As an example, if a top rate taxpayer has money in a savings account at the bank, the interest he receives on it will be taxed at 45 percent. However if he puts the money into an Individual Savings Account (ISA), a special type of tax-free savings account created by the government, the interest will be exempt from tax. That tax-free ISA could, in all other respects, be just the same as the taxable savings account – with the same bank, paying the same rate of interest, on the same terms for taking money out – but changing the nature of the account changes the tax due.
Is that tax avoidance? Yes – the money has been moved from one type of bank account to another simply to escape tax. Is it immoral to take advantage of an opportunity offered to us by the government? It is difficult to see why.
Similarly, the tax paid by car drivers varies depending on the car’s emissions and fuel type. If I deliberately buy a car with lower emissions to reduce my annual tax bill, is that immoral?
But if the ISA and the low-emissions car are not immoral, how can the footballer’s image rights company be immoral? It is a more complex structure, but only because the footballers’ finances are more complex. It is less common than an ISA, but only because few people are in the footballers’ position of having a high income for just a few years in their youth.
The tax avoidance is not based on hiding income; tax collectors know exactly what payments are being made to these image rights companies. Nor is it based on pretending that the income is something it is not; the payments for lending your face to advertising is genuinely different to the salary paid for playing football.
The tax system is highly complex, because of deliberate decisions by the government over decades. In addition to the different types of income we have, our tax liability can depend on our level of income, our personal circumstances, what investments we hold, and what we purchase with our income.
With all these variables, it is impossible to say that there is any general obligation to pay a certain amount of tax. The tax system is entirely a creation of statute; a system based on general morality could not have come up with anything like its complexities, variations and exemptions. Therefore, the only true guide to how much tax to pay is the law, as set down by Parliament and interpreted by the courts.
To argue that legal tax planning is immoral, especially for a politician to do so as David Cameron did, is to subvert the constitution, to usurp the function of the legislature and the courts.
That is not to say that we can be selfish and keep our money to ourselves. What we do with our money, and our time and other talents, is an area where morality and the obligations of charity and society play an important role. But so long as we pay the amount of tax that is legally due, the best use of our remaining income is not necessarily to give it to the government.