As international organisations, national governments, industry, individuals and campaigning groups engage closely in the debate about post-coronavirus tax systems, what those systems ought to deliver and their perceived current shortcomings, public interest in taxation has never been more pronounced. These debates have the potential to change corporate and individual behaviours both nationally and internationally, helping or hindering countries as they try to chart a fiscal course out of the ravages of Covid-19. However, the way in which they might do so, and what role the public might play in shaping that transformation, remain open questions.
In the UK, HMRC and the Office of Tax Simplification regularly seek contributions from all interested parties by publishing detailed consultations. However, these tend to focus on single issues rather than looking at the broader shape of the tax system.
With the UK political party (virtual) conference season under way, I have been reflecting on whether, over the years, increased public interest in taxation has been accompanied by enhanced public understanding in a manner which elevates the quality of the debate around tax issues.
While it would be uplifting to identify public engagement with taxation as a force to identify what might be called social ‘goods’ and to achieve those through the tax system, it has to be recognised that public interest in taxation seems to peak in line with social ‘bads’ such as the tax misdemeanours of celebrities and well-known corporate brands.
The public may rush to judgement, especially when tax avoidance appears to be involved, insisting that those who have been identified should pay more, notwithstanding that the tax behaviours may be in accordance with both the intention and the letter of tax law. It is arguable that this tendency to rush to judgement, and the relative ease with which tax authorities can enact anti-avoidance measures, have contributed in no small way to the success of many tax authorities in bringing down levels of tax avoidance by the few.
However, political and legislative responses to public concerns about taxation, particularly where the issues appear to be especially egregious or relate to the unintended application of existing law, may lead to knee-jerk reactions and low-quality legislative responses. This was seen last year with the unintended consequences of the NHS pensions tax rules, which led doctors to reduce their hours, which was detrimental to patient care.
Interestingly, in many jurisdictions illegal tax behaviours by the many continue at high levels. It may be thought that public engagement is accompanied by a powerful, inbuilt and unspoken facility to distinguish between ‘them’ and ‘us’. What ‘we’ do is acceptable, but ‘they’ should pay more tax. This is no basis for a tax system: a view which is broader than the individual’s is essential.
Short memories can also be a problem. While public engagement in taxation may be sincere and intense, it tends to be short-lived, with little or no long-term impact on public behaviour. This is evidenced by retail organisations such as Starbucks. Revelations of tax avoidance were accompanied by a short-term dip in retail sales, following which sales appeared to return to normal with no long-term adverse effects.
Although news coverage provides an important stimulus and a foundation for public discussion of taxation, differences of legal, academic and professional opinion stand as reminders that, even within a single jurisdiction, there are legitimately different expert interpretations of what a tax system should achieve, how it ought to look, and how it can be designed, regulated and integrated into society. At the very least ‘a tax system should look as though it was designed to be that way’ (William Simon, American businessman, 63rd US secretary of the Treasury and philanthropist).
The media therefore have an important role in presenting the range of possibilities: who should pay how much tax and on what? Time is short but the media, looking to professional bodies where appropriate, can identify which topics deserve public attention and help explain what can be complex, with a view to bridging the diverse conversations occurring around taxation and facilitating a richer public dialogue.
Public discussion would also benefit from moving beyond single-issue initiatives and reporting based on sources which tend to concentrate only on one side in a way that undercuts a wider understanding of tax as a public issue. Increased engagement from tax professionals, activists and others can provide alternative independent views on the capabilities, promises and pitfalls of taxation while helping to portray tax less as an unwelcome imposition and more as a powerful force for societal good.
The world will not be the same after coronavirus. That applies to tax as much as to anything else. If tax systems are to be updated to reflect the new demands they will have to meet, shouldn’t the people who will have to pay the taxes have more say in designing them?