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‘Spirit’ of tax legislation is pure fantasy

19 April 2011


From Mr Simon McKie

Sir, — The letter from Julian Boys of Christian Aid (15 April) typifies the confusion that bedevils so much discussion of tax avoidance. He attempts to distinguish “companies that respond as intended to policy­makers’ attempts to use tax breaks to change their behaviour” from those who undertake tax avoidance on the grounds that in the former case “no tax is due.”

The very nature of tax avoidance, however, is that it involves so structuring one’s transactions that they do not incur, or they incur a lesser, tax charge.

Mr Boys then ignores his own distinction by admitting that tax avoidance is legal, but then claims that it “contravenes the spirit of the law”. The idea of tax legislation’s having a “spirit” is pure fantasy. It is true that those who design legisla­tion have a purpose in doing so. There is no reason at all why citizens should endorse the purposes of bureaucrats, governments, and legislators in drafting, sponsoring, and passing legislation.

Tax law is commonly drafted by civil servants and sponsored by governments who are at pains to hide the real effects of the legislation that they propose, and enacted by legislators who do not understand the provisions they pass. Nobody would design a tax system like ours if they were to start with a clean slate. It is irrational, unfair, and, in parts, incomprehensible. Most tax systems are. If we were to base the amount of tax we pay on the amount that is in accordance with the “spirit of the law”, no one would ever agree on their liability.

It is important that the tax system should be based on respect for the law and on a shared recognition, by taxpayers, of our duty to comply with it even where we disagree strongly with its content. That cuts both ways. A government that appropriates property not on the basis of the law but on its own view of the spirit of the law is simply a tyranny.

Tax planning is based entirely on this respect for the law. Deliberately confusing it with tax evasion, as Mr Boys does, is mischievous. Mr Boys refers to a “real scandal”. I suggest that the scandal is that a Christian charity, such as Christian Aid, should insult law-abiding taxpayers as “dodgers” and waste the money it raises for charitable purposes on such ill-thought-out political campaigns.

Rudge Hill House, Rudge
Somersetshire BA11 2QG

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