Dr Stephen Daly

The recent debate on tax in the UK has strayed into the murky area of questioning the relevance of morality. Chair of the Public Accounts Committee Margaret Hodge has stated that exploiting the complexity of tax law to reduce tax liability is “morally reprehensible”. David Cameron meanwhile in the last week voiced the opinion that there is a “moral duty” to cut taxes in order to allow people to spend more money on their families. What has perhaps been overlooked in relation to these assertions is that philosophers and jurisprudes for centuries have struggled to understand not only what influence morality has on the law, but also what influence it ought to have. As such, it seems unlikely that there will be a speedy resolution to the debate about tax law and morality.

Leaving aside the issue of what part morality ought to play vis-à-vis reducing tax bills, it is interesting to note that in certain circumstances there is no rigid figure as to what tax must be collected by HMRC. Taxpayers may find their tax bills to be less than that which is strictly owed under the law, without resorting to the use of ‘gimmicks’ or abuse of reliefs. As such, the tax which is raised from taxpayers is relative and this arises in two cases: first, where the law is fuzzy and second, where the law cannot be practically applied.

To explain this relativeness, it is worth recalling that HMRC’s primary duty is to collect and manage taxes and credits (Commissioners for Revenue and Customs Act 2005, s. 5). Within this duty is contained

“a wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, the highest net return that is practicable having regard to the staff available to them and the cost of collection”[1]

In the case of complex or fuzzy law where it is unclear as to the true amount of tax which is due, HMRC are empowered to arrive at a working interpretation which objectively satisfies the will of Parliament and in their opinion would raise the greatest amount of money in relation to that tax, over the course of all taxpayers. This same logic applies where the law itself is clear but would be impractical or unworkable in a certain set of circumstances. The Courts have found time and time[2] again that, where this arises, it is proper for HMRC to forego the full collection of tax in a particular case, so long as it is done with a view to raising the greatest amount of money for the exchequer overall.

Whilst morality will continue to cause debate as to its proper relevance in relation to tax, the relative nature of tax itself provides an interesting problem which is often overlooked. Complexity and resource constraints reduce the tax which might otherwise be due. With HMRC visibly struggling with the continuing reduction in resources (see here) and the increasing layering of complexity in tax law, this issue is set only to become more important. Should we not then be more concerned with reality than morality?

[1] Lord Diplock in the House of Lords in Commissioners of Inland Revenue v National Federation of Self-Employed and Small Businesses Ltd (1981) 55 TC 133, at page 163

[2] See R (on the application of Greenwich) v Commissioners of Customs and Excise [2001] EWHC Admin 230; R v Inland Revenue Commissioners, ex parte Unilever plc [1996] STC 681; R v CIR, ex parte Fulford Dobson [1987] STC 344; Commissioners of Inland Revenue v National Federation of Self-Employed and Small Businesses Ltd (1981)

Originally Published in COLR Letters to the editor here at http://corkonlinelawreview.com/index.php/2014/10/20/musings-on-our-shared-history/ and reproduced with permission

It has been much the repetitive mantra of late that Ireland and the UK have a “shared history”. Recent events in Ireland relating to tax however demonstrate both symmetries and asymmetries of this ‘shared history’. Whilst the introduction of new taxes is met with the same disdain in both jurisdictions, the relationship with multinationals offers an interesting distinction.

New Taxes

It is fair to say that the Irish public has not warmed to the idea of a Water Charge. This levy has spurred a series of demonstrations,[1] with more set to occur.[2] In December last year, during the second stage of the Water Services (no. 2) Bill 2013 in the Dáil, Luke ‘Ming’ Flannigan famously invited Minister of State Fergus O’Dowd to drink a glass of “piss” water he had retrieved from Castlerea in Roscommon.[3] Sinn Féin’s Mary Lou McDonald, elsewhere, has written that:

We are committed to fighting water charges as we believe that fresh, free-flowing water is a basic human right[4]

Much the same resistance accompanied the introduction of the Poll Tax by Margaret Thatcher’s Tory government in the late 1980s. The Poll Tax was a Community Charge which was levied at a fixed rate per adult, with reductions for the unemployed, disabled and students. There was considerable anger at this new tax. A series of protests were organized, with some famously turning into riots.[5]

Such symmetry between Ireland and the UK as regards backlash against additional charges should come as little surprise. Indeed, since time immemorial, it has been a cardinal rule that the public will not take kindly to new taxes. As far back as 1776, Scottish philosopher Adam Smith reflected upon the fact that novel taxes inevitably generate discontent

Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meet with some opposition. The more taxes may have been multiplied, the higher they may have been raised upon every different subject of taxation; the more loudly the people complain of every new tax, the more difficult it becomes too either to find out new subjects of taxation, or to raise much higher the taxes already imposed upon the old[6]

Inequality of Treatment

This dissatisfaction is often aggravated by the perception of unequal treatment: that not everybody is paying their fair share in the new circumstances but rather that what is being observed is the working class being squeezed to the benefit of the wealthy.

The UK has borne witness in recent times to such aggravated discontent. The perception of inequality came in the form of contrast between austerity measures affecting the populace and the ‘Sweetheart’ deals afforded to large multinational corporations. During the course of 2010 and 2011, it came to light that HMRC (the UK tax authority) had arrived at large settlements with both Vodafone and Goldman Sachs.[7] A backlash ensued, fueled in particular by protest groups who were apoplectic about the apparent benevolent treatment. For instance, the group UK Uncut forced the closure of up to 30 Vodafone stores by virtue of its protests[8] and subsequently took a judicial review action against HMRC in relation to the Goldman Sachs deal.[9]

However, such outspokenness in relation to inequality of treatment, with regard the tax affairs of multinational companies, has not travelled so well across the Irish Sea. This is particularly interesting in light of the 6 continuous years of austerity which have been inflicted to date. To this end, the accusation by the European Commission of a ‘Sweetheart deal’ between the Irish Revenue Commissioners and Apple has received a much more muted response in Ireland.[10] The Commission has claimed that the Revenue provided selective treatment to Apple, thereby breaching EU State Aid rules.[11] In effect, this amounts to the charge that Apple paid too little tax in Ireland.

Perhaps this contrast in public mood serves to underline a cultural difference between Ireland and the UK generally as regards relationships with multinationals. Before the US Chamber of Commerce in March of this year for instance, Taoiseach Enda Kenny remarked that it was the Government’s goal to “make Ireland the best small country in the world for business”.[12] Indeed, Barrister Kieran Corrigan presciently picked up on the Irish attitude to businesses and taxes back in 2000, noting the “public inclination towards [State-sponsored] tax avoidance”.[13]

Comment

Whilst there is undoubtedly a shared history between Ireland and the UK, it is not beyond the scope of asymmetries. Whilst the introduction of novel taxes produces an equivalent discontent, a corresponding anger towards large businesses is largely absent.

This is not to promote or criticise the prevailing Irish attitude to multinational companies, but merely to outline the curiosity in the contrast. It is notable that a subsequent report into the settlements with Goldman Sachs and Vodafone in the UK found the deals to be ‘reasonable’.[14] Only time will tell then whether the relative Irish reticence is justified.

[1] http://www.rte.ie/news/2014/1001/649163-irish-water-charges/

[2] http://www.irishtimes.com/news/politics/anti-water-charges-protest-due-for-dublin-on-october-11th-1.1949285

[3] http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2013121900017?opendocument

[4] http://www.irishmirror.ie/news/news-opinion/sinn-fein-td-mary-lou-3438040

[5] http://news.bbc.co.uk/onthisday/hi/dates/stories/march/31/newsid_2530000/2530763.stm

[6] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, (Strahan and Cadell: London, 1776) Book V: Chapter III p. 2

[7] http://www.publications.parliament.uk/pa/cm201012/cmselect/cmpubacc/1531/1531.pdf

[8] http://www.ukuncut.org.uk/about/

[9] http://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Judgments/uk-uncut-v-hmrc-16052013.pdf

[10] cf: http://www.theguardian.com/technology/2014/oct/05/apple-tax-investigations-europe-united-states-cork-ireland

[11] http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf

[12] http://www.merrionstreet.ie/index.php/2014/03/speech-by-taoiseach-enda-kenny-t-d-to-the-us-chamber-of-commerce-washington-thursday-13-march-2014/

[13] Kieran Corrigan, Revenue Law: Volume II (Roundhall: Dublin, 2000), 589; see also: John Cooke, “A Legal View of Tax Planning” (1995) 7 IT Rev 1355, 1361

[14] http://www.nao.org.uk/wp-content/uploads/2012/06/1213188.pdf

The Sunday newspapers lit up with news of Bono’s interposition into the debate on Ireland’s tax system. Referring to the current pressure from Europe in an interview with The Observer, Bono appeared defensive of Ireland’s generous tax regime:

“Look, Ireland is not going to back down on this. We are a tiny little country, we don’t have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we’ve known. That’s how we got these companies here. Little countries, we don’t have natural resources, we have to be able to attract people. We’ve been through the 50s and the 60s, and mass hemorrhaging of our population all over the world. There are more hospitals and firemen and teachers because of policy.”

Coming off the back of criticism of U2’s own tax arrangements, this intervention is perhaps unwise. Whatever else, at least Bono is consistent, as evidenced by his attestations in an interview last year in The Observer:

“[A]t the heart of the Irish economy has always been the philosophy of tax competitiveness. Tax competitiveness has taken our country out of poverty. People in the revenue accept that if you engage in that policy then some people are going to go out, and some people are coming in. It has been a successful policy. On the cranky left that is very annoying, I can see that. But tax competitiveness is why Ireland has stayed afloat.”

Ad hominem attacks aside however (and with Bono they come thick and fast!), it is worth untangling the general sentiment of his statements. On two counts, Bono is correct. First, it is true that low corporate tax rates are an historic feature of Ireland’s tax regime. When Saorstát Éireann (1922 predecessor to the Republic of Ireland) came into being, the Corporate Tax rate stood at 5%, although Income Tax was also levied upon companies at that time. It is 1957 which really marks the era of low corporate taxes wherein certain firms were subjected to overall rates of 10%. Second, Ireland has not had an entirely prosperous economic history and the 50s and 60s were incredibly hard.

Immediately, however, Bono’s logic has come undone, for whilst Ireland has had a competitive tax regime almost since her inception, economic prosperity did not arrive until the 90s. This suggests that there must be something other than corporate tax rates which drove the economic prosperity. Membership of the EU and Eurozone undoubtedly contributed. The IDA will claim some of the credit and the International Financial Services Centre in Dublin, which was created in the late 80s, has also clearly been a factor. More sinister is the probability that other unscrupulous tax benefits have had an effect, such as the treatment of dividends, controlled foreign companies, thin cap rules and corporate secrecy (see here).

Two propositions flow from this analysis. The first is that Bono has overegged the importance of Ireland’s tax system, failing to take account of the influence of the EU, IDA and IFSC. The second is that Bono has overstated by omission the moral integrity of Ireland’s tax system. More distinguished minds will debate which proposition is more correct. Whatever is preferred, it is clear that Bono is out of place in this debate.

Ultimately, this intervention serves as another reminder of the need for a more intellectually engaged discourse on tax issues.

The European Commission is certainly not letting up easy on Ireland. In addition to the investigation into Apple’s tax arrangements with the Irish Revenue Commissioners, it was reported last night in the FT that the Commission is now investigating the ‘Double Irish’ tax structure.

This highly controversial measure allows companies to significantly reduce their tax bills and funnel profits to tax havens by virtue of a mismatch in residency rules. In the US, residency is based on place of registration, whilst in Ireland corporate residency is determined by “central management and control”. To exploit this mismatch, US multinationals merely need to place assets, such as intellectual property, with an Irish registered company which is controlled from a tax haven, such as Bermuda.

For Ireland, this mismatch is relatively unintended but nevertheless incredibly surreptitious, given the number of people employed by multinationals. The Irish residency rule owes its genesis to the bygone days of the British Empire. In 1906, an issue came before the House of Lords as to the corporate residency of a South African incorporated mining company, De Beers Consolidated Mines Ltd. The Court ultimately decided that the company was resident in London as “real business is carried on where the central management and control actually abides”. This was a question of fact and the court was satisfied of London residence on the basis that the majority of directors lived in England; that the directors’ meetings in London were the meetings where the real control was exercised; and that London controlled the negotiation of the company’s contracts.

This is just one of many archaic rules which are no longer fit for purpose. It serves to highlight just one of the many difficulties which we face in the reform of International Tax Law.

For the time being however, it is the European Commission which is unilaterally seeking reform of the way in which companies are taxed and indeed, this is its modus operandi. One wonders however whether politically this attack is prudent on the part of the Commission, given the rise of Euroscepticism and the fact that direct taxation is a field in which EU Member States are thought to have retained competence.

Complexity is an ugly derivative of the tax system. There is even an argument to be made that it goes to the heart of the taxing provisions given that, fundamentally, the majority of items upon which we levy tax are artificial. For instance, the income which we eventually tax is not visible or tangible, but rather the result of a mathematical calculation. If we were to imagine the revenue that one receives for their job as a river which travels parallel to another river which reflects the costs and reliefs which were incurred in obtaining the revenue, then what we tax is the imagery stream calculated as the difference between the two.

Today’s leaked email to the Telegraph serves to highlight the pervasiveness of complexity and its impact upon ordinary taxpayers (see: here and here). This email reveals the difficulty which HMRC has had in administering the tax code. Four months ago, HMRC admitted to miscalculating the tax due from more than five million people in the 12 months up to April 2014. In response, HMRC sent out tax demands to those who had underpaid and repayment checks to those who had overpaid. It has now been realised that “thousands” of mistakes were made in this response, such that many may have been prematurely excited at the prospect of repayment and others unduly worried about tax demands. Of this episode, Elaine Clark of the Cheapaccounting tax practice has said: “This is extraordinary, a disaster, and heads need to roll at HMRC.”

Unfortunately these mistakes arising out of the clout of tax complexity are not victimless. Whilst sophisticated, well-advised taxpayers are somewhat sheltered from the shrapnel, the unrepresented, lower-paid and vulnerable are ultimately disproportionately affected. This arises by virtue of the fact that, as HMRC has stated, the problems have been caused by an increase in the number of people in employment that has come with the recovering economy. It is suggested also that a key driver, and closely related to HMRC’s point, is that lower-paid workers are taking several (newly available) jobs at any given time and may have failed to inform HMRC of this fact, resulting in too many tax credits being given.

At a conference at the Bingham Centre for the Rule of Law, Jane Shillaker of TaxAid spoke of the need to ensure that our tax system is “both designed and administered with the needs of the lower paid and vulnerable in mind”. This latest episode surely serves to illuminate the paramountcy of this request.

The Commission’s letter publishing the reasons for its investigation of Apple’s advance pricing arrangements in Ireland this week (available here: http://ec.europa.eu/competition/state_aid/cases/253200/253200_1582634_87_2.pdf) has spawned much debate in the tax community. Indeed, it comes against the background of some serious activity with regard to reform of Transfer Pricing. It appears thus far however, that one particular element of the case has been overlooked, namely, the relevance of Al-Fayed (Fayed v Commissioners of Inland Revenue [2004] SC 745).

This note will seek to give a background to the issues in Al-Fayed and how this might be relevant to the current Apple case. A detour through constitutional history, although not entirely necessary, provides a fascinating perspective to precede the analysis of Al-Fayed. Similarities likewise will be teased out briefly between the statutory scheme underpinning the Revenue authorities duties in both Ireland and the UK. Thereafter the issue of long-standing forward-looking agreements as arose in Al-Fayed will be analysed before finally examining the impact which that case may have on the current Apple issue.

Constitutional Background: The Gunpowder Plot & Catholic emancipation

In 1605, Guy Fawkes and others hatched the botched Gunpowder Plot to assassinate King James I. The ultimate goal of the scheme was to install a Catholic monarch, with religious tolerance having become unlikely under the reign of James I. 80 years and 2 kings later, a Catholic monarch was established with King James II. His reign was short-lived however as 3 years later his son-in-law William III of Orange invaded England on the request of the nobles. Thereafter, the Bill of Rights 1689 was passed which had the effect of curtailing the powers of the crown. Article 2 of this constitutional document reads as follows:

That the pretended Power of Dispensing with Laws or the Execution of Laws by Regall Authoritie as it hath beene assumed and exercised of late is illegall.

In other words, neither the Crown nor the executive has the power to exempt particular individuals or groups from the operation of an Act. At least as far back as 1689 in the UK accordingly, and against the backdrop of attempts at Catholic emancipation, it has been a constitutional principle that the executive does not possess a prima facie dispensing power.

It has been doubted elsewhere whether the Bill of Rights has effect in Ireland (Geoffrey Lock, ‘The Bill of Rights Act 1689’ (1989) 37(4) Political Studies 150), but nevertheless, this constitutional history provides an important framework within which the Revenue must operate. In the Republic of Ireland, the essential tenets of this principle are espoused by Article 28, which states that:

The executive power of the State shall…be exercised by or on the authority of the Government.

This renders the question of whether the Bill of Rights was imported into Ireland (by virtue of Article 73 of the 1922 Constitution (of the Irish Free State) and thereafter Article 50 of the 1937 Constitution (Bunreacht na hEireann)) as essentially redundant for our present purposes and thus relative constitutional symmetry with respect executive authority and the prohibition on dispensation has been established.

‘Care and management’ of taxes: Administrative Discretion

More importantly, however, Statutes of the United Kingdom must be read against the Bill of Rights. Accordingly, s. 13 of the Inland Revenue Regulation Act 1890 provides that the Revenue ‘shall collect and cause to be collected every part of inland revenue, and all money under their care and management’. In layman’s terms, this dictates that the Revenue is under a duty to collect the taxes which the legislature has prescribed to be due. Part 2 of S.I. No. 2/1923 – Revenue Commissioners Order, 1923 incorporated this section into Irish Law. On the converse, Article 2 of the UK Bill of Rights 1689 and/or Article 28 of the 1937 Irish Constitution likewise prevent the Revenue authorities in both jurisdictions from exercising a general dispensing power in favour of particular taxpayers.

Plainly, however, practical matters such as resource constraints and complexity in legislation ensure that neither Revenue authority is bound to this binary. An administrative discretion is necessarily and axiomatically inherent in the duty of the Revenue to collect all taxes due. To fail to acknowledge this would be to endorse a Diceyan view of the rule of law (see: Galligan, Discretionary Powers: A Legal Study of Official Discretion (Clarendon, Oxford, 1986)). Thus, when the Revenue authority is endowed with responsibility for the ‘care and management’ of taxes as occurs in both Ireland and the UK, an administrative discretion arises. In the UK, this concept has been dubbed ‘managerial discretion’ (R v IRC, ex parte National Federation of the Self-Employed and Small Business [1982] AC 617, 636 (Lord Diplock))

Al-Fayed: The legality of forward-looking agreements

As the symmetries between the constitutional and statutory positions of the Irish and UK Revenue authorities have now been dealt with, it is now time to turn to the UK case of Al-Fayed.

The three Al-Fayed brothers were (and presumably still are!) wealthy Egyptian Businessmen who entered into a forward-looking agreement with the Revenue. This agreement concerned the level of taxes that would be paid by the brothers to the UK Revenue for prospective years. It was accepted that the three family members concerned would be subject to tax on foreign source income and capital gains on the remittance basis [para 4]. This being the case, appropriate arrangements could be put in place to avoid or minimise the charges [para 7]. To avoid the economic expense of actually putting such arrangements in place, the Fayeds negotiated with the Revenue forward-looking tax agreements in which the taxpayers would pay specified annual sums in respect of future years of assessment. The quid pro quo for the Revenue was that it would be incredibly costly to actually investigate the circumstances of the Fayeds and the Revenue would also face significant litigation costs if they were to challenge the affairs [para 12]. The Court ultimately held however that the agreement was outwith the ‘managerial discretion’ of the Revenue and thus ultra vires.

Several factors which drove this decision are relevant in terms of the Apple ruling, upon which I will shortly deliberate. First, even if the sum to be paid under an agreement between the Revenue and the taxpayer was a reasonable estimate of the taxpayers’ liability at the outset, it could not be taken as a measure of that liability throughout the period. The amounts involved could obviously change, as indeed could the provisions of the tax system. As such, the agreement would invoke a failure on the part of the Revenue to exercise its duty to collect taxes and thus its managerial discretion [para 74]. Further, the agreement contained no provision for termination or alteration on a material change in circumstances [para 80]. Second, when the agreement at hand was made, it was not based on any current information but had merely been updated from the figure which had been used in a previous agreement 12 years previously [para 79].

Al-Fayed accordingly serves as a lesson on the parameters of the administrative discretion which the Irish and UK Revenue authorities hold.

Apple and its current EC woes

The relevance with respect the current Apple case is in the parallel elements from Al-Fayed which were present in the 1991 and 2007 rulings which Apple obtained from the Irish Revenue Commissioners. The issue of State Aid ultimately hinges upon the Commission making out that Apple was subjected to selective benevolent treatment (Commission’s letter para [48]). If the Commission were to make out a case on the basis that the 1991 and 2007 rulings were contrary to Irish Law at the time, this criterion would likely be satisfied and this is where the Al-Fayed case becomes relevant, namely on the basis that the agreements were outwith the administrative discretion of the Revenue Commissioners. As noted in the Commission’s letter:

[T]reating taxpayers on a discretionary basis may mean that the individual application of a general measure takes on the features of a selective measure, particularly, where the exercise of the discretionary power goes beyond the simple management of tax revenue by reference to objective criteria. [para 52]

The two factors outlined above in Al-Fayed appear from a reading of the Commission’s letter to be present in the Apple case. As to the first point, the Commission is doubtful as to whether the original ruling in 1991 was in fact based upon reasonable or commercial estimates:

[The Fact that] the taxable basis in the 1991 ruling was negotiated rather than substantiated by reference to comparable transactions…reinforces the idea… that a prudent independent market operator would not have accepted the remuneration [allocation] [para 58]

Furthermore, there does not appear to have been any amendment or review in light of any change of circumstance between 1991 and 2007, even if the initial agreement was commercially reasonable. The parallel with Al-Fayed is quite striking on this point:

[The 1991] ruling was applied by Apple for fifteen years without revision. Even if the initial agreement was considered to correspond to an arm’s length profit allocation, quod non, the open-ended duration of the 1991 ruling’s validity calls into question the appropriateness of the method agreed between Irish Revenue and Apple, given the possible changes to the economic environment and required remuneration levels [para 65]

As regards the second factor from Al-Fayed, the Commission has expressed misgivings about the 2007 agreement and whether it was based upon relevant, timely information:

[T]he profit allocation to the [relevant Apple subsidiary], agreed in the 2007 ruling, does not factor in the evolution of sales. In fact…the sales income of [the Apple subsidiary] increased by 415% over the three years 2009-2012 to USD 63.9 billion. For the same period, the operating costs as reflected by the taxable income (which represents around [8-18]% of operating costs of the branch according to the ruling of 2007) increased by [10-20]%… [T]he discrepancy between the sales growth and the growth of the Irish operating capacity, cannot be explained. [para 67] [My emphasis added]

On the basis of the above, there is a case to be made that there are parallels between Al-Fayed and the current Apple case. In both cases, there was either a failure, or lack of a provision, to review the agreement in light of changing circumstances. Similarly, the later agreement in both cases was based upon information which may not have been timely. It is necessary, however, to insert several caveats at this point. The first is obviously that Al-Fayed was a UK case and that the Apple case concerns Irish (and EU) law. As I have attempted to stress above however, there are symmetries between the constitutional and statutory laws in the jurisdictions. A much more important caveat is that to date, we have just seen one side of the argument. For instance, there may be more correspondence between the Revenue Commissioners and Apple between 1991 and 2007 than we are being shown and most definitely stronger reasons justifying the arrangements. It is important to remember in this respect that as soon as a boxer gets the first hit, the opponent immediately looks worse. But as we know, the fight does not end there.

We need to shift the discourse.

Too often taxes are justified or debated on the basis of what one gets out of the tax system. Like the NHS? Pay your taxes. Like good schools? Pay your taxes. Fire-service? Pay your taxes.

But this feeds a misconceived impression: that what you pay in taxes, you get directly from the system. Unfortunately, it is not so simple-if it were that simple, it wouldn’t be called tax…it would simply be payment! Tax, by definition, hinges on the idea that there is no correlating benefit.

This focus on direct benefit however leaves a gaping conceptual hole. What about the people, mobile workers for instance, that actually do not use the resources which taxes pay for and yet are forced to pay? Likewise, what about the people who only take and never give back? These “us v them” arguments become too easy to make.

We need to take a step back and look at the system as a whole. We need to stop focusing on what taxes pay for and instead think about why they are paid in the first place. It is often quipped that taxes represent the price paid to live in a civilized society. I would agree, but a stronger reason emerges when we look at the reason there are even things worth taxing. The banker in London, for instance, who earns £1mil in income, might believe they have pulled themselves up by their own bootstraps and take little out of the system. But this narrative is blind to the real forces: would one get £1mil doing the same job in Mozambique? No. The fact is that there are few places in the world which value to such an extent the banker’s particular skill set. The tax the banker ought to pay is not derived from the fact that they will get the tube to work but rather because they wouldn’t have earned that money in the first place if it weren’t for London!

Lets stop focusing on the benefits and look at the reason taxable items even arise. Let’s shift the discourse.

I should add a proviso at the same time however: Governments must demonstrate that the taxes being levied are going to pay for programmes, assets or policies that are actually needed. But that is a different story for a different blogpost.