Tax Avoidance is Moral

by | Apr 22, 2016 | Taxation

Those who think that government collecting taxes from those who are productive to give them to those who are not is just, do so because they have accepted the morality of altruism and egalitarianism and believe that statism is the ideal social system.

The recent leak of the Panama Papers—which consist of confidential banking documents that report names of thousands of offshore corporations and their shareholders—created a media storm around the world. Many of these corporations are shells that serve as “tax havens:” they allow corporations and individuals to avoid paying taxes in their home jurisdictions. Although most of the money invested in these shell companies is not criminally ‘laundered’ but obtained legally, media commentators have been lamenting that tax avoiders are immoral because they are not paying “their fair share” of taxes. They accuse those investing in offshore shell companies of “ripping off the middle class” by shifting the tax burden to it.

Why is there such a moral indignation—and why should we defend tax avoiders instead? To answer these questions, we must first ask: Why do these lamenters think paying the maximum amount of taxes is a moral duty?

In a recent column in the Financial Post, Kevin Libin points out that taxes are merely legalized theft by the government. If our neighbor stole from us, we would be calling the police, outraged at the injustice and demanding to get our property back. However, when the government takes our property by force—through taxation—and gives it to our neighbor, or to an artist who can’t find buyers for his works, or to a company unable to develop competitive products, or uses it to fund any other of its myriad “re-distribution” schemes, we accept that as just and moral.

Those who think that government collecting taxes from those who are productive to give them to those who are not is just, do so because they have accepted the morality of altruism and egalitarianism and believe that statism is the ideal social system.
According to altruism, we should sacrifice our interests to other people, particularly to those who are needier than us; therefore, taxation is moral. According to egalitarianism, reducing or eliminating inequalities of income and wealth is the moral ideal; therefore, taxation is moral. And according to statism, the government knows what’s best for its citizens; therefore, it has the right to violate their individual rights to liberty and property, take their money, and spend it whichever way it deems best.

According to these views, “a fair share of taxes” is as much as one can afford to pay—as determined by the government, which considers it “fair” to tax those with higher incomes and wealth relatively more.

However, if we recognize that altruism, egalitarianism, and statism are destructive doctrines that contribute to human misery and poverty (as extreme examples, think of the ‘social experiments’ of Mao Tse-tung’s China and today’s Cuba) and if we accept human flourishing as the moral standard instead, we would reject taxation as immoral and avoiding taxes as the moral imperative.

There is only one social requirement of human flourishing: the absence of coercion, including taxation. (It is no wonder the 19th century America—with no or minimal taxes—witnessed so much invention and wealth creation). Humans survive and flourish by thinking: using reason, and by acting on their rational conclusions. If government tells them to obey its orders instead and confiscates their property, the result of their productive efforts, flourishing and prosperity are not possible.

By taxing the wealth creators, governments everywhere incentivize them to shelter their property against heavy taxation instead of investing it in productive purposes and further wealth creation, which would lead to economic flourishing for everyone participating in productive activity: shareholders, employees, suppliers, and other businesses (with which shareholders, employees and suppliers would trade).

By taxing the producers, governments prevent the free markets from working to everyone’s benefit (even to those who for reasons of disability or other misfortune are not productive, as abundant wealth creation and the absence of government hand-outs would lead to flourishing private charity and insurance business). Governments’ own attempts to make investment decisions (such as in infrastructure or to “diversify the economy”) or to reduce poverty by “re-distributing” money from the productive to the non-productive are no match to the free markets in  enhancing human flourishing. No matter how well- intentioned the politicians and bureaucrats are, by curtailing the freedom of individuals to make their own choices, they diminish human flourishing.

Avoiding taxes is moral, and using your money to promote your self-interest through production and consumption is a moral imperative—if long-term profitability and happiness are your goals.

11 Comments

  1. All of the activities of government that can be clearly linked to protecting every person’s life, liberty, and honestly obtained property, are right uses of taxation monies. Roads and other transportation infrastructure are appropriate expenditures of tax money, as you can not defend the nation from foreign or domestic attacks if you can’t get the army or police to the fight. Police services, military, probably fire fighting services, definitely courts, and other activities that clearly serve the protection of life, liberty, and property of every individual are appropriate. Some utilities and public transportation may be appropriate due to the sheer inconvenience of having competing structures to support separate private companies attempting to provide these things.

    All of the false philanthropy, social welfare, and corporate welfare is utterly wrong, not constitutional (twistings of the general welfare and interstate commerce clauses notwithstanding) and criminal. Further, all such theft perpetuates antagonism, dependency, and the limiting of our progress to the vision of bureaucrats.

    Fine. But our governments are entrenched in this mode of violating rights for political support. Thanks to government education and a moronic media, a large portion of our populace thinks the government should be taking and giving, and/or ‘supporting’ various businesses, or ‘protecting’ businesses, or giving special advantages to some businesses. These folks are much more motivated to vote, as they are often the beneficiaries of the theft, as compared to those who simply work hard honestly and expect no favors. The politicians – their political longevity depends on such trading of market advantages for political support / money, or promises of continuing or increasing social handouts in trade for votes / political support.

    So, what does the honest man do to obtain or encourage a very limited government (per the constitution) that does no cheating for anyone and ONLY protects every person’s life, liberty, and property? Frankly, he has no one (or very very very few) to vote for. If he ran for office himself, he would likely fail as he would not be promising plunder for anyone, publicly or privately. An honest man is of little use to those who would use the force of government to obtain things they can’t obtain honestly.
    What to do………

  2. Perhaps you can contribute articles to CapMag yourself. Many of your postings are about as long as articles, and I think they would fit in well with most of these other articles.

  3. Ha! I certainly have never won any awards for brevity…. and that’s while trying to be succinct.

  4. I notice that in this article the word loophole is not used. A lot of times tax avoidance is treated like tax evasion to unfairly treat law abiding citizens. I really enjoyed seeing this article on business ethics because it is a rebuttal to the herding of people. I believe a republic over a democracy is the preferred vehicle to deliver personal freedom. A republic is defined by its laws. And when it enforces its laws then it has integrity to be as defined. So I ask this question when I think about corruption caused by a nation not enforcing its laws. When is a law abiding citizen corrupt?

    Now I ask you, when a nation does not enforce its immigration laws, is that the sign of a corrupt nation?

  5. So you support coercive taxation. As for defending the country that’s what the militia is for.

  6. I would support a system of consent to taxation to be used only for right protection. No pay – no right protection.

    Who pays for the militia in context of modern warfare ? Without a compulsory form of funding for all who wish to benefit from the organization of force for only right protection, application of defense becomes impossible. It is not feasible to organize defense ONLYof the lives that paid to support it.

  7. Or since in Libertopia the government is so small non coercive means of funding could be found. Roads? We don’t need no stinkin’ roads. In Libertopia there are flying robotic cars you order on your phone.
    As for the militia they provide their own weapons and gear. But really the success of capitalism will soon eliminate the need.

  8. For the time being, the rest of us will need, and pay for roads.
    What do those not wishing or able to fight trade for protection? How does every militia member provide for GPS coordination, rocket launchers, battleships, drone defense, howitzers, fighter planes, etc.
    Icetrey, have you been drinking?

  9. Yes!

  10. I should note, however, that I would welcome any practicable plans for funding right government functions by means other than taxation. Further, direct taxation ought to have remained apportioned by dividing the cost of the rights protection service equally among the beneficiaries.

  11. Is it no longer possible to print out these articles on paper?

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.

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