"Nothing in life is certain but death and taxes"
A version of this article was first published: The Australian Farm Business Review - September 2002
In the midst of so much change and uncertainty, Ben Franklin's words have an eerie sense of permanence and inevitability. Yet, I doubt that he ever reckoned on a country like Australia in which attempts to defeat the intentions of the tax office would take on the status of a national sport. So, what are we to make of our obligation to pay tax? Should we apply the strict letter of the law and pay not a cent more than we are legally obliged to contribute? Or should we respond to the spirit of the law and hand over the amount that parliament intended us to pay?
Now, it might seem to some that the answer to such questions is obvious. Unfortunately, I'm willing to bet that for every person who thinks the answer is simple and clear there will be another who is the champion for a completely opposed point of view. Others might consider such questions a little too 'theoretical' for practical people focused on the bottom line. Let's see.
The 'black letter law' approach to tax is the argument most favoured by those who advocate that we are entitled to pay the bare minimum of tax required by law. Those who support this approach generally fall into one or more of the following groups.
First, there are those who simply want to hold onto as much of their hard-earned money as is possible.
Others are convinced that they can spend their money more wisely than can the governments that collect it. In fact, many people say that they would be prepared to pay a little more in tax if only they could trust government to honour its promises and spend the money in a prudent and sensible fashion.
Next, there are those who support 'black letter law' because of an ideological conviction that the only good government is 'small' government; with a severely limited capacity to curb the freedoms of its citizens. Indeed, some argue that all law is a limitation on personal liberty and that the best way to preserve our freedom is to hold everything back from the law unless strictly required to comply. Finally, there are people who do not object to paying tax in general – but strongly object to what they consider to be an unfair tax (or tax system). For such people, playing the 'game' of tax minimisation is a form of conscientious objection.
In all cases, supporters of the 'black letter law' approach thrust responsibility for the payment of tax back onto the parliaments of the land. Their catch-cry is simple: “you make it perfectly clear what we should pay – and that is what you'll get. If you're foolish enough to legislate the loopholes, then don't be surprised if we dance through them”.
There are a couple of obvious points that can be made in reply to supporters of the 'black letter law' approach. At the 'theoretical' level, it seems more than a little contradictory to claim your liberty with one breath and then refuse to take any responsibility for your choices with the next. Our freedom as citizens includes the freedom to uphold the spirit and not just the letter of the law.
At the more practical level, there is the simple fact that governments starved of funds can't be expected to do any of the things that we think they should do – either to invest in our collective future or to underwrite our way of life. For example, the current conditions of drought mean that many farmers (and their families) are facing ruin. They quite rightly look to the community to lend them a hand through government funded drought relief. Where does this money come from? Taxes. What if successful strategies for tax minimisation meant that there was not enough to go around? Would we applaud the principle while watching families go to the wall? Is this just a theoretical concern?
If there is a social obligation to pay taxes, then it goes beyond times of emergency. Much of what we consider our 'birthright' as a nation is the product of public investment. Of course private investment is essential and meritorious. However, it is qualitatively different for the simple reason that it is private. Like voting, paying tax is one of the few things that we do together on an equal footing as citizens of Australia. Earlier generations of citizens accepted that there are certain things that a decent society ought to provide to all of its people – irrespective of their wealth or station in life: our public parks, our libraries and art galleries, our public health system, social security for the most needy, and so on. Our predecessors all chipped in to bring such things into existence.
In the end, it's a personal choice (and a personal responsibility) as to whether we follow the letter or the spirit of the tax law. My guess is that nothing much will change until we have a tax system that Australians generally believe to be fair. Whether we get that or not is ultimately up to us – the voters who elect the politicians who enact the laws in our name.