It’s not a coincidence that things have been getting better for the super-rich while getting worse for the rest of us. Since the 1980s, government policy has taken a decisive shift in the interests of the super-rich. Under Margaret Thatcher’s premiership, their taxes were cut, they were sold industries at knock-off prices, house ownership was redistributed in their favour and the power of their workforce was severely diminished.
It’s in the context of this deeply unequal society that we learnt of the Paradise Papers.
These leaked files showed that the super-rich are engaged in tax avoidance on an industrial scale. They showed that the super-rich employ lawyers and accountants — that only the rich can afford — to find and exploit tax loopholes.
They register their businesses, shares and savings beyond the reach of Britain’s tax authorities. This allows them to further enrich themselves and it deprives us of much-needed tax revenue. That’s money that could be used to help fund our hospitals, schools, and other vital services.
The super-rich use their economic privilege to sidestep the rules that apply to everyone else. It means one rule for the rich and another rule for everyone else.
Much of this is within the law. It’s tax avoidance (legal), not tax evasion (illegal).
Amazingly, when stories like this break, we often hear from people defending super-rich tax avoiders in the media.
Defenders of the super-rich sometimes argue that because tax avoidance is legal, it is beyond criticism, but this is a bad defence. We know tax avoidance is legal. The criticism is that it’s wrong and people shouldn’t be allowed to do it.
What’s wrong with tax avoidance is that tax avoiders use their economic privilege to sidestep rules everyone else has to follow and by doing so they further enrich themselves and hurt everyone else. That sounds wrong to me.
There’s another defence of super-rich tax avoiders. This one says that, given the opportunity, everyone would engage in tax avoidance, that people tend to act in their own interests, that’s just what people are like. Because of this, it’s merely moralistic, perhaps even an expression of envy, to condemn super-rich tax avoiders, says this defence.
This isn’t true, but it does hint at something that is importantly true. It’s not true because not everyone acts in their own narrow self-interest. People can and do act out of concern for others.
We see this in the way many people behave. We see it in our teachers and nurses, who have been working harder and for less for the last seven years thanks to the Conservatives’ austerity. Speaking to many of them, I know that they continue to do the work they do because they care about others.
But this defence of tax avoiders does hint at an important truth that, because free market fundamentalists champion greed, the super-rich tend to exploit circumstances for their own benefit.
What’s important about this isn’t primarily to do with the moral character of the super-rich. It’s important because it needs to be remembered when we’re thinking about how our social, political and economic system is structured.
It helps to explain why there are continuing opportunities to avoid tax — because the super-rich are super-rich, they have enormous political power.
They fund political parties, they lobby members of Parliament, they sponsor think tanks, they dominate influential professions and they control media outlets.
They use this enormous political power and, as the defence of tax avoiders says, they tend to use this political power to advance their own interests. When the super-rich act in their own interests, they exert massive political power.
This explains why offshore tax havens continue to be protected by the government, why non-domicile tax status has been maintained and why the government employs more inspectors to look into “benefit fraud” than tax evaders, even though significantly more money is estimated to be lost through tax evasion.
However, the political power of the rich doesn’t just explain tax avoidance.
It explains how society functions more generally. From legislation about media ownership to the funding of political parties, trade union legislation to how the arms industry operates. None of this is left untouched by the political power of the super-rich. In all these instances, the super-rich tend to use their power to advance their own interests.
It’s because of this that the revelations exposed by the Paradise Papers are symptoms of extreme inequality.
If we’re serious about ending tax avoidance, we need to do more than tinker with tax regulations. We need to address the problem at its root. We need to deprive the super-rich of the wealth that they use to corrupt our democracy.
To end tax avoidance, the wealth and power that is concentrated in the hands of the few needs to be redistributed to the hands of the many.