Tax Avoidance Might Be Legal But it’s Time We Seriously Questioned Its Ethics
Nicholas Lord, 10 Nov 17
       

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Remember, remember, the 5th of November. Not, this time, for gunpowder, treason and plot. But for the news break by the International Consortium of Investigative Journalists (ICIJ) of the so-called “Paradise Papers”, a leak of 13.4m files detailing the financial behaviour of individual and corporate elites, many of whom use offshore financial centres to avoid paying tax in their home countries.

This is a major leak that not only questions the opportunities available to the wealthy in arranging their taxes, but also the extent to which governments facilitate such enduring arrangements for the benefit of an elite minority.

Tax takes many forms: income tax, corporate tax, land tax, capital gains tax, death tax, inheritance tax, sales tax, customs and excise tax, and value-added tax are all available to governments. Plus many more. Paying our taxes to fund public policy initiatives and investments is a central necessity of most societies – and most of us do meet these expectations.

But while there are those who seek to criminally evade their tax liabilities, or fraudulently deceive the government, we also see varying levels of non-compliance by others in society, raising questions about the ethics of minimising how much tax you pay.

For instance, there are entirely legal and approved ways of “avoiding” tax liabilities for both individuals and businesses. Reducing your tax bill through effective planning is legal, ethical – and in some forms encouraged by government-authorised schemes. For example, claiming tax relief on capital investment, saving in a tax-exempt ISA or saving for retirement by making contributions to a pension scheme are all legitimate forms of tax planning. The key point is that here we see tax relief obtained in the ways that the government intended.


Bermuda is one of the offshore locations at the centre of the Paradise Papers leak. EPA-EFE/CJ Gunther

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