Please turn on javascript in your browser to play chess.
Debates Forum

Debates Forum

  1. 29 Jun '12 12:34
    In the UK, Jimmy Carr (a comedian) has been pilloried in the press for using an offshore structure (legally) to reduce his tax bill from the normal 50% to around 1%. This has been described as immoral by our Prime Minister. I have seen similar comments by Barack Obama about practices like these.

    To be clear, I am not interested in tax evasion (i.e. illegally avoiding the payment of tax), but rather the use of complicated and artificial structures to avoid tax legally.

    Is this immoral? To which my answer would be unequivocally yes. Anyone disagree?

    (To declare an interest in this topic, my first job was working in the tax planning department of an accounting firm which sold a number of tax....ahem....mitigation strategies. But I am a reformed character now.)
  2. 29 Jun '12 12:48
    Originally posted by Rank outsider
    In the UK, Jimmy Carr (a comedian) has been pilloried in the press for using an offshore structure (legally) to reduce his tax bill from the normal 50% to around 1%. This has been described as immoral by our Prime Minister. I have seen similar comments by Barack Obama about practices like these.

    To be clear, I am not interested in tax evasion (i.e ...[text shortened]... h sold a number of tax....ahem....mitigation strategies. But I am a reformed character now.)
    As long as you do it legally, there is no reason not to avoid paying taxes. If you can get a deduction use it. Do you think it is immoral to give money to charity and get a deduction? To pay tax free bonds from your municipality? To buy infrastructure for a business and take depreciation?
  3. 29 Jun '12 13:05
    Originally posted by quackquack
    As long as you do it legally, there is no reason not to avoid paying taxes. If you can get a deduction use it. Do you think it is immoral to give money to charity and get a deduction? To pay tax free bonds from your municipality? To buy infrastructure for a business and take depreciation?
    No I don't think those things are immoral.

    But, in the UK, the Government specifically legislates for people who give to charity to get tax relief to encourage this behaviour. Ditto giving tax relief to companies who invest in capital assets. (I can't comment on tax free bonds as I don't know what these are). This is very different to acting in a contrived way which goes entirely against the spirit of tax legislation.

    To demonstrate what I mean, one of the schemes I was involved with related to a type of tax favoured savings plan. Contributions were explicitly capped by the Government at £6,000 and the plan advertised as such. However, the clever bods in the department found a way to enable their high net worth clients to contribute up to 10 times as much. Including their wives, many were able to shelter nearly quarter of a million from tax before this loophole was shut down.

    Legal, of course, but moral?
  4. 29 Jun '12 13:28
    Originally posted by Rank outsider
    No I don't think those things are immoral.

    But, in the UK, the Government specifically legislates for people who give to charity to get tax relief to encourage this behaviour. Ditto giving tax relief to companies who invest in capital assets. (I can't comment on tax free bonds as I don't know what these are). This is very different to acting in a ...[text shortened]... ter of a million from tax before this loophole was shut down.

    Legal, of course, but moral?
    Taxes are so complex that if you follow the rules its enough for me. It not reasonable or even possible to decide the "spirit" of taxes and to expect people to follow the spirit.

    Similarly, I would not allow a defense that although one technically violated the taxing statute, they followed the spirit of the tax.

    Once we talk morality and taxes we open a can of worms and it goes both ways? One could argue that taxes as administered are immoral/ unfair and have disproportionate effect on certain groups of people. One could argue the same thing about caps or allowing or disallowing spouses to take advantage of a program. Rather than argue morality let's focus merely on if you followed the law.
  5. Standard member sh76
    Civis Americanus Sum
    29 Jun '12 13:46
    I don't think it's immoral for people to legally avoid taxes.

    However, I do think people who legally avoid taxes give up their moral right to whine about government (legally) enacting policies that don't support their interests.

    Sauce for the goose...
  6. 29 Jun '12 13:49
    Originally posted by quackquack
    Taxes are so complex that if you follow the rules its enough for me. It not reasonable or even possible to decide the "spirit" of taxes and to expect people to follow the spirit.

    Similarly, I would not allow a defense that although one technically violated the taxing statute, they followed the spirit of the tax.

    Once we talk morality and taxes w ...[text shortened]... tage of a program. Rather than argue morality let's focus merely on if you followed the law.
    The reason tax legislation is so complex (partly) is because people do not follow its spirit and successive Governments have to add to it to close down all the loopholes. If tax legislation were simpler, there would be far more avoidance. Life and relationships are complex, and yet we judge some behaviour as immoral even when it is legal (e.g. adultery).

    Of course, there are some borderline cases, but the example I gave was one where the spirit was absolutely clear. £6,000 was the limit. Everyone knew this. It wasn't open for debate. But some rich people exploited an obscure technicality in the drafting which means, all things being equal, that some other people would have to end up paying more tax.

    Isn't opening up a can of worms what this forum is about?
  7. 29 Jun '12 13:54
    Originally posted by sh76
    I don't think it's immoral for people to legally avoid taxes.

    However, I do think people who legally avoid taxes give up their moral right to whine about government (legally) enacting policies that don't support their interests.

    Sauce for the goose...
    I am confused. If what they have done is morally OK, then why can't they keep their moral right to whine?

    If only those people who do not avoid taxes have the moral right to whine, then aren't you accepting that those who do not avoid taxes are more moral than those that do?
  8. Standard member sh76
    Civis Americanus Sum
    29 Jun '12 13:59
    Originally posted by Rank outsider
    I am confused. If what they have done is morally OK, then why can't they keep their moral right to whine?

    If only those people who do not avoid taxes have the moral right to whine, then aren't you accepting that those who do not avoid taxes are more moral than those that do?
    I don't mean they don't have the right to whine. Everyone has the right to whine. It's freedom of speech. I spoke imprecisely. I mean that the legitimacy behind their complaints is diminished when they do what they can to avoid supporting the system.

    Example: A should pay 10% state income tax. Instead he establishes an offshore account to generate tax free capital gains and pays 2% state income tax instead.

    Four months later, A calls the local DOT to complain that they haven't filled the pothole on front of his house. While he has the right to whine, as far as I'm concerned, he has lost the moral high ground in complaining to get his pothole filled.
  9. 29 Jun '12 14:21
    Originally posted by Rank outsider
    The reason tax legislation is so complex (partly) is because people do not follow its spirit and successive Governments have to add to it to close down all the loopholes. If tax legislation were simpler, there would be far more avoidance. Life and relationships are complex, and yet we judge some behaviour as immoral even when it is legal (e.g. adulte ...[text shortened]... to end up paying more tax.

    Isn't opening up a can of worms what this forum is about?
    When you say "someone exploited an obscure technicality" you have pre-decided the issue. One could easily say that some people benefited from a provision in the legislation which allowed them to go over the 6000 limit and it would seem less morally objectionable

    I think adultery is immoral because you made a promise (literal or implied) to the person you chose to be your spouse. Taxation is not a personal relationship it is imposed on you by the government. The government isn't there every day when you drag yourself out of bed but somehow they tax your income. The government can make everyone pay a fee (a tax in dollar terms) or percentages; they can even exempt some people. There are arguments for or against each manner of taxation. But in the end morality is irrelevant -- you simply must pay the tax.
  10. 29 Jun '12 14:54
    Originally posted by sh76
    I don't mean they don't have the right to whine. Everyone has the right to whine. It's freedom of speech. I spoke imprecisely. I mean that the legitimacy behind their complaints is diminished when they do what they can to avoid supporting the system.

    Example: A should pay 10% state income tax. Instead he establishes an offshore account to generate tax free c ...[text shortened]... I'm concerned, he has lost the moral high ground in complaining to get his pothole filled.
    Well, I'm glad you accept that people have the right to whine, otherwise we Brits would end up like Trappist monks!

    Seriously, though, I still struggle to see how you are not accepting the basic premise that there are standards of behaviour in relation to tax which fall below what we might regard as desirable or acceptable. If he has 'lost the moral high ground' then shouldn't the behaviour that causes him to lose the moral high ground be regarded as immoral?
  11. 29 Jun '12 14:54
    People should pay as little tax as they can legally - that way the system is fair for everyone.

    However, many of the problems associated with legal "evasion" can be resolved by implementing a minimum nominal tax rate, regardless of deductions or other methods of tax reduction; e.g. making it so that any personal income above $100k is taxed at at least 25% no matter what (this would make Romney's tax rate effectively 25%, for instance).
  12. Donation rwingett
    Ming the Merciless
    29 Jun '12 15:00
    Originally posted by Rank outsider
    In the UK, Jimmy Carr (a comedian) has been pilloried in the press for using an offshore structure (legally) to reduce his tax bill from the normal 50% to around 1%. This has been described as immoral by our Prime Minister. I have seen similar comments by Barack Obama about practices like these.

    To be clear, I am not interested in tax evasion (i.e ...[text shortened]... h sold a number of tax....ahem....mitigation strategies. But I am a reformed character now.)
    If a government can be set up in such a way that it can be controlled by the rich, who then use its mechanisms to enact laws which benefit their own narrow interests to the detriment of society, then, yes, it is immoral. If it is immoral for me to steal food from the mouths of children, then it is just as immoral for the rich to use their vastly disproportionate access to the levers of government to enact tax policies which essentially do the same thing.
  13. 29 Jun '12 15:05
    Originally posted by rwingett
    If a government can be set up in such a way that it can be controlled by the rich, who then use its mechanisms to enact laws which benefit their own narrow interests to the detriment of society, then, yes, it is immoral. If it is immoral for me to steal food from the mouths of children, then it is just as immoral for the rich to use their vastly disproporti ...[text shortened]... te access to the levers of government to enact tax policies which essentially do the same thing.
    If the masses vote for things that disproportionately benefit them and put more than a fair burden on the wealthy, it is equally immoral. In a country where only half the people pay income tax, this morality issue is more than just theoretical.
  14. 29 Jun '12 15:11
    Originally posted by quackquack
    When you say "someone exploited an obscure technicality" you have pre-decided the issue. One could easily say that some people benefited from a provision in the legislation which allowed them to go over the 6000 limit and it would seem less morally objectionable

    I think adultery is immoral because you made a promise (literal or implied) to the person ...[text shortened]... ach manner of taxation. But in the end morality is irrelevant -- you simply must pay the tax.
    Well, the legislation specified the amount "£6,000", the Press Releases issued by the Government stated that contributions were capped at £6,000, every newspaper report said contributions were capped at £6,000 and every piece of marketing done publicly by those offering the products to the general public(and there was masses) stated that you could only put in £6,000. So I think anyone participating in the avoidance scheme was well aware that they were not acting in accordance with the spirit of the scheme.

    OK the reference to adultery is not perfect, but as a society we have essentially made a contract with each other that taxes should be paid and that we should all pay our fair share. Exactly what is fair and how much we should pay in total are essentially political questions and we allow politicians to decide them. But once elected representatives have taken a view on what this is, we should seek to abide by the intention of the legislation where it is clear and unambiguous.

    Morality, to some extent, is about the choices we make which are not dictated by the law.
  15. 29 Jun '12 15:16
    Originally posted by quackquack
    If the masses vote for things that disproportionately benefit them and put more than a fair burden on the wealthy, it is equally immoral. In a country where only half the people pay income tax, this morality issue is more than just theoretical.
    Yes, good point, in one of the most unequal countries in the western world the "fairness" of taxation of the wealthy is a really huge issue. And of course calling the tax "payroll tax" instead of "income tax" magically does not make it a tax anymore.