TAX AND MORALITY -- WE NEED TO DO GOOD

Jimmy Carr - Did he consult his conscience?

How much tax should we pay and who should pay it? The recent Jimmy Carr case illustrates the approaches that can be followed. Certain people with clever advisors and a gullible HMRC can set up schemes to try and avoid paying tax on the income they earn whether through a company or themselves working for an employer. Everyone wants to pay less tax however is it just that those under PAYE should shoulder a proportionately higher burden than those who may be richer but are smarter at re-defining their job roles and income streams? Tax evasion means not paying the taxes that you owe - whereas tax avoidance means minimising your tax liability as much as is possible. Such an action can be legal but is it moral? Is such an action judged to be right or wrong? Is such an action virtuous or not.

An individual earns a lot of money, deposits it in an offshore bank which loans him back the money. His income magically transforms itself from earned income into a loan where he may not need to repay the principal for a number of years hence and may pay an interest charge on that loan ( will that be tax deductible or not?). Sounds great -- but what if everyone did that? Would we have enough revenue for the government to run the country? The government is now looking to differentiate between "aggressive avoidance" and normal avoidance. David Cameron stated that aggressive avoidance was morally questionable. How does he know this to be so? Is there a moral crusade against tax avoiders in the offing? Will politics and economics develop a moral dimension? Probably not.Perhaps it should?

When we are faced with an opportunity to minimise our tax burden in moral terms we should be able to distinguish whether we are undertaking a moral (good) action from an immoral(bad) action. People possess reason and a conscience which should enable them to make clear judgements irrespective of the laws which have been enacted. These judgements often stem from a religious belief. Clearly the actions of Mr Carr are legal but there is a strong case for saying that they are immoral,particularly when this comedian,as part of his comedy shows, has pilloried rich people who have entered similar schemes. He has now decided to leave this scheme - possibly because he thought it was poor judgement on his part or possibly because he thought it would destroy his credibility as a comedian who needs to be in a position to challenge society's status quo through humour. We will never know the real reasons for his conversion but it may also be the case that he reflected and listened to his conscience. Some very intelligent people dream up these clever schemes and if they applied 10% of their talents to solving society's problems we may all be in a much better place.

The state itself is not immune to these moral judgements as well. If it has been excessively profligate and has increased the financial burdens on all members of our society -- then it has also acted immorally -- It has done things that it should not have done and has not assessed the future outcomes of its actions in a proper way. 

The tax burden needs to be modified on certain classes of individuals -- especially the very rich in our society and the very poor. To encourage different work structures like co-operatives and other profit and not for profit ventures involving risk taking then the tax charges on these ventures -- especially in the early years,should be minimised so they encourage growth and development.

Similarly, investment in capital and people needs to be treated in a related way. There need to be tax incentives to individuals\companies on their willingness to do good for society. This does not mean just giving to charity but would capture individual\company schemes to improve our society's economic and social capital. Lending your own money to yourself through the instrument of an offshore bank would not qualify for these expressions in my book. Other schemes and approaches which are intended to increase the common good might qualify here -- We need to be creative in what we embark upon -- Ensuring of course that in a moral sense we are doing good.