Tax avoidance is growing into one of the most contentious economic issues in the modern financial age. Although perfectly legal, the morality and motivation behind the manipulation of the current tax regime is questionable. Whilst visible to the public eye, the issue remains to be a frequently occurring theme among wealthy individuals and large corporations.
Taxes are a monetary resource collected by the government and used to protect and develop essential public services such as education, the NHS, social services, and law enforcement, amongst many more. When tax liability is reduced, such services receive less funding and can subsequently deteriorate. Individuals’ health, wellbeing, and quality of life are often dependent on the quality of these services, therefore ethical questions are raised when a vastly wealthier individual, with a high standard of living, intends on minimising their contribution towards Her Majesty’s services.
In June 2012, a sense of civic responsibility was not expressed by comedian Jimmy Carr, who defended his financial controversies during a gig by replying to a heckler: “I’ve not broken the law. I’ve not done anything illegal. But morally, morally…” The vexed comedian has since apologised for utilising a legal tax avoidance scheme which enabled him to pay as little as 1% tax on his earnings. Tax advisers have also been recruited by England international footballers (Wayne Rooney and Theo Walcott included) who are renowned for receiving enormous wages and are reputed for living well above their means.
Furthermore, global corporations are more than happy to take advantage of loopholes within the ever changing UK tax regime; Google, Starbucks, Arcadia Group, and Amazon pay little or no tax in the UK. Starbucks, who claim to be ‘a responsible company’, are delighted to inform the consumer about their ethically sourced goods and influential UK community work, however they reported sales of £400m in the UK last year and paid no corporation tax.
Jimmy Carr’s actions were publicly highlighted and criticised by Prime Minister David Cameron who described some of the tax avoidance schemes as “morally wrong” which clearly illustrates the government’s repugnant stance on the issue. Despite this, it would appear that this disapproval is not easily reflected in HMRC’s tax legislations, as loopholes are still evident and tax avoidance is still occurring and has been for a long time.
A flat tax rate may be favoured by some and perhaps a motive behind the tax minimisers. Moreover, since each tax payer pays for the same public services, it could be argued that the same figure should be paid by each person, irrespective of their income. It may be construed as immoral that one individual is required to pay significantly more income tax than another. Whether this perspective is economically feasible or socially ethical is another question.
Whether it is morally right or wrong that an individual or business avoids what HMRC expects is down to the opinion of the individual. However, it is highly probable that tax avoidance won’t stop in the near future and the cycle of HMRC closing one loophole, followed by tax advisers exposing another, will continue. This sparks the question: If tax avoidance is so immoral, then why is it legal?