Fabian's Blog

Paying one's taxes

The recent revelation that HSBC has provided advice to its wealthy clients on how to avoid some UK taxation by holding money abroad has provoked yet another level of justified outrage against the world of banking. Yet I wouldn’t mind betting that among those who have used the bank ’s services are some who are vociferous critics of the government failing to fund such issues as the provision of drugs, care for the elderly or even perhaps the state of the railways. We are all sometimes attracted to the ideas of excellent state provision yet, secretly, we don’t actually want to pay for it ourselves.

In all the places I have visited around the world as an MP, I have often come across the culture of tax avoidance. I am happy to say that in the UK we seem more committed to paying our taxes than most others. However, we are not immune from temptation, as the HSBC revelations show, as indeed has the fuss surrounding Ed Balls and the question of whether or not we should insist on receipts for all the goods and services we pay for using cash. Much of the difference in philosophy between political parties is an argument about the size and role of the state. A state needs money to do its work. When we conspire to withhold some our own money from the state, perhaps we are saying either that the state should do less or perhaps we feel that it should not cost as much.

We can legislate to block the latest loophole that has been discovered in taxation rules but that can  just provide an additional challenge for the accountants that those with lots of money can afford to pay. We need some different approaches.

Somehow we could do with a greater culture of pride in paying our taxes; a pride which stems from satisfaction about how the money is used. I welcome the recent introduction by HMRC of the letter to taxpayers that details how much of ones personal tax payment has gone into each category of government expenditure and it is salutary to realise just how much is used for some aspects such as education and how little (relatively) is used for others such as Europe. This needs to go further. I do not want to see HMRC letters turning into detailed balance sheets but there could be scope for giving some breakdown of the way, for example, the money spent on benefits, education, health care and defence is distributed within those areas. I know it would be an anathema for any chancellor but perhaps we could also explore some degree of taxpayer discretion allowing each contributor some say on where part of their taxes were spent. Would it totally undermine budgeting if I could decide the specific areas where (say) 5% of my income tax payments were spent? I would love to swing a greater proportion of my personal taxation towards the building of more social housing.

Back to the bankers and those paying cash in hand. I hope that there is a mechanism  properly to fine any bank that connives with tax avoidance and if there isn’t we need more legislation and closer regulation. On the level of the small trader we need greater integrity with all businesses and self employed persons required to submit returns using chartered accountants whose own businesses and integrity would be put at risk through accrediting business records and tax returns that were implausible. We will never find the means of policing individual transactions. If I paid my neighbour in cash to wash my car and then he paid me to cut his hedge we could both be seen as cheating the taxman. We could, on the other hand, not bother with the money and just say that one good turn deserved another. So the only way forward is to raise the profile of personal responsibility and integrity.

I do not think my ideas go very far and I would love to provoke a debate on these issues.