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Obeying the law is not enough – you have to read politicians’ minds, apparently

Here is a classic piece of nonsense to start this week in chilly Britain:

The UK tax authority said the amount of tax that big companies may have underpaid by using artificial intercompany transactions to inappropriately reduce taxable profits has risen 48 percent last year. The figure comes as public anger grows over tax avoidance by big businesses and British MPs investigate possible remedies.

– (From a report from Reuters.)

I read this report carefully and nowhere does it say that the firms concerned have broken laws, engaged in fraud, or used violence or engaged in criminal acts. They are taking full advantage of the laws of the jurisdictions with which they have contact, as their shareholders would expect them to do in maximising shareholder returns. If politicians really wanted to reduce what they see as such dodgy tax avoidance, perhaps they should enact taxes that are simple, low, and flat. This is not rocket science, as the 2020 Tax Commission report issued last year showed.

The recent naming and shaming of Starbucks, for example, of simply making use of legal arrangements, was particularly odious. No wonder people are thinking that we are living in a world like something from the pages of Atlas Shrugged.

Tim Worstall writes about this sort of issue a lot, usually in the process of skewering that socialist “accountant” from Wandsworth, Richard Murphy. Tim is always entertaining and instructive at the same time.



15 comments to Obeying the law is not enough – you have to read politicians’ minds, apparently

  • Andrew Zalotocky

    The social democratic Leviathan is rapidly running out of other peoples’ money. So the statists are becoming increasingly desperate to find some extra source of revenue to stave off economic reality for a little bit longer. The definition of “tax avoidance” will be stretched to the point of absurdity as they try to pretend that the state isn’t really broke, it’s just being swindled by dirty capitalists. It’s only a matter of time before they start denouncing “hoarders and wreckers”.

  • Simon Jester

    One minor quibble, JP: R. Murphy genuinely was an accountant, responsible for ensuring that many of his clients’ arrangements were as “tax-efficient” (read: tax-avoiding) as possible.

    It’s his pretensions to being any kind of an “economist” that Mr. Worstall skewers, on a regular basis.

  • Andrew Duffin

    I await with trepidation the loss-making Guardian’s campaign to name and shame people (such as myself) who do not pay tax on the interest they receive on their ISA’s.

    That’s the next logical step is it not?

  • Lee Moore

    I don’t want to alarm you unnecessarily, Andrew, but I am willing to bet you a fiver that the tax free income from ISAs will be capped before, say, 2020. I am not willing to bet on the figure – which will in any case change, as the reform will initially be brought only to hit “the rich.” Say income of £25,000 or more pa in an ISA. It’s a matter of fairness, you see.

    I agree with y’all about the wickedness of extra-legal tax threats, but that ship sailed a long time ago. The real problem is not so much venal politicians or the Grauno-Beebist sections of the media, it’s the courts. Starting with the Ramsay judgment, the courts have progressively abandoned any pretence of sticking to the rule of law in the field of tax. It started off by being cloaked in a fog called “the new approach” , it then morphed into a sophistry called “purposive construction” and is now simply a straightforward acknowledgement that tax is not a legal but an administrative exaction.

  • Johnathan Pearce (London)

    Simon, I know, but given his ignorance not just of economics, but even of basic legal concepts – such as the difference between avoidance – which is not criminal – and evasion – which is, there is no way I would want this man to do my accounts.

  • Sam Duncan

    Andrew: What interest?

  • Paul Marks

    In Britain and the United States we are moving further and further away from clear laws – towards government by “discretion” (whim).

    It was bad enough under “legal positivism” (i.e. the doctrine that government could make any rule and declare it a “law”), but now (as J.P. points out) we are into the world of guessing the rulers whims – and trying to please them.

    It really is a bad as this.

  • PersonFromPorlock

    It was bad enough under “legal positivism” (i.e. the doctrine that government could make any rule and declare it a “law”)….

    Paul Marks
    January 21, 2013 at 7:24 pm

    I can get whole choirs of Lawyers upset by declaring that “In a legal positivist world, Lincoln’s famous dog really does have five legs.” Then I top it off with “The real translation of ‘befehl ist befehl’ is ‘the law is the law’,” and finish up with “The ‘rule of law’ isn’t a suicide pact.”

    Law is fun and easy once you realize that most of its complexity comes from lawyers trying to find principled reasons for having their cake and eating it too.

  • Nick (nice-guy) Gray

    You can avoid the whole mess by giving all your money to the government! Who needs to live, anyhow?

  • veryretired

    We are under an extreme threat of possible economic and social collapse due to our falling victim to two damaging and intertwined ideas—

    First and foremost is the fundamental progressive idea that the public is in danger from the actions of private people engaged in entirely lawful behavior if that behavior is economic in nature, and that the necessary antidote to that threat is to continuously enlarge the power of the allegedly benign state in order to protect the public from the depredations of their fellow citizens.

    Second is the unintentional, but very real, takeover of the apparatus of government by one very self-interested guild of lawyers, which has legitimized the idea that any and all problems are amenable to a legalistic solution, which is written, enforced, interpreted, and adjudicated by a single small group of legal professionals who control all three branches of government.

    Removing, or significantly weakening, these underlying foundations will make it much easier to reform the over-arching state and bring its powers and spending back under control.

  • Paul Marks

    Yes veryretired – the media (especially the entertainment media) present businessmen as the threat to ordinary people, and the education system (the schools and the universities) has already made many people open to such propaganda.

    As for the lawyers – they are not just greedy, they are ideological (power hungry). As you know.

    PersonFromPorlock – yes Legal Positivism is absurd (Hans Kelson and co led the study of law to a dead end, indeed to the death of law – they are really the return of Thomas Hobbes, and therefore the natural enemy of a “student of the common laws of England”). Jurisprudence has basically become a dead subject now – which is why modern lawyers are so hopeless with things like the Ninth Amendment (which was intended to be the First Amendment – Madison messed up the order, the Ninth was intended to be the First and the Tenth was intended to be the Second) and the introduction to the Constitution of Texas (1876).

    Nick (nice guy) Gray – yes that does appear to be the plan of the collectivists (sorry the “liberals”).

  • lucklucky

    Glenn Reynolds Instapundit just made text about “Due Process When Everything Is A Crime”


    Results of evolution that turns Democracy into Totalitarian Democracy.

  • Paul Marks

    lucklucky – the Glenn Reynolds quote from Atlas Shrugged is good.

    But he is mistaken, things ARE “that bad yet”.