for wealthy individuals and corporations to outwit legislators and law enforcement agencies when it comes to minimising tax liability, as the Carr case shows (and the many examples of people who are clearly public sector employees reducing their tax liability by having their income paid to private companies which they have set up).

You do indeed differ fundamentally from my view here and, whilst it would be arrogant and rude of me to say that I am right and you are wrong on this (so I'll desist from so doing), I fail to understand how taxation policy and structure, tax raising, tax collecting and the rest of the taxation panoply can be anything other than "about law" because all of this is determined solely by legislators and policed by government (whose duty it is to make law), not by philosophers, moralists, the Church, neuroscientists, political lobbyist groups et al.

You are, of course, correct in stating that it will always be possible for individuals and companies "to outwit legislators and law enforcement agencies" but you tell this in a loaded way by referring only to wealthy ones whereas in fact anyone can do it and most people do, or at least they try. As I've stated before, those who make contributions to pensions and other savings schemes that embrace government-sponsored tax avoidance do it and the fellow that I mentioned who engineered his affairs in order that he could manage on a substantially reduced income has done it; in the latter case, it could be argued that, in spending considerable sums of his own money protecting himself from the taxman by arranging matters in order that he could manage on less income, thereby deliberately exonerating himself from the obligation to make the contribution to society that he would otherwise have had to make, he has outwitted legislators and law enforcement agencies just as have those wealthy individuals and corporations who adopt tax avoidance schemes to protect their own interests. The difference, however, is that no law states - or indeed could state - that each individual must make sufficient income to oblige him/herself to pay at least a certain sum in tax. The freedom to manage on less income is therefore wholly commensurate with the duty of the individual to pay as little tax as possible - i.e. the correct amount due by law; it is up to each of us to determine, as far as is possible, how much income we take.

I have paid less tax than has been demanded of me on several occasions, but this has always been through negotiation with the taxman as a consequence of a belief that I had been incorrectly assessed, which I had been on each such occasion; the amounts were small in each case, but had I done nothing about it and simply paid what I'd been asked to pay, it is clear that I would have paid too much tax; by challenging these demands, however, i was able to avoid paying too much tax. There's no moral consequence of that - merely a legal and administrative one.

The government is planning to bring in a general anti-tax avoidance principle to tackle the most egregious of the schemes which some individuals and companies use, but it's unlikely that it will have a significant effect.

Much will depend, at the very least, on how effective such measures turn out to be and whether and how successfully any of them might be challenged in the courts; the changes will need a reasonable amount of time before their effectiveness or otherwise can be determined.

Legislators are never that enthusiastic about clamping down on tax avoidance because a) many of them are rich themselves b) their parties are funded by rich individuals and companies they do not want to offend and c) it is so much easier to go after benefit claimants who are a captive and dependent group.

This may be true to some extent but, again, it eschews all reference to and indeed recognition of the individuals who manage legally to reduce their overall annual tax bill from, say, £2,500 to £2,000 rather than just settling it in full without question. Going after benefit claimants for the sake of it is reprehensible in all cases other than where there is incontrovertible evidence that they are abusing the system.

But the moral question is: should individuals and corporations contribute in the way society intends to the funding of all the services that help the stable functioning of that society (which actually enables them to accumulate the wealth that they do) or should they do everything possible to reduce that contribution, to nothing if that is possible.

Any such moral question is dependent upon the effectiveness and reasonableness of tax law and the amounts of tax that it allows to be demanded of taxpayers at any given time. Tax must be affordable and any effective tax régime should take due account of that affordability; the expectation that people should have if necessary to borrow to pay some or all of their tax or the turning of a blind eye towards people who find themselves having to do this is fraught with dangers.

Likewise, it is important to remember that tax authorities have a duty to charge the least amounts of tax possible just as taxpayers have a duty to pay ditto; that's what's meant by the correct amounts of tax accordingly to the law. The entire moral argument about tax is immediately untenable when one realises that morals and moral obligations towards society are by nature far more of an idée fixe than any tax rates or demands that are determined solely by law from time to time and fluctuate according to many circumstances including government policies and prevailing economic conditions - one might paraphrase Wilde and think of this argument as the immutable in pursuit of the immeasurable.

The widespread support for the second approach in places like Greece and parts of Italy has led in part to an impoverishment of the whole society, which also affects those individuals and companies which have practised it. It is irrelevant to me whether Carr's income tax payments were legal or whether Barclays' tax-avoidance schemes were legal: the attitude is effectively on a par with the Greek one, that those who pay their full taxes are suckers - let's take as much as we can from society and give as little back. I think that's a bad and destructive attitude.

Those who retain as much of their income and assets as possible (and, again, I'm not just talking about wealthy individuals and companies here) are not necessarily impoverishing society by so doing; there is no ineffable connection between the two, for they are not by definition synonymous. What would you say if some of them instead decided that they'd make a lot less money and then they wouldn't have to fund society and could no longer afford to do so anyway? Wouldn't that choice, if made, be as inherently "immoral" as a decision to hang on to as much as possible? You write of the attitude that "those who pay their full taxes are suckers"; do you mean by so saying that taxpayers should never challenge their tax bills or ensure that they are charged - and pay - as little as possible by legal means?

I have undergone two tax investigations and hope never to have to suffer a third; in the first, which lasted for four months, it was found that I owed the taxman £19 and, as the taxman agreed that my underpayment had been down to its fault rather than mine, it generously agreed to waive not only any penalty and interest on the unpaid amount but the unpaid amount itself (I did tell you that tax avoidance isn't all about large amounts being avoided by the rich, didn't I!) and, in the second, which lasted almost a year, the outcome was the that taxman owed me nearly £500 which it paid, along with interest at a far lower rate that it charges those who have underpaid tax or paid it late (is that just?). Who paid for these investigations? Other taxpayers, of course!

[aeolium]

Is there a moral obligation to pay an amount of tax that isn't what the tax law demands but is instead some other amount that is commensurate with the benefit received? I don't think so, not at all.

You could though phrase the question differently: "Is it morally right for me to pay an extremely low rate of tax by exploiting loopholes not foreseen or intended by Parliament, even though if everyone behaved in this way the tax take would be quite insufficient to fund the public services that society requires?"

Apart from anything else, many rich people get very little benefit from the state. They don't send their children to state schools, use the NHS or subsidised public transport, etc. etc.

I think that's a view that's only really sustainable as part of a philosophy that thinks "each man is an island" or "there is no such thing as society". Even rich people are inextricably bound up with society and dependent on the proper functioning of public services however much they avail themselves personally of those services. They presumably use roads, lighting, benefit from the protection of the law and the police force (all publicly funded). They benefit from an educated workforce, most of whom will have been educated by the state, and even if they use private health services, they will probably be treated by nurses and doctors who in many cases have benefited from state education and NHS training. The various bodies monitoring food and water quality help to ensure that even the rich do not die of food poisoning or cholera like their forebears in the early C19. They may benefit from flood protection schemes, or emergency services - publicly funded. Defence against invasion? There's no private army. And the various social security schemes, from assistance for the unemployed, old age pensions, care for the elderly etc are all publicly funded and mean that this society unlike that in the C19 does not see the great extremes of poverty, degradation and suffering that were common in that time. Personally, I think even the rich are more dependent on the state (in all its manifestations) than they care to think.

[aeolium]

ahinton, I think we both have a good idea of our respective positions on these matters and for my part I don't see any gain in pursuing the discussion further. We'll just have to agree to disagree on this. I do agree with you though that these are not just issues that apply to the rich.

Incidentally, I had an idea that you had had some unpleasant experience with the tax inspectors and you have confirmed it

[Serial_Apologist]

I think that's a view that's only really sustainable as part of a philosophy that thinks "each man is an island" or "there is no such thing as society". Even rich people are inextricably bound up with society and dependent on the proper functioning of public services however much they avail themselves personally of those services. They presumably use roads, lighting, benefit from the protection of the law and the police force (all publicly funded). They benefit from an educated workforce, most of whom will have been educated by the state, and even if they use private health services, they will probably be treated by nurses and doctors who in many cases have benefited from state education and NHS training. The various bodies monitoring food and water quality help to ensure that even the rich do not die of food poisoning or cholera like their forebears in the early C19. They may benefit from flood protection schemes, or emergency services - publicly funded. Defence against invasion? There's no private army. And the various social security schemes, from assistance for the unemployed, old age pensions, care for the elderly etc are all publicly funded and mean that this society unlike that in the C19 does not see the great extremes of poverty, degradation and suffering that were common in that time. Personally, I think even the rich are more dependent on the state (in all its manifestations) than they care to think.

This was a point I remember being made very strongly by Neil Kinnock when he was leader of the Labour Party when challenged over tax rises Labour was accused of promoting prior to a general election. It was probably the only thing he ever said that I agreed with him on. The alternative that could be staring most of us in the face as British capitalism further outsources its operations to low-tax havens would be the sorts of gated communities for the rich we see in Latin American countries among other places, now including parts of London, with high perimeter walls topped with razor wire, guards with dogs, watch towers, CCTV of course, ensconsed private clincs, helicopted landing stages - the rich otherwise only communicating with each other by means of virtual reality conferencing and being ferreted from places to places outside these confines in bullet-proofed limos with blacked-out windows.

[PhilipT]

Ahem! I hope I've already made it clear that I don't think "each man is an island", or that people should contribute in proportion to the benefits they receive. Neither do I deny that the rich receive some, but they receive less than the poor wherever benefits are means-tested, and often elsewhere (health, education, transport, but not defence (2% of GDP - ha!) or justice or law and order). My point was to show that expecting the rich to contribute according to the benefits they receive might not yield that much. Turn it around and ask what would happen if the poor were expected to contribute according to the benefits they receive. Clearly they can't, so someone else must be putting in more.

[Serial_Apologist]

so someone else must be putting in more.

The rest of us, and quite right too.

[aeolium]

My point was to show that expecting the rich to contribute according to the benefits they receive might not yield that much. Turn it around and ask what would happen if the poor were expected to contribute according to the benefits they receive. Clearly they can't, so someone else must be putting in more.

I should clarify that I didn't mean that people should contribute in proportion to the benefits they receive from the state but the benefits in terms of income (individuals) or profits (companies) that they derive from society, given that the ability to do that can not be dissociated from all the infrastructure and institutions provided by the state to keep society running smoothly. The corollary of this is that it doesn't look very good (and might even be considered immoral) when individuals or companies seek to reduce their contribution to the barest minimum. You're right though that legally the income tax rates and thresholds are set on ability to pay.

[PhilipT]

We are a little closer to agreement. But I would ask S_A to consider who "the rest of us" are. The truth is that, in monetary terms, the break-even point between net recipients and net contributors comes about 70% up the income scale. The majority are net recipients. And I would ask aeolium to consider (bearing in mind the title of this forum) the contribution made to society by entrepreneurs who are in it for the money but who create jobs. If that isn't a contribution to society, what is?

[heliocentric]

the contribution made to society by entrepreneurs who are in it for the money but who create jobs.

I wonder if anyone has any figures on that phenomenon in the UK at the moment. It seems to me that very many of these "entrepreneurs" since the country's manufacturing industry was decimated are in the "financial services" sector who not only don't create jobs but derive their profits from gambling with money that others have worked for, and indirectly from the suffering that results for example from speculation on food prices. And then you have the "entrepreneurs" who take advantage of this government's (and indeed all governments' since the 1980s) headlong rush to privatise public services by offering to do whatever job it is more cheaply, that is to say by employing fewer people and/or paying them less than would have been the case before privatisation. Then you have the "entrepreneurs" who create fat profits for themselves and their shareholders by outsourcing work to countries with lower wages and/or less "restrictive" working conditions. I imagine that your "entrepreneurs" who create jobs are vastly outnumbered by the aforementioned ones.

[ahinton]

You could though phrase the question differently: "Is it morally right for me to pay an extremely low rate of tax by exploiting loopholes not foreseen or intended by Parliament, even though if everyone behaved in this way the tax take would be quite insufficient to fund the public services that society requires?"

However the question is phrased, it should be answered if it deserves answering! The trouble is that all manner of loopholes in all manner of legislation, not just tax legislation by any means, might not be "foreseen or intended by Parliament", but that's what law is all about - not only such loopholes and their potential or actual exploitation but the changes in circumstances that prompt governments to need to keep tinkering with laws in ways that might be seen as non-commensurate with moral viewpoints that do not raise similar invitations for change. That said, no tax take will or indeed could ever be "sufficient to fund the public services that society requires", partly because both new scientific and other discoveries as well as public greed and other demands help to raise the bar of public expectation.

I think that's a view that's only really sustainable as part of a philosophy that thinks "each man is an island" or "there is no such thing as society". Even rich people are inextricably bound up with society and dependent on the proper functioning of public services however much they avail themselves personally of those services. They presumably use roads, lighting, benefit from the protection of the law and the police force (all publicly funded). They benefit from an educated workforce, most of whom will have been educated by the state, and even if they use private health services, they will probably be treated by nurses and doctors who in many cases have benefited from state education and NHS training. The various bodies monitoring food and water quality help to ensure that even the rich do not die of food poisoning or cholera like their forebears in the early C19. They may benefit from flood protection schemes, or emergency services - publicly funded. Defence against invasion? There's no private army. And the various social security schemes, from assistance for the unemployed, old age pensions, care for the elderly etc are all publicly funded and mean that this society unlike that in the C19 does not see the great extremes of poverty, degradation and suffering that were common in that time. Personally, I think even the rich are more dependent on the state (in all its manifestations) than they care to think.

There are some interesting thoughts there - and let me say right now that the notion that "there's no such thing as society" is as much of a nonsense now as it was when Thatcher was credited with having claimed this to be the case; that said, each man (and woman) is both an island and a member of society and it is important to recognise that the two states are not preternaturally incompatible, either in practice or on theory.

We do demand more and more, however and let it be understood that one reason why we demand ever more from our state health services is that their past successes have encouraged us to do so; one could accordingly see NHS as at the same time a self-fulfilling and a self-defeating prophecy.

[ahinton]

ahinton, I think we both have a good idea of our respective positions on these matters and for my part I don't see any gain in pursuing the discussion further. We'll just have to agree to disagree on this. I do agree with you though that these are not just issues that apply to the rich.

Well, thanks - this at least indicates that we're each considering a phenomenon that cuts right across society rather than one in which the richest within it inflict the outcome of their machinations on the remainder.

Incidentally, I had an idea that you had had some unpleasant experience with the tax inspectors and you have confirmed it

I'm not sure why, but let me hasten to assure you that (a) I'm not and never have been wealthy and (b) my experiences with the taxman have in no way and at no time influenced any of my thoughts about taxation or its rôle in and/or for society!

[ahinton]

This was a point I remember being made very strongly by Neil Kinnock when he was leader of the Labour Party when challenged over tax rises Labour was accused of promoting prior to a general election. It was probably the only thing he ever said that I agreed with him on. The alternative that could be staring most of us in the face as British capitalism further outsources its operations to low-tax havens would be the sorts of gated communities for the rich we see in Latin American countries among other places, now including parts of London, with high perimeter walls topped with razor wire, guards with dogs, watch towers, CCTV of course, ensconsed private clincs, helicopted landing stages - the rich otherwise only communicating with each other by means of virtual reality conferencing and being ferreted from places to places outside these confines in bullet-proofed limos with blacked-out windows.

...and if we're going to extend that kind of situation to embrace all of those who make at least some successful attempts at tax avoidance, regardless of scale, then everyone almost without exception will as a consequence become everyone else's enemy; whilst I do not altogether dismiss your statement here, I somehow cannot quite see that state of affairs coming about.

[ahinton]

I wonder if anyone has any figures on that phenomenon in the UK at the moment. It seems to me that very many of these "entrepreneurs" since the country's manufacturing industry was decimated are in the "financial services" sector who not only don't create jobs but derive their profits from gambling with money that others have worked for, and indirectly from the suffering that results for example from speculation on food prices. And then you have the "entrepreneurs" who take advantage of this government's (and indeed all governments' since the 1980s) headlong rush to privatise public services by offering to do whatever job it is more cheaply, that is to say by employing fewer people and/or paying them less than would have been the case before privatisation. Then you have the "entrepreneurs" who create fat profits for themselves and their shareholders by outsourcing work to countries with lower wages and/or less "restrictive" working conditions. I imagine that your "entrepreneurs" who create jobs are vastly outnumbered by the aforementioned ones.

Surely one fundamental and inescapable problem here is that, just as there will almost certainly always be countries with different salary structures, different economies and economic expectations, different tax régimes and the rest, there will always be individuals and companies at all wealth levels who are on the lookout for advantages that might be seized as a direct consequence of making use of them?

[heliocentric]

on the lookout for advantages that might be seized as a direct consequence of taking advantage of them?

I hope you know what you're talking about because I have no idea what your post might be intended to mean. What I was saying was that the much-vaunted "trickle-down effect" of "entrepreneurs" creating jobs as a byproduct of their own acquisitiveness seems to me to be largely mythical.

[ahinton]

I hope you know what you're talking about because I have no idea what your post might be intended to mean. What I was saying was that the much-vaunted "trickle-down effect" of "entrepreneurs" creating jobs as a byproduct of their own acquisitiveness seems to me to be largely mythical.

See my corrected post which was not best phrased first time around, for which carelessness I apologise. That said, most entrepreneurs who fail to create jobs as a by-product - or more importantly as an essential intrinsic product - of what they do, they may as well shut up shop and go work for someone else; furthermore, your post appears to imply that entrepreneurs by nature only do what they do - including the creation of jobs - as a sole consequence of their alleged acquisitiveness, which I do not believe to be the case. I think part of the fundamental problem of understanding here is that those who create jobs do so in part with a view to making more overall profit and that this applies as much to public sector jobs as it does to those in the private sector; much as some will disagree, all business, including state businesses like NHS, must continuously generate a profit because they have a social duty to do so in order that they will be able to provide an ever-increasingly good service to their shareholders, namely public for whose benefit they exist and if major state enterprises fail to do that they will to some degree fail the society that they're charged to serve.