The explosive coverage of the “Paradise Papers” is remarkably revealing, though not in the way you think.
Of course tax evasion is wrong, but tax avoidance is legal.
However, you would struggle to draw that conclusion from the media coverage. I bet focus groups show people think tax avoidance is illegal.
The remarkable thing about the Paradise Papers is that the entire coverage is back-to-front. It shows that, as a society, we have a corrupted view of economic liberty and property rights.
The state’s right to obtain our property is being put above the individual’s right to defend it.
The contemporary view of economic liberty has become far too narrow. Democracy is not a guarantor of both political and economic freedom. Democracy and interventionist states go hand in hand, and interventionist states need to be paid for. In order to pay for them, economic liberty has been sacrificed at the altar of statism.
We need what the American philosopher John Tomasi has described as a much “thicker” concept of economic liberty, on a par with natural rights.
Essentially, thicker economic liberty means that economic freedom takes on as much importance as other freedoms and is raised to the level of a natural right. In philosophical terms, owning oneself (maximising individual property rights) becomes central to economic liberty.
Much of the language around the release of the Paradise Papers suggests that the very wealthy are ducking their responsibilities by failing to pay their fair share. But this is nonsense.
The top earning one per cent of Americans pay nearly 50 per cent of all federal income tax revenues. The top one per cent of British taxpayers pay nearly 30 per cent of all income tax. If there is an unfairness, here, I would suggest it’s in the opposite direction to the conventional wisdom. The top one per cent have a good case for saying the system is unfair towards them.
The second President of the United States, John Adams, stated that the commandments “thou shalt not covet” and “thou shalt not steal” must “be made inviolable precepts in every society before it can be civilised or made free”. Wise words which are ignored today, when we covet the incomes of the wealthy, and view taking their money as a right. The re-distribution model encourages covetousness and the belief that the state has a right to the property of others. However, though it may have the legal power, it doesn’t have this natural right.
I also think this week’s coverage has smacked of rank hypocrisy at times. Many of those doing the castigating would probably operate the exact same tax avoidance schemes if they had the income to do so.
The underlying problem here is not that the wealthy are paying too little, but that the state is taxing and spending too much.
Research and common sense suggest that the super rich are highly sensitive to tax rates in their decision as to where they want to locate. The sensible response to the Paradise Papers would be to say that, in a twenty-first century world of footloose entrepreneurs, we should tax them less, so that they want to live and work in Britain.
Sadly we seem to want to do the exact opposite.
In the 1970s, the then Labour chancellor Denis Healey was reported as saying he wanted to “squeeze the rich until the pips squeak”. Four decades on, British politicians are trumpeting the same message.