The moral aspect of low taxes
British Prime Minister David Cameron has this week publicised his tax returns. The unprecedented move follows the furore surrounding the so-called Panama Papers allegedly incriminating his late father’s investment fund in claims of tax avoidance.
Following suit in revealing their tax details were Chancellor, George Osborne; Labour leader, Jeremy Corbyn; and shadow chancellor, John McDonnell.
It’s dollubtful the stream of disclosure wi end there. Labour are seemingly determined for the tax information of everyone in the public eye to be divulged, with some claiming this transparency should be stretched to the whole working population.
However, rather than offering a view into the world of tax evasion, and how to tackle it, the debate has now turned into a left-wing attack on the government. The “one law for the rich and another for the poor” is a claim to which the Tories, with a number of wealthy individuals at the helm, are particularly exposed.
The Prime Minister is aware of this, and has previously been backing the condemnation of high profile individuals, such as Jimmy Carr, who have used tax avoidance vehicles in the past.
Yet, so as to define the stark difference between legal tax avoidance and illegal tax evasion, Mr Cameron introduced the phrase “aggressive avoidance”. The PM has since realised that people cannot be punished for acting within the law.
As such, Mr Cameron launched a formidable statement of support for the creation of wealth, enterprise and low taxes.
Nevertheless, despite this, in the House of Commons this week, the Labour leader continued his focus on the alleged public outrage over the large sums of money that the super-rich “ripped off” the economy; funds that, he says, could have been allocated to public services.
However, in contrast to Mr Corbyn’s claims, it was revealed that the Labour leader contributed £18,912 in income tax last year, whilst the Prime Minister paid £75,000 and Chancellor, George Osborne, £70,000. This is almost four times the amount paid to the Revenue by Mr Corbyn.
As I see it, we can view taxes in two ways. One, which is predominantly the Conservative view, is that they should be kept low, with a sufficiency to protect the country; keep domestic law and order; and provide education and healthcare. This way people have more money in their pockets and can spend how they wish, thereby boosting the economy through consumerism and private investment. It can be sensibly argued that individuals and companies are better at spending their money than governments.
On the other hand, most left-wing politicians argue they know how to spend the country’s money the best, and should be trusted to do just that. The fact that Labour seems to hold the views that wealth accumulation is a bad thing and curbing tax liabilities is disruptive, could be the reason why the party has lost the last two general elections.
In my view, if indeed there is a moral argument to support low taxes – which permit individuals to save money and spend it how they wish – tax cuts unquestionably motivate the creation of wealth.
As reiterated by Mr Cameron in the Commons recently – and not before time – low taxes inspire people to work harder to earn more, drive their aspiration and achieve their ambitions. And this can only be a good thing for individuals, families and for the long-term, sustainable growth of the wider economy.