Morals or rage won’t end tax avoid­ance, only rules can do that

The Irish Times - Business - - CAVEAT - Mark Paul

Is tax only for the lit­tle peo­ple? It is one rule for the rich and an­other for the rest of us. If only wealthy peo­ple and busi­nesses paid their fair share, we would have more money to fund ser­vices. Tax avoid­ance is morally wrong. Peo­ple should not avoid tax.

That’s a flavour of the typ­i­cal gamut of re­sponses to this week’s Par­adise Pa­pers leak, which re­vealed that com­pa­nies and rich peo­ple still don’t like pay­ing tax if they can get away with not do­ing so. Did they ever? More im­por­tantly, will they ever think dif­fer­ently?

The typ­i­cal re­sponses above, which are all com­pletely un­der­stand­able on a hu­man level, also re­veal two much more in­ter­est­ing things: our own naivety to think that moral­ity or vol­un­teerism will ever trump hard rules when it comes to hand­ing over cash to the tax au­thor­i­ties; and the to­tal cow­ardice of our politi­cians, who pre­fer to in­dulge in rage bait along with the crowd in­stead of get­ting off their am­ply cush­ioned rears and do­ing the hard work of cre­at­ing so­lu­tions.

First, our own naivety. Tax eva­sion is il­le­gal, that is cut and dried. Any eva­sion re­vealed by the Par­adise Pa­pers is demon­stra­bly wrong and that is the end of that de­bate.

But the vast bulk of the ac­tiv­ity re­vealed ap­pears to be le­gal tax avoid­ance. Are we not off our heads, or at best wil­fully naive, to think that any­one will ever pay more tax than they legally must?

To hold this out as the way for­ward is to re­duce the pay­ment of tax to a sort of char­i­ta­ble ac­tiv­ity, some­thing that rich peo­ple and busi­nesses should vol­un­teer to do to a cer­tain level, even though the law says they don’t have to. There is some­thing fun­da­men­tally un­sus­tain­able about that as a propo­si­tion; a fal­lacy that serves only to make us feel more moral as we rage, know­ing full well that, in their shoes, we might well con­sider do­ing the same.

The level of em­bar­rass­ing and glo­ri­ous de­tail con­tained within the Par­adise Pa­pers leak, and the ef­fect these rev­e­la­tions have had on the rich and global busi­nesses, has been the best bit of this whole af­fair. From Bono to the ac­tors in Mrs Brown’s Boys, from Ap­ple to the clients of AIB and, of course, our beloved plu­to­crats, I have en­joyed watch­ing all of them squirm. It’s the smarty-pants sadist in me.

But would I be­have much dif­fer­ently if it were me? I’m not sure that I would.

Cow­ardice

We can all eas­ily say that we wouldn’t be­have the same way, that we’d be more moral. But there is a cer­tain cow­ardice in that no­tion, too, be­cause most of us will never be that rich, with the tax ad­vis­ers that we hired yap­ping in our ears about what we do and do not have to pay. And so we will never have to test our own self-ag­gran­dis­ing the­o­ries that we would be­have in a morally su­pe­rior fash­ion to Bono and all the rest if it was our hard cash that was about to handed over vol­un­tar­ily.

The tax avoiders are sim­ply ex­ploit­ing loop­holes, which, when you think about it, only arise as a re­sult of some­body else’s in­com­pe­tence. If the rule-mak­ers were com­pe­tent, there would be fewer loop­holes. I’m not sure I’d be moral enough to pay for some civil ser­vant or politi­cian’s in­com­pe­tence with a few mil­lion euro of my own cash, if it came down to it. Per­haps you would.

Moral­ity should have no place in the op­er­a­tion of the tax sys­tem. It is too neb­u­lous, too eas­ily avoided, too de­bat­able a con­cept to be used as the ba­sis for the col­lec­tion of money to fund vi­tal pub­lic ser­vices. Firm, clear, in­vi­o­lable and com­pe­tently as­sem­bled rules are a bet­ter ba­sis. They’re just not as sexy a con­cept as moral­ity.

I agree that rich peo­ple and com­pa­nies should not be able to pay mi­nus­cule tax bills that are out of whack with the pro­por­tions of tax paid by the rest of us, sim­ply by bung­ing stuff off­shore. But it is ridicu­lous to sug­gest that we can square that cir­cle by plead­ing with the rich to be more moral. Only the law­mak­ers can solve this prob­lem, which is where the cow­ardice of our politi­cians comes in.

Howl­ing about the un­fair­ness of it all along with ev­ery­body else gives the care­fully cre­ated im­pres­sion that politi­cians are de­ter­mined to deal with the mat­ter. It is cer­tainly a lot eas­ier than get­ting out the con­sti­tu­tional law­book and de­vis­ing wa­ter­tight rules. Re­peat­edly telling us that the new rules are on the way is not good enough. De­liver.

The Par­adise Pa­pers, and the Panama Pa­pers and Luxleaks be­fore them, have done the es­sen­tial job of fo­cus­ing the light on where these loop­holes ex­ist. For that is what we need to solve the quandary of how to make the wealthy pay tax at the level that so­ci­ety de­sires: more light, and less rag­ing, self-serv­ing heat.

The loop­holes are no longer un­known un­knowns. Politi­cians and civil ser­vants know ex­actly what they are. But to make an hon­est at­tempt at fix­ing them, they must first con­front their own in­com­pe­tence, which caused the mess in the first place.

If they are not pre­pared to do even that, that should be of more con­cern to us than the moral­ity of a rock star, or a com­edy soap ac­tor, or those whose morals we al­ready know are com­pletely shot through.

PHO­TO­GRAPH: JAC­QUES DEMARTHON/AFP/GETTY

Bono was linked to some of the rev­e­la­tions in the Par­adise Pa­pers. But are we not off our heads, or at best wil­fully naive, to think that any­one will ever pay more tax than they must?

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