British society favours the rich – the tax avoidance scandal makes this clear

British society favours the rich – the tax avoidance scandal makes this clear
Owen Jones, The Guardian

Life is cheaper for the rich. That holds for many reasons – not being saddled with personal debt, for example – but being able to use devious means to avoid paying tax is one privilege of the rich. Lord Fink tried to mitigate the embarrassment of his climbdown with Ed Miliband by claiming that “everyone” avoids tax. This attempt by wealthy individuals to sow mass confusion about what tax avoidance is must not go unchecked.

The retort of tax avoidance apologists always goes like this: “Ever bought anything from duty free? Got an Isa by any chance?” There are many ways to avoid tax, goes this line of attack, and everyone from a hospital cleaner to a multibillionaire hedge fund manager uses them. This nonsensical argument reinvents what tax avoidance actually is. As HMRC puts it: “Tax avoidance is bending the rules of the tax system to gain a tax advantage that parliament never intended.” To avoid tax is to not pay tax parliament intended you to pay; it is to go against the spirit of the law without going against the letter of the law; it is to exploit loopholes that by definition were unintended.

An Isa is a government scheme to encourage people to save. It is entirely intentional; it exists by design. You are not going against the spirit of any legislation by having an Isa; you are behaving as parliament expected you to. The same goes for duty free. Indeed, it would be scarcely less absurd to claim that personal allowances are a form of tax avoidance. Certain companies benefit from tax breaks – like the fossil fuel and renewable energy industries. These may well be described as subsidies, but they certainly do not constitute avoidance.

Shouldn’t the grievance be with the loopholes rather than the individual exploiting them? It is possible to target both. Tax avoidance is a conscious decision that requires effort. Some rich people and major companies elect not to use the clever forms of tax avoidance employed by, say, Starbucks or Gary Barlow. You are not compelled to do it; you choose to do it. Furthermore, your local cafe cannot employ the forms of avoidance used by Starbucks, which means using foreign entities to make it appear as though no profit is being made in Britain. They suffer from an unfair competitive disadvantage as a consequence.

Tax avoidance really underlines how different life is for the rich and for everybody else. Wealthy individuals can afford accountants to zealously hunt down loopholes and exploit legislation. The “big four” accountancy firms are themselves employed by government to advise on drafting tax laws. As the House of Commons public accounts committee has detailed, they then use their expertise to tell their clients how to get around the legislation they have helped to draft. Imagine benefit claimants were employed by the Department for Work and Pensions to draw up legislation on social security. They are not because British law is rigged in favour of the rich, while it cracks down on the smallest misdemeanours of the poor.

To avoid tax is to scrounge off the state. Rich individuals and major companies depend on the state: whether it be a financial system that was bailed out by the state; state-funded infrastructure; tax credits to subsidise the wages of their low-paid workers; a law-and-order system to protect them and their property; an education system to train up their workforce and those of other institutions they depend on; and so on.

Tax avoidance – particularly in an era of cuts and austerity – is indefensible. But it is a symptom of a wider problem. British society favours a mean and greedy elite. The financial disaster brought this injustice into acute relief, but there has been a concerted attempt to redirect popular anger to those at the bottom of society. Maybe, just maybe, that anger is beginning to shift upwards instead.