Tuesday, April 09, 2013

Tax avoiders bad: tax takers good?

Despite everything you might hear, most New Zealanders mostly pay their taxes, on time and in full. We’ve got a very good compliance rate here. Somewhere between 80% and 90% of taxpayers pay their tax on time, and over 60% file their returns on time.

Like we have any option? The case for citizen buy-in is impossible to assess or prove when the law forbids choice.

People who won’t pay their taxes free ride on other New Zealanders.
Tax aoviders not only free ride on other New Zealanders, but they undermine the whole tax system. Tax compliance is a trust game: if people think that other people comply with tax law, then they are more inclined to do so themselves. But if they think that other people are rorting the system, and not paying taxes, and squirreling money away, then they lose confidence in the system, and start to avoid paying taxes themselves. The reasoning is straightforward: who wants to be the only schmuck left.

This interests me because it's exactly the same thought process I've heard blamed for benefit exploitation in Europe. The reason for the decades-long increase in people relying on state hand-outs is attributed to progressive capitulation from those thinking, "If you can't beat them, join them." The more normalised living off the state becomes, the greater the benefit uptake will be.

The one defense that these tax avoiders might try is that their activities are perfectly legal...But even if the procedures used are legal, it’s not clear that they are ethically acceptable. This is in fact the closest I can get to understanding exactly what a rort is: it’s something that is technically legal, but nevertheless pushes the law to such an extent that it is immoral.

Again the "perfectly legal" tax avoidance defence has its parallel with the 'perfectly entitled' tax take defence. Many have become far more concerned with legal entitlement to benefits than moral.

But look what follows:

We’ve heard a great deal of nasty rhetoric about people on benefits in recent years, but very little about the scungy behaviour of tax avoiders and tax evaders.

By Russell's logic, we should be hearing "nasty rhetoric about people on benefits" if the behaviour of tax avoiders and evaders is also "scungy". If people who don't pay tax are "free riding" so too are those who take it when they do not need to.

The problem is both groups are failing to accept her "common good" philosophy.

This isn't a defence of greed or laziness. But without the "common good" ends realised only via state force, those character traits would be visited upon their bearers - not you and I.


Allan said...

Taxation is theft end of story. You are forced to hand over money to a Government who then decides how to spend the money. You have no say in how this money is spent. I would not mind paying say a flat 15% tax rate which was then used to fund Education, Health, The Armed Services and the Law and Order areas of our Society. It is the constant utter waste of money being spent on an ever increasing Welfare budget and Waitangi Claims to name a couple that really makes me angry. Our tax rate is exhorbitant and discourages enterprise and hard work. No wonder those who can afford it go out of their way to find tax havens. I firmly believe that the tax take would actually increase if we had a fairer system with a 15% flat tax. People would not mind paying this so tax avoidance would not be an issue.

James said...

You are no more morally obliged to pay taxes as you are to offer your body to a rapist...

Now "Paying your way for what you want and use".....very different thing altogether...

Coercive taxation is not needed to supply free market wants and needs...so why does State need to do it for the services it provides that people WANT?

Anonymous said...

Just reading "Twisting the Treaty". Nice to see the rich Maori businesses are charities and don't pay tax like a conventional business would. Nice rort bro.