Taxation is fundamentally a confiscation of private assets for public purposes. It may well be necessary. Tax laws may be fair or unfair. Good citizenship – individual or corporate – then requires that prevailing rules of taxation law be followed, due amounts calculated and paid. Individuals and companies are required to cooperate in calculating the taxes they owe to their tax jurisdictions under existing rules and to pay such amounts in a timely manner.
I find it irritating when the lawmakers then criticise taxpayers for the deficiencies of the laws they have formulated. It has become popular for politicians to criticise large companies and wealthy individuals for “tax avoidance” (which is perfectly legal) as being cases of “not paying your fair share of tax”. It strikes me as a rather irrational – if populist – argument. Tax laws are not inherently, and of themselves, “fair”. In fact the question of “fairness” is not a criteria when it comes to paying or not paying tax. It comes into play only in the formulation of the enabling law. Once a tax law is passed, all legal entities within the jurisdiction are required to pay – whether or not it is “fair” in somebody’s opinion. Many tax laws are intentionally “unfair” to try and implement some policy or other, or to encourage some particular behaviour. When politicians start referring to the “spirit of the law” not being followed, it is just a confession of their own incompetence in formulating laws to implement their intentions.
As law-abiding individuals and companies, we calculate and pay our taxes according to the rules that prevail. We use all available rules of allowable deductions and off-sets and deferred taxes and tax-breaks to minimise the amount of personal assets that are to be confiscated by the State. We use accountants and experts to navigate the complexities and intricacies of tax legislation. No individual is ever expected to pay more than the prevailing rules require. Any individual who does pay more than required, and assuming his perfectly rational objective is to minimise the tax to be payed, is fundamentally incompetent. Any company which pays more tax than it should also demonstrates incompetence and is not demonstrating due care of its investors’ assets.
Individuals and corporations are not required or expected to pay more than what is due under the rules prevailing. The issue of ethics is in play when the rules are formulated and is also involved in the following of the rules. The act of payment is an ethical issue but minimisation of tax due is a matter of competence, not of ethics. Paying more taxes than are due demonstrates incompetence and gains no ethical credits. So when there is criticism of companies for “not paying enough tax”, the real failure is with the politicians who have made the deficient rules – not with the individuals or companies who have followed the prevailing rules to their own best advantage.
I would certainly not wish to invest in any company which was not sufficiently competent to keep its taxes to a minimum.
Tax evasion is illegal and demonstrates a lack of ethics with the taxpayer. Tax avoidance is a measure of the incompetence of lawmakers and of the competence of the taxpayer. I would go so far as to say that to pay more tax than is due is not just incompetent, but also unethical in being deficient in the due care of resources to be expected of any responsible entity.