Tax evasion and the deficit: another argument for reform

This article by Eoin Clark makes the case that the total tax evaded under New Labour  is – within ten percent or so – the amount by which the national debt – the accumulated fiscal deficit –   grew over the period.

Therefore, the argument goes, if there had been no tax evasion, there would now be no additional debt, to which we must of course add a giant CETERIS PARIBUS, and an even larger reminder that they never are. Nevertheless, some part of the principle still applies – if more people paid more taxes, the deficits and the debt would have been smaller.

So what are we to do about it? The answer, “deal with tax evasion”, is far too glib. People evade taxes because the tax system is full of loopholes. You cannot simply close them without triggering many unintended consequences….. and it is a fair bet that every loophole is there because some particular lobby group lobbied for for it. Some of them even you will agree with. There has to be a clear exposition of how to deal with tax evasion.

There needs to be a total rethink on what taxes are for, why we pay them, and how we should collect them. Fair taxes, transparently levied on a concrete, objectively-determined base, to pay for an appropriate set of communal services.

Tax avoidance and evasion are possible because we have a broken tax system: one in which tax advisers prosper. Simplify taxation, so everyone pays everything that they should and tax advisers turn their talents to something productive rather than leeching

Note that I am not saying we should outlaw tax advisers. We should just stop having a tax system in which they can prosper by playing off evasion and avoidance – in which there is no demand for tax advisers. The existent of a tax advice profession is a strong indicator of a tax system that is too complex.


1 comment so far

  1. Quotebag #61 | In defense of anagorism on

    […] “The existent of a tax advice profession is a strong indicator of a tax system that is too complex.”—ejoftheweb […]

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