According to Hugh Cortazzi (Nov. 28 article, “Failures in market economies“), “When people and companies enjoy the benefits open to all in Britain. … [yet] do all they can to avoid paying tax, their behavior is immoral.”
Cortazzi is making a moral argument about tax avoidance, but fails to consider the morality of the tax regime itself.
Most industrialized nations have a tax regime that is complex and opaque, used as much for social engineering as for generating revenue. Labeling legal tax-avoiders as “immoral” in countries where double, triple or quadruple taxation is the norm is the very definition of hypocrisy.
There is nothing immoral about using legal means to lower one’s tax liability. In fact, every time we choose not to buy something, or not to look for a better job, we are avoiding the consumption tax and payroll taxes, respectively.
For their part, businesses have a fiduciary obligation to protect the interests of their shareholders and customers, who are after all the ones who actually pay the corporate tax through higher prices and reductions in stock value.
So-called tax havens are good for society because they put downward pressure on jurisdictions with confiscatory tax rates. When a new grocery store opens up across the street from an old one, we tend to see the ensuing price war as a good thing for consumers. The same holds true for tax competition.
Furthermore, tax competition forces governments to make the best of the revenue they get, because waste and corruption encourages tax avoidance.
If industrialized nations made their tax regimes simpler, more transparent and less reliant on multiple taxation, individuals and businesses would have reduced ability and reduced motivation to avoid or evade taxes.
The opinions expressed in this letter to the editor are the writer’s own and do not necessarily reflect the policies of The Japan Times.
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