The joy of tax

by Peter Goddard

Let’s play a game.

Add another word to the following to make a popular phrase… “Tax _____”

What did you answer? Burden? Evasion? Avoider? Loophole?

Whatever it was, the chances are you weren’t thinking anything positive. “Tax hero”? “Tax Embracer”? Unlikely.

The debate around tax, on both side of the political divide always seems to revolve around who isn’t paying enough, who is benefitting too much and inevitably, who is cheating.

But whilst the activities of UK Uncut and their ilk play a valuable role in exposing corporations and individuals who are paying far less than their perceived fair share, are we missing a trick on the other side of the equation?

When I donate £25 to Save the Children, I receive an effusive thank you and the assurance that I have bought ‘safe birth kits’ for five women giving birth at home.

When I give £10 a month to adopt a leopard with the World Wildlife Fund, I receive an effusive ‘thank you’ from the recipients. I also receive regular updates about my newly-saved jaguar and, if I want, a cuddly toy.

And yet when I pay thousands of pounds each year to HMRC, what do I get? To stay out of prison.

Whilst I am a huge fan of not going to prison, it is hardly surprising that thousands of people and companies choose to minimise the amount of tax they pay, sometimes using the mechanism of giving money to charity to reduce their payments.

Either way, the individual is paying out, but at least with charity they have a feeling of wellbeing and a cuddly leopard to show for it.

So why is nobody making any attempt to celebrate the people who do indeed “pay their way”?

What is needed is a new, two-pronged approach to our attitude to taxation, combining vigorous and visible prevention of cheating with a celebration of and gratitude for contribution.

First, the prevention of cheating.

At its heart, paying tax is the foundation of social contract, the formal representation of the reciprocal altruism found in all human cultures.

However, as observed by evolutionary psychologists Delton, Cosmides, Guemo, Robertson, and Tooby of  the University of California, Santa Barbara, “For collective action to evolve and be maintained by selection, the mind must be equipped with mechanisms designed to identify free riders—individuals who do not contribute to a collective project but still benefit from it.”

Interestingly, their research indicates that “When intentions were held constant, differences in contribution level were not used to categorize individuals as free riders “

In other words, we do not judge people by how much they contribute, but by whether we think they are cheating or not.

The debate on disability benefit is interesting on this matter.  The case for maintaining disability benefit has been entirely focussed on the social need for this benefit.

Generally, this is pushing against an open door, as the other side is in agreement with the need, but claims that cuts have to be made and the rise in disability claimants of 2 million people between 1963 and 2009 means someone must be cheating. This conclusion may not be a correct, but the perception needs addressing.

In fact, if supporters of disability benefits really want to make a case that the other side might embrace, they would be more effective proposing new and alternative methods of policing the system.

The Conservative party have been allowed to promulgate a myth of a Britain awash with scroungers and benefits cheats. The solution is to not just offer the alternative view with different statistics, but to also promote a system of policing that gives the community confidence that cheats will not prosper.

Of course, this cuts both ways and the system should be equally robust at identifying tax cheats on the other side of the bargain.

The second and more overlooked element for repairing the social contract is gratitude. In the debate on benefits and government spending, much time and energy is expended talking about rights and entitlement.

This is quite right and should continue. This does not, however, exclude the possibility of introducing an element of gratitude.

Is this demeaning to the recipient? Research would suggest not. In fact, there is a plenty of evidence that showing gratitude actually has a positive effect on a person’s well being, much of which is documented in “59 Seconds”, by Professor Richard Wiseman

In one study, by Robert Emmons and Michael McCullogh, three groups of people were asked to spend a few minutes a day writing down their thoughts. One was instructed to list five things for which they were grateful, one group wrote five things that annoyed them and five simply noted down event that had taken place.

At the end of the study, compared to the annoyed and’ ‘events’ groups, those expressing gratitude ended up happier and much more optimistic about the future.

How we could introduce this gratitude is a difficult question, but it seems likely that an increased awareness of the tax people pay and the support that others received would go some way to reinstating the natural human tendency to say ‘thank you’.

In fact, it’s not just the recipients of generosity who benefit. Elizabeth Dunn from the University of British Colombia showed, “Those who spent a higher percentage of their income on others were far happier than those who spent it on themselves.”

This effect is supported by the work of neuroeconomist (yes, such people do exist) William Harbaugh, who gave participants a virtual bank account from which participants saw some of their money given to help those in need via mandatory taxation, and who were then asked to decide whether to donate some of the remaining amount too.

Brain scans showed activity in the areas of the brain that also show activity when we eat tasty food or feel valued by others, with more activity when the generosity as voluntary.

This suggests that by allowing the perception of tax as a burden and benefits as something to be expected, we are doing neither side any favours and are simply inhibiting an opportunity for both groups to increase their general well-being.

So what can we do?

For starters, HMRC could say ‘thank you’ as part of their acknowledgment of your tax payment and maybe give an indication as to how it is being used. At the budget some moves towards this were announced with the prospect of personal tax statements in a couple of years, though as ever it will all depend on the implementation.

But for Labour there are other opportunities. The party should be promoting and celebrating the people and organisations who stand up and do their tax duty, eschewing off-shoring and other tax avoidance measures.

This could be easily accomplished. Corporate Social Responsibility (CSR) is big business, but it seldom, if ever, addresses the tax contribution a company makes as part of this responsibility.

As well as naming and shaming tax avoiders, the Party should be recognising tax embracers, identifying and promoting the pillars of the tax-paying community.

A simple “good citizen” certification would give those companies a competitive advantage over their off-shoring, tax-sheltering rivals and, just as with the Fair Trade scheme, social factors above and beyond simple cost will become influences in the marketplace.

In addition, the party should ensure its own house is in order, making a commitment to transparency in the tax affairs of all of its candidates.

At heart, paying tax is a good thing and it should be celebrated as such. For surely being part of a society in which the fortunate willingly contribute to assist those less well off is something we can all be grateful for.

Peter Goddard is a sales and marketing consultant

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10 Responses to “The joy of tax”

  1. Nick says:

    How about.

    Why aren’t my taxes going on services?

    Ah yes – you’ve run up massive debts. Hidden them off the books just like any fraudster.

    t heart, paying tax is a good thing and it should be celebrated as such.

    So look at how you treat people who pay the most tax. You treat them as scum. They have decided they aren’t welcome, and they have buggered off. In lots of cases, they have just invested their money overseas. It is the message you’ve given.

    How about personal debt statements. How much debt you have to pay off, that has been run up by the government?

  2. swatantra says:

    ‘Tax’ and ‘Dodger’ are the words that come to mind, slightly judgmental but not entirely criminal.
    Maybe HMRC should be giving out FREE T Shirts emblazoned with ‘I pay my taxes’ and a £50 voucher to spend at Alton Towers.
    George in fact did did introduce the ‘happiness factor’ by cutting the 50% rate down to 45% so the theory is substantiated.
    In fact all workers contribute roughly to the same degree whether they are mere manual workers or high flying executives, only their incomes are different. Thats why socialism should be advocating more the redistribution of wealth more fairly, so that essential services hat we all need can be paid for.

  3. Henrik says:

    @swatantra: “In fact all workers contribute roughly to the same degree whether they are mere manual workers or high flying executives, only their incomes are different” – and the fact that the high-flying executive is paying a far greater *proportion* of his income, as well as a larger net sum of cash.

    That aside, there’s an awful lot in what Peter says above and this is exactly the sort of thinking Labour should be doing – as the Tories clearly aren’t. I challenge you to find one person who is entirely happy, under whichever party is running the country, with how his money is spent by that government. I’d go even further and challenge you to identify anyone who works for a living who doesn’t actively dislike taxes. It’s a human instinct.

    Now, no-one sane is going to deny the need for some form of taxation to pay for the communal services which require a government to deliver them. There’s a much longer conversation about which services these might be and to what extent government should be involved in normal folks’ lives, best we left that for another day; certainly, generally, tax is unpopular and faced with a foolproof option for evading it, with absolutely no prospect of being detected, I rather suspect that 99% of people would be up for it.

    Incentivising mechanisms like this might help. Good thinking.

  4. SadButMadLad says:

    The words Tax Cut come to my mind.

    “Elizabeth Dunn from the University of British Columbia showed, “Those who spent a higher percentage of their income on others were far happier than those who spent it on themselves.””

    I would point out that paying taxes so that the government can pass it on to others doesn’t allow the giver to get that feel good factor. The way in which it works is where the giver is giving the money directly to the recipient. This is more commonly done via charity.

    By having tax cuts people will have more money in their pocket. They can either save that away (which banks use to invest in businesses thereby increasing jobs) or they can spend it (which businesses use to make more products thereby increasing jobs) or they can give it away (which makes them feel good). Paying taxes is none of the above.

  5. Peter Goddard says:

    SadButMadLad you are partly right, but William Harbaugh’s work did show a similar, but less strong, response to giving via mandatory taxation. That said, I take your point, although I’m not convinced it disagrees with mine. I am suggesting tax, when implemented and promoted correctly, should indeed give you the same feeling as giving to charity. That it does not currently is the problem, not an immutable truth.

  6. swatantra says:

    Nobody likes paying taxes but if services are going to be provided then they have too be paid for by the community. I’ve always flt that capping taxes was counterproductive. If residents are unhappy about the level of tax and quality of services then they can always remove that Adnmiistration at the next elections.

  7. Well, actually people should be proud of paying taxes.If it would not be so troubling and taxes weren’t so high I am sure they would.Of course you feel much better if you have paid taxes and it’s like a kind a charity, you realized that you have just helped some one and did a good thing.Because usually when you feel taxes you expect that this money will be useful for your country, but I think that government do not use taxpayers money in a right way.All the time they just want more and more and nothing becomes cheaper or easier for us.That’s why when we talk about paying taxes we feel almost nothing positive.

  8. Chris Bergin says:

    When I started work in the ’60’s I think I was paying about 30% tax. Nobody woriied about the rate paid very much because at that time we were all in it together. Even banks paid up

  9. Chris Bergin says:

    soryy! new puter hit wrong key.
    The overall feeling was that business did contribute and the nationalised industries were still able to cross fertilize with any surpluses going to the non profit orgs’ like NHS. Nowadays we all know that the biggest business of all is tax evasion/avoidance and this has brought all business in to disrepute. Why give loyalty to a company that gives none back. The Thatcher regime with greed is good and asset stripping has changed our perceptions and grievances for all time.

  10. I’ve read a very comprehensive and a very informative post. You really have great point there. Paying taxes should be done not because you forced or have to but because you want and are willing too. Sad to say that there are others who do not really pay how much they should pay. Anyway there’s still individuals who have golden heart in which they pay taxes at the same time contribute by having charities which youll really see where your Lake Forest tax resolution go.

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