Tag Archive | IEA

Tax Avoidance (part 2) – Blame Culture, Not Carr

Following yesterday’s sandstorm over Jimmy Carr’s tax arrangements, he has apologised for a ‘terrible error of judgement’. Cool. Can we now move on to a consideration of the other estimated one thousand(!!) avoiders invested in the K2 scheme he was a part of, and the swarms of other super-rich people who are using creative accountants and lawyers to help them pay much less tax than people who earn far less than they do?

Picture of mountain 'K2'

Want to pay less tax? Head for a Pakistani/Chinese mountain.

Slemrod and Yitzhaki’s 2002 paper on Tax Avoidance, Evasion and Administration includes in its conclusion a nod to public choice theorists interested in the impact of the ‘inability of compromise-seeking legislators to agree upon a well-defined law’ (2002: p. 1465). The authors of that particular paper see tax avoidance/evasion as a rational, cost-benefit analysis case – people with the resources to do so will weigh up the relative benefits they can obtain from investing in avoidance against the potential harms to themselves if the authorities come down on them. Their inference in that mention of the public choice considerations is thus presumably that politicians with conflicting interests are unable to produce suitably firm legislation to ramp up the “harms” side of that equation enough to deter evaders.

It’s interesting stuff, and it’s well worth a thought. At the moment, it appears that if you’re rich enough, HMRC are about as scary as Winnie the Pooh.

But, much in line with my post yesterday, I’m still more interested in the conflicts inherent at a cultural/ideological level in an administration with myriad links to tax avoidance attempting to legislate on the matter. There may indeed be bureaucracy/corruption related problems with trying to establish sufficient (qua ‘sufficiently intimidating’) legislation, but it all seems rather meaningless when the moral virtues of paying your taxes are being expounded to us by the Party of Tax Avoidance, with their close links to organisations like the IEA, who’s rather predictable response to the Carr story is;

We pay far too much tax on incomes in Britain and it is hardly surprising that high earners, particularly those with limited shelf life like popular comedians, want to keep as much of their income as possible.

While philanthropy is admirable (and I understand that Mr Carr donates a substantial amount to good causes), paying more tax than necessary is a foolish and undirected form of giving.

The problem here is not just legislative, and it’s not just a few rogues who won’t play by the book. The underlying problem is the pervasive neo-Thatcherite ideology rampant in the British polity which dictates that paying taxes is to be avoided wherever possible. David Cameron attempting to put out that fire is a bit like Mr Kipling delivering lectures on tackling child obesity.


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