Carr, Cameron’s Hypocrisy & The Morality Of Tax Avoidance

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One week on, the Carr tax-avoidance scandal has gone away; the problem has not.

With beautiful views of the French Alps, ski resorts aplenty and the world’s third highest life expectancy; Lake Geneva, Switzerland is a pretty good place to live. The rich and famous clearly think so – Shania Twain, Phil Collins, Michael Schumacher, Boris Becker, Roger Moore and Ingvar Kamprad (Ikea Founder) are just a few of the celebrities who reside around Europe’s most scenic lake. Of course, it might also help that Switzerland is a tax haven.

Yet, as Jimmy Carr showed us, you don’t even have to move abroad to avoid tax nowadays. Last week, it was reported that comedian Carr was found to be sheltering around £3.3million a year from being taxed through the use of a Jersey-based tax avoidance arrangement, paying as little at 1% tax on his earnings. The K2 scheme allows money to be paid into an offshore trust, which then pays you a small salary with the rest being loaned back, allowing someone with an income of £280,000 to reduce their tax bill from £127,000 to just 3,500.

As the news broke, David Cameron waded into the issue calling the arrangement “morally wrong” – with cohort Osborne going for the more eloquent “repugnant”. They were right, of course. Whilst the K2 scheme is legal, it is clear that avoiding tax is morally wrong. There is no debate on this. The whole point of tax, after all, is to pay for the services that the government provides as well as to redistribute wealth through society. It is not optional, but a moral duty to pay in order to better society, help achieve equality and stop a state becoming even more inegalitarian than it is.

Yet, coming from Cameron, it was a fairly decent dose of hypocrisy. After all, Ian Cameron, David’s father, built up their 2.75million fortune through the use of tax havens. Moreover, it is remarkable how silent Cameron stayed on the news that Gary Barlow had also used such schemes – but then again, he is an “old chum” as well as bona-fide Conservative supporter. And what about Andrew Mitchell, Tory Cabinet minister, who invested into firms which avoided paying £2.6million stamp duty? And Culture Secretary Jeremy Hunt who avoided a £100,000 tax bill just days before the 2010 election. (Maybe then, its okay to avoid tax if you are a Tory?)

“It’s alright Gary; you’re a Conservative!”

The list would go on and on to endemic proportions. Tax avoidance is not a small issue. In fact, if you wanted to take a stand and stop ‘paying’ tax avoiders, you would have to stop watching any elite football or Hollywood films, be unable to vote ever again and would have to throw your iPod out the window when “Man! I Feel Like A Woman!” comes on.

So morally wrong, yes. However, the real problem is the system itself; after all, many people would pay less tax if they could. Yet, the government has made no attempts to change it. The government hasn’t even given a word of encouragement that it will seek to do so.

Instead, amongst the lampooning of Carr, it was slyly announced that the government would not be not be publishing the tax details of its ministers. If they had nothing to hide, clearly such a proposal would be implemented. The government cannot seek to play god of ethics on other peoples’ tax arrangement if there is no transparency – and therefore trust – in their own.

The government cannot seek to play god of ethics on other peoples’ tax arrangement if there is no transparency – and therefore trust – in their own.

More importantly, however, is how the government and Her Majesty Revenue & Customs allow big corporations to exploit the tax system. HMRC have been accused of having very close ties to big businesses, with deals being strike between representatives to cut down tax bills. Let’s have a recap; US Banking giant Goldman Sachs let off a £20million tax bill; Sir Phillip Green, the Topshop billionaire, accused of avoiding a tax bill of £300million – but appointed to review public spending cuts two years ago; the world’s biggest online retailer, Amazon, which has generated sales of more than £7.6 billion in the last 3 years while their tax bill is sitting pretty with no corporation tax on the company’s profits. The relationship between those taxing and those being taxed is too close for comfort.

Of course, the most famous of these cases came with mobile operator Vodafone who refused to pay their £6 billion tax bill and instead offered to pay £1.25 billion of  it (less than 25% of the original bill). To put that into context, thats about 2,878 Jimmy Carrs. David Cameron stayed rather mute on this one however.

In fact, that is the most shocking thing about the last week. I have waited and waited for someone in government to speak up and say that tax avoidance will now be forcibly stopped. Even some rhetoric in that direction would be appeasing, but it has not been forthcoming.

Instead, Cameron has taken it as another chance to lay his boot into the welfare state. This week, the Prime Minister announced that under-25s would not long be able to claim housing benefits as well cutting benefits for lone parents. Rather than the lack of jobs, Cameron has blamed “entitlement culture” as the cause of unemployment claiming that the current system makes it seem like people are “better off not working”.

The safety net of welfare is slipping; no doubt struggling to survive in the current economic climate. Yet, it is bewildering how Cameron believes that this is a legtimate way to cut the debt – by making the chances of young unemployed persons even bleaker – rather than clamping down on unpaid taxes.

It is difficult in these circumstances to disagree with Owen Jones’ assertion that benefit fraudsters and ‘scourgers’ have become the long-term targets of whats wrong with Britain, hunted down by the tabloids and politicians “with relish”; whilst those who avoid tax are mentioned as nothing more than a passing story – no doubt because many of the large corporations that run such media outlets have poor tax records themselves.

Benefit fraud costs less than 1% of total welfare spending; an amount which is seventy times less than that of tax evasion.

Even with Carr, Treasury Chief Secretary Danny Alexander pipped up with “Rich tax dodgers are as bad as dole cheats”. Well, no, Danny; tax avoidance and evasion is far worse. Benefit fraud costs less than 1% of total welfare spending; an amount which is seventy times less than that of tax evasion. In fact, in most cases, the very people that are attacked by journalists and politicans for being on benefits “pay more tax proportionally to their wage packet” than the attackers. Such a case is rarely made in the public sphere however. After all, it is easy to scapegoat the poor and powerless in order to avoid upsetting the urban rich.

Overall, UK Uncut believe that the country loses £25billion every year through tax avoidance. Tax evasion, which is illegal, costs the economy up to £70 billion a year. Such money would cover the £18 billion of cuts currently being taken by the current parliament with ease. Despite this, the tax scandal has died down; bound now to fall into the void of governmental indolence while the welfare state continues to take a battering.

Cameron came, he virtued and he left; he gave no word of closing tax loopholes, recouping any of the unpaid tax or shutting down tax avoidance measures (or the many thriving havens that surround the UK)

Tax avoidance is both unethical and immoral and – despite my lambasting of the Conservatives – is an issue that no political party has dealt with properly. This is just as immoral in failing to stop an act which is the true stain of our society. Ultimately, politicians are the only ones capable of stopping it.

The PM is right is one respect; there is a entitlement culture in Britain, but it is resting squarely at the door of the the wealthy and influential.

Immoral Cameron? Do something about it then.

After all, everyone hates a hypocrite.

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Discussion7 Comments

  1. avatar

    An interesting but too left leaning (politically) article. Legal tax avoidance has been going on for decades and possibly centuries and clever accountants will always find inventive ways to help their clients avoid tax. Indeed some schemes are set up by government e.g I S A s which are used by millions of ‘ordinary’ people to reduce their tax bills. Successive governments have done little to stop immoral tax avoidance so don’t just lay into the current one – Labour had their chance during 13 years in power and did little but spend money they didn’t have.

    Alexander Green
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    “Tax avoidance is both unethical and immoral and – despite my lambasting of the Conservatives – is an issue that no political party has dealt with properly.”

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    I think writing that Tax avoidance is worse than benefit fraud misses the point, tax avoidance is Legal, immoral but relatively rare, benefit fraud is illegal immoral and widespread- Plus if you are going to be taxed as much as 50pc or, as in France soon 75pc, any way to keep ones hard earned cash away from social spenders is unpatriotic but understandable. This is comparable to blatant benefit frauds who flaunt laws which are meant to keep the vulnerable safe, reducing the funds for the really needy and the rest of society.

    Alexander Green
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    How does it miss the point? The media and politicians portray benefit cheats as a major cause of our “broken society” – in fact, they are so much centred on this that even in this tax case the coalition branded tax avoiders “as bad as benefit cheats” – and are likely to pass judgement on these people despite their own corrupt immoral actions. This is despite tax evasion and avoidance costing the economy far more than benefit fraud. My point is that benefit fraud is exaggerated – I’m not saying it is not morally wrong, (as it is) – and that it is hypocrisy for those in power to pass judgement on these people without looking in the mirror themselves. It is unfair that benefit cheats are scapegoated for the country’s problems.

    The coalition are spending large amounts of money on changing the benefit system – (with legitimately ill people being taken off benefits, due to major problems with the work capability assessment). Where is the change for the tax system?

    Alexander Green
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    And yes, there are problems with our tax system; in that, it doesn’t differentiae between the super rich and the upper middle-class. But tax is both law and your moral duty for society. After all, tax avoiders use the roads, the NHS, have their bins collected…people have no right to just take it into their own hands not to abide by the law because they don’t like it.

    Your main argument seems to based in the fact that benefit fraud is illegal whereas tax avoidance isn’t it (which is only due to loopholes). You are talking in legalities; I’m talking in morals. Whether its legal or not doesn’t make a difference in the crime – both are depriving the government from money which is rightly theres to spend. Where is your evidence that tax avoidance is rare, while benefit fraud is “widespread”. (+ just because something is more widespread doesn’t make it any more or less immoral). Similarly, you say that benefit fraud “reduces the funds for the really needy and the rest of society.” Surely thats exactly what tax avoidance and evasion does as well?

  3. avatar

    “Tax avoiders – not benefit cheats – are the real criminals of Britain”

    Well seeing as benefit fraud is a crime, and tax avoidance is by definition legal, I think you’ve gotten yourself a bit confused.

    Alexander James Green
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    No, not confused at all. If you had actually read the article – rather than just the strap line – you would see this. Firstly, the position stated is not based in legality, but ethics. Secondly, my argument centres around the fact that benefit cheats are demonised and used as a example of broken britain by those who in powerful media and political position, who often fail to pay their taxes. These people are therefore worse, especially as they fail to stop tax avoidance which, while legal, is unmoral (they fail to make it illegal as they profit from it themselves) – plus the fact that is costs the economy over 70 times more.

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