The stifling impact of being run by so-called “moderates” continues. On the BBC TV this morning, the programme is leading with the fact that a government finance minister, some hopefully soon-to-be-gone creature called David Gauke, is attacking people who have ever paid a builder, plumber or garage mechanic in cash so as to avoid paying VAT. Mr Gauke told his TV interloctor, in words that may haunt him, that he has never done any such a naughty thing, oh no.
The context for this is that the UK government has recently announced a campaign against what it defines, with worrying vagueness, as “aggressive avoidance” schemes. Not just “avoidance”, which is what happens if you hold a tax-advantaged fund such as a Self Invested Personal Pension, or if you do not smoke (avoiding tobacco duty), or don’t drive (avoiding petrol tax) or drink (etc). No, “bad avoidance” is if you structure your financial affairs in such a way as to pay as little tax as you can do so without actively defrauding anyone. An interesting notion. As we know, the UK comedian Jimmy Carr was recently hit by exposure of his tax-planning, and other celebs and sports folk have sometimes got into similar sorts of arrangements.
In as much as governments need to exist at all – and I am not an anarchist – there is a legitimate argument about the least-bad way to do this, and the simpler and flatter the tax regime is, the better. A huge chunk of this tax planning industry from which people like Jimmy Carr make use would vanish in a puff of smoke if our system was overhauled on the sort of lines recently proposed by the 2020 Tax Commission.
The trouble with the stance taken by Mr Gauke is that he presumes that there is some correct chunk of our wealth to which the State has presumed to take a share, and that any action we take to avoid tax might increase the tax burden paid by our fellow citizens. But what this man seems to ignore is, a), that an economy is not a static pie where my action must negatively affect someone else (that old zero-sum problem again), but an economy is something can grow through mutually beneficial trade, and that that, b), in a tolerably free society, the level of tax that citizens will pay has its limits, even if people don’t go in for some of the more artificial wealth structures to minimise tax (bearing in mind that it costs money to get an accountant/lawyer to set these schemes up).
Also, suppose that, instead of getting a builder into do a bit of work for cash to smarten up my flat or tackle an issue, I try and get a mate around to do the job for me in return for buying him a nice bottle of wine or editing some material for him/her? Is this not also wrong in the eyes of Mr Gauke? I guess it is. Even before I have done anything, the State is saying: “I want a piece of whatever action you engage in”. Taken to extremes, this penalises work over leisure. It is not surprising what the results are.
At root, this is a matter of basic political philosophy. In the main (there are exceptions), the current Conservative Party and its Liberal Democrat coalition partners subscribe to a deeply paternalistic, communitarian outlook of the sort that Barack Obama, in his recent communitarian-leaning “you did not build that” speech, could identify with. This is also a sign of how under Cameron, the Tory party has reverted to the older, more trade-disdaining traditions of old and away from its Thatcherite strains. How’s that working out for us?
People who make a living by getting paid in cash to fix windows, respray cars or mend pipes are not an evil. In the vast majority of cases, they are doing something about which someone like David Gauke, David Cameron or Barack Obama have been ignorant of all their lives: earning a living, and providing people with goods and services in a free market. They might as well try and understand life on Mars. It is shame we can’t send them there.
Update: The Daily Telegraph weighs in. It is not impressed by Gauke.