by Neville Kennard, veteran preaching and practising capitalist

There is tax avoidance and there is tax evasion. Tax avoidance is legal. Tax evasion is illegal. The distinction can be difficult sometimes to discern and often it takes courts, sometimes several courts, to rule whether it is one of the other. The tax rules are so convoluted and complex that opinions from legal experts are needed on whether it is in the “avoidance” box and okay, or in the “evasion” category and thus illegal and subject to hefty penalties, gaol even.

We are told that we should pay our taxes, our “fair share” but no-one can tell us what is “fair”.

We know governments waste our money. Milton Friedman considered that when government functions were privatised or contracted out they could be done for about half the cost. This is bad enough but governments are far worse than this. Not only are their activities wasteful and inefficient, they are often downright damaging. They undermine personal responsibility, reduce competition, make people dependant. The unintended consequences of a government intervention are inevitably more damaging than the perceived problem the intervention was intended to alleviate.

Another wise quote from Milton Friedman: “Thank goodness we don’t get all the government we pay for!” Just as well they waste a lot or we would all be more severely hobbled and restricted.

There are a myriad examples of damage done by government intervention, using our taxes, but take one example – Child Care: the government takes so much of our money that both parents need to go out to work. Then the cost of child care (government licensed of course) becomes a burden; politicians rise to the occasion and propose subsidising child care. Of course with subsidised child-care there is more demand than supply and so the cycle goes on. Better by far to reduce taxes and let people work out their own child-care, or maybe with lower taxes some mothers, or fathers, may not need to work. And as for government licensing of child-care centres, parents are well able to sort the good from the bad and child-care centres will find it profitable to get private accreditation and to maintain standards.

Citizens know best how to spend their money. They know how to save, to invest, to learn, to spend. They make mistakes, of course; that’s life, that’s learning. If they can find ways to hang on to more of it and avoid giving it to the government to waste and misuse they will be better off. Our society too will be better off as it will be better spent, better saved on what individuals want and not what governments and bureaucrats think they should have.

Politicians and bureaucrats like to extract taxes, then to control, regulate and dispense largess. This is their whole raison d’être. They must be seen to be “doing something”.

Politicians’ self-interest is to get into power and to stay in power for as long as possible. If they can demonstrate how important they are, how good they are at handing out goodies, then they will stay there. Some politicians manage to stay in their jobs for decades, sometimes in government and sometimes trying to get into government.

Bureaucrats like to be secure in nicely-defined roles, finding more and more to control and spend, building little fiefdoms. If they find “programs” (and they can be quite entrepreneurial in this) to create, develop, enhance then they climb up the civil-service ladder. One thing a bureaucrat doesn’t want is for a program to succeed, because that will reduce the need for that program. Better that a program gets a lot of attention but fails, which can of course be blamed on “inadequate resources” — meaning, “more funding needed”. A bigger budget is called for.

It always seems strange to me that governments trust its citizens to vote, and to pay taxes, but then don’t trust them to spend their money as they see fit.

The Eurocrats call for “Tax Harmonisation” so as to try to stem the flow of funds (and people) to low-tax regimes. These crats hate to have to compete, as we in business must, so they would like to legislate “tax cartels” between compliant countries. But that will never work. (Funny that governments hate business cartels and monopolies, but like their own).

For an articulate explanation of the economic benefits of tax havens, see this video:

I like the term “Tax Havenisation” — get the world competing to lower taxes, shelter income, protect assets.

We all like paying less tax, because we know we can use the money better than the government, and our priorities are our own.  So don’t worry about being labelled a “tax cheat”, just arrange your affairs as best you can to pay as little tax as possible, legally, and we’ll all be better off.

Tax Evasion is illegal and I would not recommend anyone illegally evade paying their proper share of tax, and if you can’t figure out what this is, then you should get expert help.