WARNING! SOME OF THE FOLLOWING IS ABOUT TAX LAW!!!
PS THERE AREN’T MANY JOKES
Some years ago, when I was pulling in a more than decent six figure whack from my travails in the TV writing industry, my lovely accountant (you know who you are!) lobbied me pretty intensively with regard to ‘incorporating’ myself. For those unfamiliar with this concept – essentially it meant turning myself into a company – Martin Jameson Ltd – subject to beneficial rates of corporation tax – and then paying myself from the dividends, thereby reducing my tax liability by thousands of pounds every year.
This was a completely legal form of tax avoidance – although I think the tax benefits have shifted a bit these days – and a commonplace amongst many media professionals. It went on all the time and no one thought much about it.
Well I thought about it – very seriously – but on balance I decided that a) it sounded like an awful lot of hassle (which would have been one reason my lovely accountant was keen as he would ‘take care of it’… for a very competitive fee of course) and b) as a democratic socialist earning a decent fist, I actually wanted to pay my fair share of tax from which my health care, kids’ education, state infrastructure etc was paid. So far, so virtuous.
Many of my contemporaries – including several who would regularly tout their working class lefty credentials – chose to exploit this completely legal method of reducing their personal tax liability.
Of course all self employed media hobbits exploit a well established system of tax avoidance. We run our own businesses, work from home, provide all our own working materials, pay for all our own research, buy our own heel balm and hairy foot coiffure etc etc… and so quite reasonably the costs of these items are not subject to tax at whatever is our highest rate. The list of things we can legitimately claim for is decided upon and constantly reviewed by the bods at HMRC.
But tax avoidance it most definitely is – as opposed to tax evasion, which is illegal – and until a couple of years ago no one batted an eyelid. But now multi-nationals are keeping their patents off shore and their UK franchises pay royalties to those ‘parent’ companies equal to any taxable profits here where they make their cash – and hospitals are starved of it. And Prime Ministers’ fathers set up – completely legal – offshore funds, and offer their kids a chunk, who profit from the tax free status, and everyone goes MEME crazy on Facebook.
So is one form of tax avoidance ‘better’ than another – more, or less, morally acceptable?
Going back to the arcane tediosity of being a self employed scribbler, did I, having made my goody-two-shoes decision to pay self employed income tax as per normal, stand sanctimoniously in judgement of my colleagues who chose a less taxing route?
No. Absolutely not. It was completely legal and a matter of personal choice. Pay unto Caesar what is Caesar’s, and if Caesar says incorporating is ok, then clearly Caesar has factored that in. Caesar can make that illegal if he wants to. However, interestingly, in recent years, anyone openly declaring their left wing credentials is a lot more wary about going down the incorporation path. It’s starting to be seen as a bit iffy.
So what about the other more aggressive forms of tax avoidance? Are they ‘worse’?
Well, the argument runs that the problem with the ‘Starbucks’ strategy, or the offshore tax haven strategy is that, although they are legal, they are essentially inequitable. You can only do these things if you have shed loads of dosh in the first place – so therefore the law is structured so that the very wealthy have opportunities to reduce their tax liability that aren’t available to the rest of us on more meagre incomes – even the hobbits.
So is it right to lambast those wealthy types for their moral vacuity, hypocrisy, greed etc for exploiting these tax loopholes? Should David Cameron be drummed out of office for some shares in his Dad’s company he owned ten years ago?
Of course, everyone’s entitled to an opinion, and it’s certainly emblematic of the way that inequality is written into the statutes of our society at a very deep level, but I can’t help thinking that the individuals aren’t really the issue.
This is about law in a democratic society.
I’ve attempted, here, to find some kind of dividing line to delineate where I think tax avoidance moves from the sensible to the poisonously inequitable – but I’ve certainly met people who are astonished, even outraged that I can set a percentage of my telephone costs off against tax, or travel for work purposes, or paper, or books and DVDs I use in my research, theatre and cinema trips, many other things… Depending on your starting point, everybody’s bottom line in the tax-sand is different.
Which is why we have a democracy, and we vote in a government, and we accept that the majority wins, whether we agree with them or not, and they get to make the laws for the time they are in office. Democracy isn’t about taking EVERYONE’s opinions into account. That’s chaos. We do the voting thing precisely to avoid that chaos.
So if we don’t like the way Starbucks behaves, or the Ian Camerons of this world, then, sure, have a pop, but the only practical, useful, meaningful thing is to lobby – in order actually DO something about what happens next – to change the law itself.
The problem with throwing mud at someone for exploiting the law as it stands, or stood in the past, is that then we are asking individuals, or companies, to make a subjective decision about what tax they should pay, as if there’s a sort of instinctive right and wrong about this stuff. It’s predicated on the idea that there is some kind of natural ‘common sense’, a moral law, that everyone’s agreed upon.
There isn’t, and they aren’t. We aren’t!
And then it all gets mixed up with the background radiation that is social media’s distaste for anyone who has any cash at all – ! – unless, of course, it’s someone they like, such as a footballer or an artistic creative. But that’s a whole other blog…
It’s so very easy to be morally self-righteous, but moral self-righteousness is fundamentally subjective, so in the end we just have to decide as a country what we want to do and legislate for it – and not be surprised when individuals or companies work within the laws our democracy provides for them.
Although, of course some of us do make that subjective choice…
Excuse me while I go and polish my halo.