Sunday, 24 June 2012

A Taxing Question of Ethics?

Here in the UK there has been a huge amount of media coverage around certain show business and sports celebrities and their approve to avoiding paying tax.  Even our Prime Minister has joined in condemning them for doing something that was not actually against the law.

This is not the first time in recent months I have given thought to the very legal practice of tax avoidance, as against the very illegal activity of tax evasion.  

The latter is without doubt wrong, as is the practice of fraudulently claiming benefits, or government financial support.  Both are factual breaches of law, rules or regulations.  

Now before I pursue this thread please allow me to muse over what I believe is a false belief among many of us.   This is that there is exists an us, being the people of the land, and a them, being the government/ tax collectors.   The reality, in my opinion, is some what different.  The them referred to above is also the us referred to above.

What do I mean by this?  Well where does the vast majority of the tax, that so many of us try to avoid paying, actually go?  It goes on; providing care for our sick and vulnerable relatives; keeping our roads fit for purpose for our cars and company vehicles; it goes on supplying our armed forces with the equipment they need to stay safe; it goes on education for our children, I trust you are getting my drift here?

So I suggest that when we seek to play the game of legally avoiding paying taxes, and for many large corporates and wealthy individuals I suspect it is seen as a game, just who are the real winners and losers?  

From where I sit it is the broader "us" who are the losers; either directly or the relatives/friends who are on the front line in the armed forces, waiting a medical treatment that cannot be afforded; that carer in desperate need of a good nights sleep and so on.

The winners?  Well that may be the tax payer who has successfully reduced their tax payment, legally, but are they a winner morally and ethically?  How does such an action fir with their organisation or personal brand?  Could it harm it?  It certainly has some individuals in the last week!  Certainly the specialist lawyers and solicitors win in terms of fees.

Just returning to my reference to fraudulently claiming benefits, this is comparable legally to tax evasion, but both these illegal acts have the same outcome as the outcome of the legal act of tax avoidance.  That outcome is to potential reduce the support available to the services that make all our lives, and the lives of our friends and relatives "better".

So my closing point here is to say, there is nothing actually wrong in avoiding tax through legal methods that successive governments have left open for highly paid accountants and lawyers to "sell" to their clients.  It is, however, up to you as an individual to exercise your mind, reaching your own decision on if it fits with your company or personal ethics.  The choice is yours and yours alone.  

Thank you for reading and remember that with passion and action you can make great things happen.


  1. This is a very thoughtful piece Ben and I agree with much of what you say. May I add a couple of related observations please?

    One thing that frustrates me in this debate is when people get stuck with the word 'avoidance' and imply that the following are both the same thing and are therefore either both fine or both bad.

    1 - Making use of specifically legislated allowances, reliefs and exemption in the ways intended by Parliament. eg: investing in ISAs, pensions or other tax favoured investments

    2 - Paying large sums to promoters of 'abusive' schemes that are reliant on Tax Counsel's opinion to satisfy everyone involved that even if challenged by HMRC, no one will be penalised as there was no intent to EVADE taxes.

    The two are not comparable and to suggest otherwise is naive at best - in my view.

    1. Mark thank you for taking the time to leave a comment.

      Good to see this piece stimulating comment. I was trying to convey the right/wrong argument around avoid, not evade, is perhaps more a question of personal ethics or moral code, than any black and white issue.

    2. Ben,
      Very good discussion material here! I especially liked your point concerning the media, and the natural tendency to inject emotion into the issues presented. I would like to add a question to your comment on the "them" the government and "us" the tax-payer. How much do you think is added to a tax payer’s emotional reluctance to pay tax when it is obvious that a substantial percentage of the tax collected is wasted! Is this even a legitimate discussion? After all in a democracy we get the government we deserve. And is it even logical? What is a fair rate of tax? Is 10% on everyone with no deductions fair, is it fair that the more productive one is the more percentage of tax is paid? I ponder these issues with a lot of thought, and I think each topic can be a real trap of emotion and belief over logic and true "Fairness". The old saying where you sit is where you stand comes to mind!

    3. Good points, I would agree waste is a contributory factor to peoples reactions to and perception of tax. I often wonder how "government" at all levels has managed to spend the last 40+ years in the UK finding efficiency savings. Just how profligate were they before this?!

      Due to life experiences I have been forced to learn to detach emotion and logic and consider both cases separately and asses which argument actually holds the greatest sway. Where you sit will certainly influence that decision.

      Thanks for taking the time to comment. It means a lot to know I have at least stimulate thoughts and conversation.