Tax avoidance: Not illegal, just harmful and deviant?

Rowland Atkinson - Associate Fellow, SPERI and Research Chair in Inclusive Society, Department of Urban Studies and Planning, University of Sheffield

Another key problem for our elites following the Panama Papers revelations relates to the increasingly clear impression we have of a class of people who are defined by their finances and whose allegiances are built around these interests. This is a class or group for whom identity is increasingly structured by however, and wherever, fast money can be made and enlarged, rather than through any sense of being part of a national or local community. What is revealed is a newfound robber-baron logic of plunder and secede that sees the wealthy secreting their money where it can grow and avoiding their national tax regime. In a political context in which an entire political project has been built upon the idea that there are limited resources to run essential public services (and new resources need to be found) the entwined sense of wealth and avoidance feels like nothing less than grand betrayal.

Because of these problems, of inequality and a rather profound breakdown in social cohesion, there is now a deep legitimacy crisis at work. This will not be explained away by an appeal to a legal/criminal distinction or the idea that the wealthy are like the majority of us. Instead it is much more likely that judgment will be formed on the basis of a belief by many that the structures of our economy work to privilege those who seek to avoid, work around and undermine forms of collective purpose and provision. Linked to this is the growing recognition that what we have seen thus far is only a glimpse of the trillion dollar economy of offshore finance placed by individuals looking to make more money for themselves than they can within their own tax jurisdictions.

So the key question ultimately generated by this mess is – if we are not in fact in this together, whose side are we on?

Where politicians and corporations apply the ‘not illegal’ defence then counter-arguments are only likely to be bolstered amidst the sense of social outrage. Criminologists have long observed how socially harmful practices (in this case tax avoidance) can move to become recognised as a form of social deviance that generates shame among those engaging in such behaviour (slavery, smoking, domestic violence can be given as examples of such transitions). Another possibility seems even more likely – that we are seeing the prelude of more concerted attempts at legal prohibition that are founded on this moral outrage as well as plausible economic evidence regarding the damage of avoidance. Here the difference between evasion and avoidance may yet be the winning or losing of the next election, rather than the well-worn anecdote about it being the thickness of a prison wall.

It seems a distinct possibility that much tax avoidance will become defined as tax evasion because the majority population feels that it is morally right to frame such behaviour in this way. Moves to prohibit anonymous ownership of offshore investments seem to be a precursor to this. A synoptic world, in which the many closely watch the few, is fuelled by social media and instant leaks of millions of documents that also drive moves in this direction. Strange as it may seem, the weakness of a plutocracy today is that it emerges into conditions of counter-surveillance that may challenge its ascendency. In a world run to the rhythms of money and little else the legitimacy of plans to raze public housing, reform public health systems, cut essential social care while protecting those with profound wealth seem at worst extraordinarily callous, at best plain wrong.

The case for alternatives to austerity and a deeper form of collective endeavour is made all the stronger by the Panama Papers and, no doubt, other revelations to come about the secret life of our elites.