How many tears will be shed in the UK if Richard Branson loses his airline and his island? Credit: James D. Morgan/Getty


May 4, 2020   6 mins

According to Jean-Baptiste Colbert, minister of finance to King Louis XIV, the art of taxation consists of plucking the goose so as to obtain the greatest quantity of feathers with the least possible amount of hissing.

In France, Poland and Denmark, they’re trying a different approach during the coronavirus crisis: geese that don’t provide enough feathers can hiss off. Those states have declared that companies that have used tax havens to reduce their tax liabilities will not be eligible for state aid to get them through the current downturn.

Britain hasn’t — so far — announced anything so stark, but quieter echoes of such thinking can be detected in the Government’s emergency bailout measures.

While Rishi Sunak has offered furlough schemes for salaried workers and support for many of the self-employed, the Treasury has so far declined to offer a specific package for people who are self-employed and paid through a limited company of which they are the sole director. That arrangement can have tax advantages to contractors, who pay themselves dividends instead of a salary.

(In the interests of transparency, I should note that some columnists use such a device for their journalistic earnings. I am not one of them.)

The refusal to include self-employed directors in the bailout has caused no little distress and anger; some of those people are contractors to big companies who have insisted that they will only pay fees to limited companies, not to contractors personally.

Yet the Treasury’s view, rarely stated explicitly, is not too far away from that of the French, Poles and Danes: if you choose to minimise your tax bill and pay less in to the state, you go to the back of the queue when the state is dishing out cash.

That’s an interesting place to start a conversation about tax after the crisis. Here, I do not mean the level and allocation of taxation. Those are second-order questions. I mean the purpose and nature of taxation. Never mind how much tax you pay, ask yourself why you pay it.

Historically, the point of taxation has shifted. Originally a tithe extracted by monarchs to support their households, tax became a levy imposed to support certain national endeavours (UK income tax was famously a temporary measure introduced by Pitt the Younger to fund the war against Napoleon) and then… what?

Whatever you think tax is now for, it is a fact of life in any modern economy, because such economies need a state and that state must be funded. But current taxation everywhere goes well beyond that needed to provide a de minimis state that offers nothing more than national defence and the rule of law. Taxes fund services and social security, healthcare and education, a range of activities that would have been unimaginable to Pitt.

But describing the things tax does is not the same as answering that question about why we pay it. Because there are two distinct answers to that question. For some, tax is transactional: you pay in and you expect to get something back.

Anecdotally, I know this idea of transaction is widespread and powerful. I used to work for a newspaper that often argued for a smaller state that spent less and lived within its means. Yet when the Coalition government of David Cameron moved to remove child benefit from higher-earners, we were inundated with angry letters from readers arguing that they had paid their dues in tax, so they deserved to get a regular handout from the Exchequer — even if they did use it to buy a slightly nicer bottle of wine in Waitrose.

Likewise the state pension. Any politician who dares to question perks such as the winter fuel allowance and the seriously expensive triple lock of guaranteed annual rises immediately faces a storm of fury from recipients insisting they have “paid their stamp” and are thus entitled to endlessly rising living standards. Never mind the fact that their “stamp” was spent years ago and their pension payments are funded from taxes levied on today’s workers.

Is tax just a mandatory subscription fee you pay to provide yourself with services you might or might not want and might or might not use?

Another way to see tax is an insurance premium towards a group policy. This view is closer to the narrow financial facts of tax: the amount we pay in is not related to what we get back.

If you’re a privately-educated high-earner who drops dead at 60 without reaching a hospital, you may well contribute far more to the Exchequer than you receive in direct services. And if you’re born disabled or develop a complex chronic condition that limits your ability to work, you’ll very likely cost the state more than you pay in tax.

Government responses to the Coronavirus crisis show that insurance policy paying out, and might just shift, a little, the way politicians talk about tax. By and large, politicians tend to speak of tax as a necessary evil, something they try to do to people without them noticing too much. Hence the continued resonance of that Colbert quotation I began with: it’s used again and again in books and articles about tax, and with good reason — it’s still relevant today.

If you present tax as that necessary evil, tax avoidance and evasion make a certain logical sense. Especially if you believe (rightly or not) that you pay more in than you get back.

That belief is most often found in “self-made” people who have made money in business and appear to believe that their success exists almost wholly separately to wider society. If you built your firm through hard work and grit, who can blame you for losing sight of the social and economic infrastructure that was a necessary condition of your success? Roads, courts, clean air, policing, defence — take them away and see how long any business lasts.

(Some small-state conservatives still recall Ronald Reagan’s joke: “The 10 most terrifying words in the English language are ‘Hi, I’m from the government, and I’m here to help.” But as the historian Ian Morris has pointed out, in reality the 10 scariest words are “There is no government, and I’m here to kill you.”)

We don’t just pay tax so we can get stuff. We pay tax so that people — including us — can get stuff when they need it. Like an insurance policy, it only works through the pooling of risk — and contributions. Part of the reason a country like Germany has been able — so far — to absorb the coronavirus crisis better than others is a history of taxation levied and used to provide insurance against disaster: the Germans have almost too many ventilators and testing facilities, tax-funded precautionary capacity that now looks more prudent than wasteful.

Which brings us back to the companies that decide to skip a few premium payments by routing profits through off-shore subsidiaries, lending money between units and all the other clever wheezes. As voters wonder why their states’ insurance policies aren’t paying out as they expect during a fundamental challenge, is it any wonder that politicians feel little urge to help such firms?

But let’s go back to Colbert’s geese for a moment. It may well be politically expedient and even emotionally satisfying to let tax-efficient corporates go under right now. How many tears will be shed in the UK if Richard Branson loses his airline and his island?

But letting the noisiest geese starve won’t bring in so many feathers. The really interesting question about tax after the crisis is whether there’s now a chance to persuade more companies — and maybe some people too — to pay more tax.

If the crisis is demonstrating that tax is an insurance payment that can help protect everyone from grave harm, what is the social status of tax avoiders? The idea of shaming companies over their tax records is now old, and largely ineffective: there are lots of firms whose tax arrangements are famously ruthless and mean, yet how many have been successfully shamed into ending those arrangements? Most just use a fraction of the money they save in tax to employ a few more top-drawer PR folk to answer questions from annoying hacks and politicians, then carry on as before.

What hasn’t been tried enough is approval, the positive moral pressure of acclamation. Some companies don’t pay enough tax, but some pay lots.

According to PWC’s annual Total Tax report, Britain’s biggest 100 firms paid £84.7bn in tax last year, 11.7% of total government receipts.

Yet how many of them talk about their total tax contribution, about how many nurses or ICU wards they funded last year?

HM Revenue and Customs in recent years has experimented with behavioural science to get us to pay our taxes in full and on time. Self-assessment payers get bombarded with messages telling us “by this point in the year, most people have already done their tax return”, and so on.

The aim is “social proof”, the creation of a clear norm that people incline to meet. I wonder if the coronavirus crisis might just offer the chance to do something similar with tax on a much grander scale, part of a new social contract between businesses and the society that is now bailing them out and paying their furloughed workers’ wages.

I’m all for naming and shaming those who don’t pay their fair share of tax. It establishes that paying tax is an intrinsically good and selfless act, something made vividly clear by Covid-19. But we should make much more use of that. Since paying tax is a good thing to do, we should dwell more on those that do it the most.

Let’s have official league tables of the biggest taxpayers, with the winners celebrated and recognised: badges, honours, the lot. Hell, why not name hospital wards after those who did most to fund them? Imagine if the eight new Nightingale hospitals had been named for the eight biggest individual taxpayers in the UK on those league tables? And think how the companies and plutocrats who came lowest on the list might respond. There is more than one way to pluck a goose.


James Kirkup is Director of the London-based Social Market Foundation

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