Avoiding the Issue

In the wake of the so-called ‘Panama Papers’ furore, the push-button issue of the One Percent being found able – OH! THE HORROR! – to shield some of its wealth from the taxman, regardless of the jurisdiction in which its members have chosen to set up shop, has predictably called forth bad economics, dubious legal opinion, and strident political point-scoring in almost equal measure.

All of this has been carefully marshalled to serve the deeper purpose of exploiting our outrage and of suckering us into calling for the ever-eager Revenue Man to be given even more power over the livelihoods and liberties not just of the Music Hall villain ‘mega-rich’, but also of those of us hoi Polloi who have been inveigled into brandishing our torches and waving our pitchforks against the cast-iron railings surrounding the mansions of the moustachio-twirling plutocrats whom we have been so readily prompted to revile.

So, in an attempt to redress the balance a little, let’s go right back to first principles and start with the shocking premise that what you earn honestly in free exchange is a sign that your efforts have added some quantum to the sum total of human happiness (or at least marginally reduced its burden of woe) – a contention which is proven simply by the transaction having taken place at all.

Let’s move to another radical concept: that what you so earn and what you have come to own is, in the first instance, yours and yours alone to dispose of as you see fit.

Next, let us imagine that We, the People, have agreed between ourselves that there are certain desirable activities which we (perhaps unimaginatively and usually at the cost of much efficiency) do not trust to the market mechanism – matters such as dispute resolution, the provision of security at home and at our borders, the co-ordination of large-scale projects, a smattering of welfare functions, etc. Accordingly, suppose we each undertake to surrender a part of those earnings to the care of the representatives whom we have chosen to do our will in the council chamber, solely in order to save ourselves the effort of attending each and every debate conducted therein.

It is vital to recognize that his act of delegation in no way confers upon said representatives the right to act as if this progression were inverted; that they were the grantors and we the grantees. It is not theirs to insist that all our property is only held in fief from them, that our labour is indentured to them as narrowly as was that of any mediaeval serf, and that we should be pathetically grateful that they allow us to enjoy whatever remains of these only after they have disposed of the greater part of them in pursuit of THEIR chosen ends, in the satisfaction of THEIR particular prejudices, or in flattery of THEIR personal vanities.

Given all of this, there is nothing at all ‘immoral’ about spending one’s own time and money in order to render the minimum unto Caesar which is permissible under the rules which he and his predecessors, after all, have themselves written. In this regard, the only feasible definition of that much-utilised canard, ‘aggressive tax avoidance’ is that your lawyers have been much smarter than have those of the emperor’s.

Nor should there be any presumption that because I, as a private citizen, do not wish every petty bureaucrat, every envious neighbour, and every predatory legalist to know the intimate hows and whys of my personal affairs, that my associated desire for anonymity means I am to be regarded as a guilty-until-proven-innocent fraudster, criminal, or worse.

It may be inefficient. It may be expensive (I am sure Mossack Fonseca and friends do NOT come cheap). It is certainly a dreadful waste of human ingenuity and scarce resources to feel one is compelled by a grasping and inquisitive State to pay handsomely for whatever alleviation of its intrusions offshore banking and private trusts can offer one. But it is neither a sin nor a crime to try to achieve these goals.

Naturally, where the dishonest, the malefactors, and the kleptocrats do try to make avail of such facilities, we should all be pleased to see their ambitions thwarted. But here, too, the fundamental principle of justice that ‘it is better ten guilty men go free than an innocent should hang’ should mean that our prosecutorial eagerness to punish the evil few should not ever be employed to sanction a callous disregard for the rights of the upstanding many.

Having been snared in a net partly of his own weaving (I refer the reader here to examples of his own populist grandstanding at the expense of one or two tax-minimizing entertainers in recent years), it is impossible not to wrinkle one’s nose at UK Prime Minister David Cameron’s hypocrisy or to take a certain malicious delight in his present political discomfort. But even as we excoriate him for his cant and for his double-standards, we would also do well to bear in mind – as impossible as it seems for the man himself to do – that it presently appears that he has been engaged in the intrinsically legal practice of tax avoidance (i.e., tax minimisation) and not in illicit tax evasion.

How many members of the howling celebrity agitators and posturing establishment media types who now fill the airwaves and the Internet forums with the noise of their affected fury have done as much, one wonders?

As for Cameron and his egregious Chancellor, rather than blustering about the increasingly Draconian measures they will now take to pull the drawbridge up behind their own, highly privileged backsides, they might rather draw the obvious lesson that the government they lead has thus been shown to be far too demanding of its subjects’ hard-earned resources. It should also be proof positive of the malign influence of the Gordian complexities displayed by a tax code to which their every working endeavour seems to add yet new layers of often mutually-conflicting obfuscation. They should thus both tax less and tax more straightforwardly in future.

Above a worthwhile basic exemption, Mr. Osborne, why not charge us all a flat, universal tax of some sensibly low percentage and so put the ingenious worthies of Panama, the BVI and elsewhere to work doing something universally constructive, not merely selectively defensive? Why not avoid all distortions, eradicate all loopholes, cut down on all the unintended consequences and perverse incentives by imposing one, simple rule: if we derive an economic benefit from something, we will pay you 20%, say, of the total (beyond the universal exemption) no matter what, how, or why we do it?

Why not leave as much of our money in our pockets as possible so that we can better mould the services we seek and the goods we buy to our own individual tastes and, into the bargain, greatly ease your budgetary woes, saving untold billions of governmental expense at a stroke by not having to pay extra pointless intermediaries first to take in, then to pay back out, then to police both the taking in and paying out of vast swathes of our what were our own monies to begin with?

Robbing Peter to pay Paul is bad enough. Robbing Peter to hire Paul to put money back in Peter’s pocket and then Percy to check it was done correctly is sheer idiocy.

Next, stop using the tax code to impose the whims of you, the Ruling Class, upon us, the ordinary folk. If we want to ignore the ever-shifting barrage of medical advice to which we are subject and eat this rather than that, or we wish to devote our free time to this activity rather than that one, or would like to buy our energy from the cheapest provider rather than from the decidedly sub-marginal, rent-seeking one which uses your ideology’s pet technologies, so be it. If you really want to mandate one thing or ban another, do it openly – then we can conduct a proper debate about whether we want you to do so and we can vote accordingly to empower you or otherwise. Do not try to impose your will surreptitiously instead by playing subsidy-monger and levy-exactor in your ever more frequent, pettifogging, stop-start budgets as a way of avoiding much-needed democratic scrutiny.

That way, our planning horizons would be longer; our way forward through your now restricted policy options clearer and more calculable. We could then concentrate more effort on maximising our returns to labour and capital according to our personal aptitudes and our entrepreneurial visions and far less on worrying whether you will confiscate more of this or less of that in the next six months as your coffers alternately empty and bulge and your electoral exigencies ebb and flow with the latest opinion poll.

We would then invest more, produce more, employ more, export more (and so pay properly for more satisfaction-enhancing imports), save more, and have a greater surplus left over to devote to the arts and to good works, whether at home or abroad. You would solve the ‘productivity problem’ in a single bound. You would exorcise the ghosts of ‘secular stagnation’ in an instant.

Incidentally, under such a system, the immigrants seeking entry to the country would almost exclusively be those of the hard-working, get-ahead type who – by very dint of their wish to use its freedoms to make better lives for themselves and their families – would integrate most readily into the society about them and who would be most unlikely ever to allow their own cultural and religious preferences, however sincerely held, to become an impediment to that very improvement in their circumstances which they sought when they first uprooted themselves to move to Britain. Another contentious issue solved at a stroke.

We might then need far less from you, George. There might be far fewer calls for you to make one of your and your ilk’s usually hapless attempts at making good a lack which we somehow cannot think to fill ourselves. You might be able to fill that battered red case which is the badge of your office with fewer official papers and make room instead for an extra round of chicken-and-pesto sandwiches, or for the crayon scribblings of your children, or maybe for the latest instalment of Scandinavian Noir crime fiction with which to while away your otherwise idle office hours.

But we can assure you that both we and our children – as well as the children of our increasingly envious neighbours abroad – will consider you to be the best and the brightest, the fairest and most far-sighted – if, happily, the least industrious – Chancellor of them all. 

So, go on. Why not give it a try? After all, nothing else seems to be working, does it?

 

PS: If you really are worried about soaring house prices, there is also no need to pretend to control this through another round of ad hoc changes to taxation or through the sudden, wrenching imposition of stable-door-bolting, ‘macroprudential’ rules and regulations. Just tell the ever-pliant personage you imported at great expense to take up the Governorship of the Bank of England to stop making artificially cheap credit available, effectively without limit, and the market will soon sort out that little problem for you, too.