Via a very odd suggestion on Facebook, I came across this video of a historian saying silly things.
“I hear people talking the language of participation, justice, equality and transparency but almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share.”
My problem with this isn’t just that I disagree – although I do. My problem stems from the fact that the comment is completely divorced from the economics of the situation, and contains exactly zero strategic thought about how to alleviate the issue that’s been raised.
Tax avoidance is when you legally structure your activities in order to reduce the amount of tax you pay. The idea of a person’s (or organisation’s) “fair share” of tax is defined by the law that states how much tax they should pay. If they’re paying tax in accordance with the law, then by definition they’re paying their fair share. If lawmakers want them to pay more, change the laws.
It could be argued that if you try to use the law to reduce your tax liability then this is “not paying your fair share”. But that’s a load of crap. As well as being a way to raise revenue, taxes are used by governments to incentivise certain behaviours. It’s an invalid argument to state that someone doing the things that governments incentivise means they’re “not paying a fair share”1. One could argue that some taxes are meant to incentivise and that others are just meant to raise revenue, and that it’s immoral to try and avoid the latter category. But tax is stipulated in law, and we follow laws based on what they say, not based on an interpretation of what we think they mean.
The issue being discussed here is inequality, and how to help people who are less well off. I think that’s a very good problem to try and solve, but the solutions have to start with those people you’re trying to help. What’s caused the problem? Where is the issue? What sort of things can you do to help people who are struggling? Tackling questions like that is much more likely to solve the problem.
Imagine the counterfactual, that the government stopped tax avoidance by rich people. Great. What next? What do you do with the money? Is there enough money to implement your solution? How do you know if it’s solved the problem? Are there any downsides to eradicating tax avoidance? Just raising more tax from rich people doesn’t actually do anything to help poorer people; it just makes rich people less wealthy. If that’s your aim then fine – although, why? – but at least be honest about it.
My problem with this isn’t that people say silly things. That happens all the time, and you can’t stop it. My problem is that things like the excerpt above are often viewed as intelligent commentary, and passed around as pieces of wisdom. But they’re not. They’re unsophisticated observations made by unserious people that fail to grasp all the facets of the issue they’ve decided to talk about. I’m not saying that I know the answer to the problem – I definitely don’t – but then I don’t go around making grand statements and pretending I have all the answers.
A lot of commentary from a lot of otherwise intelligent people falls into this category. It drives me mad.
There’s also a lack of internal consistency here. The same people who care about tax avoidance are also – often – vociferously in favour of the EU because trade. The EU is explicitly set up to encourage this sort of tax competition between states, because of the frictionless trading. It’s not logical to argue in favour of the EU because of frictionless trade, whilst denouncing anyone who engages in that trade. ↩