Toby Young

Status Anxiety: Morally taxed

Toby Young suffers from Status Anxiety

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Since the coalition came to power, a consensus seems to have sprung up on the left that tax avoidance is wrong. Not tax evasion — which everyone agrees is wrong — but avoidance. A campaigning organisation called UK Uncut has sprung up that uses social media to organise sit-ins in high street branches of Top Shop, Boots and Vodafone to protest about it.

Last week, I questioned this thinking in a review of a book on tax havens in the Mail on Sunday. I pointed out that when we buy orange juice made from concentrate, which is zero-rated for VAT, because it’s cheaper than the freshly squeezed variety, we are avoiding paying tax. Far from being wrong, this is perfectly rational and governments often increase the duty on certain goods — cigarettes and petrol, for instance — in the expectation that we will alter our behaviour accordingly.

Why is it right for ordinary citizens to avoid paying taxes but wrong for the rich? The simple answer is because there’s more money at stake. But why should the scale of the activity in question affect its rightness or wrongness?

In the case of murder, it doesn’t become more wrong if you kill more people. Something is either right or wrong regardless of scale, and if minimising your tax burden in a small way is acceptable, then doing it in a big way is fine, too.

I didn’t think this was particularly controversial, but I hadn’t bargained on the sanctimony of the left. A tidal wave of criticism was unleashed in the blogosphere, most of it too obscene to be reprinted here. One of the most morally indignant of these critics was Richard Murphy, a leftwinger who campaigns for higher taxes and advises the TUC and Caroline Lucas on tax reform. He wrote a blog rebutting my argument that was three times longer than my original piece. His complaint was that there’s a world of difference between trying to avoid paying VAT on orange juice and taking advantage of things like tax shelters to pay no more than you have to while staying within the letter of the law. In the first case you’re complying with the government’s wishes, in the second you’re not. For him, tax avoidance per se isn’t wrong, but trying to avoid ‘tax compliance’ is.

He proposed the following definition of ‘tax compliance’: ‘[S]eeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.’

There are a number of problems with this. For one thing, I don’t see why we are under a moral obligation to comply with the wishes of the state and pay more tax than it legally requires us to do. The state’s directives do not carry moral weight simply because they’re issued by the state. On the contrary, we have a moral obligation to question the diktats of the state, not comply with them.

But even if you bracket that question, Murphy’s definition of ‘tax compliance’ doesn’t get us very far. For instance, it lets Vodafone off the hook since ‘the economic substance’ of the company’s ‘transactions’ occurred in Germany, not the UK. Non-doms, too, wriggle free since the tax they avoid paying is that due on their non-UK earnings. The only miscreant Murphy catches in his ‘compliance’ net is Sir Philip Green — not a particularly impressive haul.

For anyone wishing to continue this debate with Murphy, I should warn you that his self-righteousness knows no bounds. In one of his blogs, he accuses me of ‘failing to understand morality’ and says the fact that I’m hoping to set up a free school with taxpayers’ money ‘adds insult to injury’. ‘He’s not a person with whom I really wish to be acquainted,’ he harrumphs.

Needless to say, he may not have been averse to a bit of ‘tax planning’ himself. The indefatigable conservative blogger Tim Worstall has dug around in Companies House and claims that Murphy has taken advantage of a tax-avoidance strategy that he himself condemns as an ‘abuse’ in one of his blogs. Nothing illegal about it — and not immoral, either, since we all have a right to pay no more tax than the law demands of us. But it’s quite astonishing that Murphy accuses me of ‘failing to understand morality’ for merely defending a practice that he himself may have indulged in.

Murphy’s response to this charge is: ‘If I am flawed like the rest of us — and if my thinking has changed over time (as it obviously has) and my behaviour with it then apparently I’m a hypocrite — which is absurd.’

Toby Young is associate editor of The Spectator

Written byToby Young

Toby Young is the co-author of What Every Parent Needs to Know and the co-founder of several free schools. In addition to being an associate editor of The Spectator, he is an associate editor of Quillette. Follow him on Twitter @toadmeister

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