Following the Panama Papers scandal, publishing tax returns is in vogue. The pressure on politicians to release theirs has reached the point that it has essentially become a necessary pre-condition for leading a party or running for President. Those who don’t are assumed to be suspicious and those who do are scrutinised as immoral for paying too little or, apparently, immoral for paying too much because they’re too rich.
Without being hyperbolic, it is fair to raise concerns about the effect this can have on how people judge what the grounds for electing someone are. Much more worrying, though, is the idea that all tax returns should automatically be in the public domain. As in Scandinavia, the details of how much each taxpayer declares and pays would be available for anyone to peruse online.
One argument is that fear of scrutiny would reduce evasion and avoidance. In the case of evasion, which is illegal, this makes little sense. The fact that HMRC see your return is enough of a disincentive to evade tax. And if your accounting is good enough to get past the government, it can probably outwit over-zealous armchair tax experts.
As far as avoidance, which is legal, goes, it is ambiguous how much of a difference this would make. Would the ‘shame’ of your co-workers and neighbours knowing that you use offshore banking or pay yourself through a shell company be enough to dissuade most people to stop avoiding tax? For those who were dissuaded, it is just as likely that they would declare less rather than pay more, which would perversely promote more law breaking.
In any case, a far more effective solution would be to simply close perverse or unfair loopholes. However, the real intent of ideas like this is to affect a societal shift that promotes the idea that obeying the law is insufficient and that there is a moral obligation to pay as much tax as you can.
This could result in unexpected and arbitrary changes in the tax system to respond to immediate public anger and increased focus on populist, rather than efficient, tax shifts. It would also foment an unhealthy culture of envy, resentment, and suspicion. Perversely, it could also entrench class divisions and snobbery towards people with below average incomes. Furthermore, Norway and Sweden have had to restrict availability of tax returns, as complete transparency abetted burglary and promoted tabloid voyeurism.
The sentiment that ‘if you having nothing to hide, you have nothing to fear’ is always sinister and we are already in an era defined by a creeping erosion of privacy. Further attacks on the ability of individuals to conduct their own affairs without being constantly monitored by everyone else can only be negative.