George Osborne delivered a budget earlier this year in which he claimed that aggressive tax avoidance schemes were morally repugnant. Since then, we have seen the rise of the common assumption that pretty much anyone not paying tax through PAYE is avoiding paying tax and therefore lacking in morality. Ken Livingstone’s attempt to be elected as London Mayor was damaged by revelations that he channeled income through a company so as to pay tax at a lower rate than income tax. The issue became so central that when Livingstone accused Boris Johnson of doing exactly the same thing during a radio phone-in debate, they reportedly came close to blows off-air because of it. More recently, the comedian Jimmy Carr’s use of an offshore tax avoidance scheme resulted in him being the subject of widespread criticism. The Prime Minister even felt the need to comment on Carr’s tax affairs, regarding them as “morally wrong”.
For Cameron to comment on a private individual’s legal tax affairs is wrong, and a misjudgement. Not only that, but it is hypocritical owing to the history of his family’s use of tax havens to increase their wealth. The hypocrisy doesn’t stop there. The PM declined to pass similar comment on Tory supporters and donors like Gary Barlow and Sir Philip Green, who also take action to reduce their tax liabilities.
It is common in many industries such as the media & IT for people to be self-employed and structure their tax affairs so they work for their own company. In many cases this isn’t always purely a wish to reduce tax liabilities but also as a result of the reluctance of employers in those industries to provide permanent full-time jobs. The flexibility of using such people suits employers. Should people employed solely in the short-term to provide particular contractual goals also be expected to pay tax as if they are employed permanently with all the benefits commensurate to that?
If the Tories persist on going down this route, they will undoubtedly encounter opposition from the accountancy industry, traditional backers of their party, as well as their many donors who benefit from such schemes. There is a wider principle here though, which hopefully will preclude us from spending the next 6 months trawling through the tax returns of every z-list celebrity and political donor. The principle is that everyone is expected to pay the correct amount of tax by law, no more and no less. Morality doesn’t come into it. A General Anti Avoidance Rule is unworkable for this reason. Morals are subjective and ultimately personal, so who decides what is immoral and what is not? Nobody decides to pay extra tax because their next door neighbour thinks they should. Technically, paying anything less than 100% tax is avoidance. It’s legal, of course, but you could pay more. Avoidance is too woolly & imprecise a concept on which to base the rules & guidelines which tax calculations rely upon. The answer has to be that if government & HMRC feel a particular scheme should be stopped, then they must make it illegal. No morals, no subjectivity, just law.