Limits of the law

Monday, 01 July 2013
Martyn gowar tries to make sense of the continuing debate over government and media attitudes to fairness and tax around the world.

While I am sorry to have to come back to the topic of the ethics of tax avoidance when it is daily fare in all sections of the media, a discussion with a couple of senior practitioners from opposite parts of the globe has cemented my concern that this debate is losing sight of reality. 

We started by remembering that it was that fine tax judge Rowlatt J who said (in Cape Brandy Syndicate v IRC): ‘In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.’

As we listen to what is said now about moral obligations to pay a fair amount of tax, we realise that life has moved on a long way from Rowlatt J’s formulation. And we must not forget that the movement has been judicially inspired largely by the unattractive marketed tax schemes that received such judicial mauling in cases like Furniss v Dawson, Craven v White and W T Ramsay v IRC (to name only three). 

But if the Rowlatt summary of taxing by law is no longer right, can you please tell me the correct approach? It has not yet been expressed, as far as I know. The UK government seems to want to continue to tax by reference to tax law, and the fact that the Finance Bill 2013 stretched to three volumes to tinker at the margins of tax yield is my supporting evidence. So is it that talk about morality in tax is limited to international tax issues? I suggest that it is, but while I understand the frustration, commentators and politicians have a responsibility to find an answer, not just to inflame tensions.

Any discussion about international tax has to be conducted remembering an essential truth: that each country taxes domestically and has to ignore the impact on those who are beyond the reach of revenue authorities. Imagine the uproar if the French government attempted to levy tax on British residents! But politicians and the media seem happy that, with initiatives like the US Foreign Account Tax Compliance Act, we do the reverse and impose fiscal obligations on other nations’ individuals and corporations. Coupled with that, neither states nor media argue to retain individual rights to privacy, though with different motives: one to assert power, the other to sell their next edition.

I ask you to ponder the following questions. What do you believe to be the rights of the individual against the growing intrusion of their own state? How far should another state have rights to information about individuals not connected with it? What do you think should be the grounds on which the state can extract tax? If it is not the law, then what else?

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Martyn Gowar

Martyn Gowar TEP is a Partner in McDermott, Will & Emery UK LLP.

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