issue 173 - July 1987
Dodging the dues
Self-employed people have more leeway about how much tax
they pay. Juliet Kellner spoke to some people who pay less than they
might - or none at all - and found out how they salve their consciences.
A woman I know works as a tax inspector. I knew her for months before she admitted, in a low voice, what her job was - as if she were some sort of traitor to society. Yet the tax system is there precisely for the public benefit. Why should she feel bad - and her opponents feel justified in acting anti-socially?
She sends her daughter to a private school where the headmaster is a pillar of the small-town citizenry. People turn to him for mature counsel. But when the tax inspector arrives to check his accounts, the head gets his secretary to put salt instead of sugar in the taxman's coffee.
What is it about paying tax that brings out such juvenile spitefulness even among the strenuously respectful? Every year men and women spend expensive, tortuous hours with accountants figuring out financial euphemisms to fool the tax gatherers - finding 'creative' ways to 'shelter' profits.
Tax-dodging is in line, it seems, with the spirit of the times. Three ideas tend to be used to justify it: self-empowering, justice and security.
The urge to power is the most visible of the justifications. Apparently the taxman had sat in the headmaster's special chair and this had triggered off the coffee-salting. The head had gone to great lengths to buy his own school rather than work in the state sector precisely so that he could be king-pin with nobody telling him what to do. But now his throne had been airily usurped by the taxman.
Another entrepreneur described the power struggle like this: 'Some little civil servant turns up one day and wields all this power over you. He or she sits there silently looking at your books and your business can succeed or fail depending on what they see.
'It's easy for them, isn't it, with their salary index-linked, paid holidays and regular hours - civil servants go home for their supper at 4.30 in the afternoon. Nobody rushes to my rescue shouting 'overtime' if I work half the night to keep the business going. But there I am, waiting for them to give me the okay'.
Entrepreneurs feel they have earned their freedom, their power over their little kingdom, through their hard work and willingness to take risks - it's galling to have that freedom curtailed by someone they don't respect. Not surprisingly, the temporary usurper of the throne is seen as a threat, an unworthy upstart, rather than as an understanding protector.
People go for being their own boss, usually, to feel free. But though they are free of a controlling hierarchy, they find themselves also free of a protecting structure. They stand alone - and fall alone.
That's accepted as a fair exchange most of the time. 'But,' said a self-employed woman, 'when the tax form appears, you see that you are not so free after all. You are expected to pay your whack to benefit society at large. If you break the rules you are penalized.
'That seems reasonable. But no-one seems interested in the fact that you've almost certainly stinted yourself for years. Nobody cares about the rules you've broken in relation to yourself. Who takes into account the sleepless nights, the missed family time, the frayed marriages, the unending responsibility? Who pays you back for that?'
This resentment, this sense of injustice that they have put in more than their fair share of time, energy and guts, was the most frequently struck note. If you've put in more than your share, why can't you - fairly - take more out? Mixed in with the plea for self-empowering was this justification by appeal to natural justice.
It isn't what I expected to find. I had imagined go-it-alone people to be temperamentally independent-minded and even rebellious - and perhaps to feel a kind of robust roguishness at cheating the taxman on principle. But that wasn't usually the case. Rarely did tax-dodging come over as a matter of pitting wits against the authorities to win a joyful, if surreptitious, psychological dominance. Putting salt in coffee hardly qualifies, after all, as a brilliant show of wit. Mostly it came over as a matter of feeling hard done by - self-pity rather than bravado; or a habitual, weary tinkering to save a bit here and there.
Did they resent paying tax on principle? Should taxes be abolished? The answers were surprisingly unequivocal. 'Of course we should pay tax,' said one businessman, quite shocked. 'Of course. What about the hospitals, and the elderly? It's just the amount I'm asked to put in that seems unreasonable.'
So the tax-avoiders and evaders, it seems, justify their actions by perceiving themselves as exploited by society, rather than as exploiters of it. In some circumstances, of course, this perception is justified: if you are a boy in Tanzania selling peanuts in the street in order to survive, you may be perfectly correct in your perception that the policeman approaching you is going to blackmail you for not having a street seller's license, rather than to assist you in making an honest living. In this case you are a genuine victim of society.
But not everyone is. Sometimes, it seems, the sense of victimization hardens into habit. There is a pattern of initial frankness followed by aggrieved resentment which can finally sink to a self-excusing cynicism.
'You start off wanting to be fair about everything,' said one man, ruefully. 'But after a while you feel the pressure. They're all ganging up on you, the banks, the tax people - and you've got to survive. Have you any idea how many thousands of pounds I have to pay in employer contributions each month for my employees - out of a small business with a small profit? It's ridiculous.'
Since no one else is going to look after your interests, you need to look after them yourself. According to this view you can reach for security through self-help - individual action, or action in small groups of like-minded people - but not through reliance on big bureaucracies.
In such an atmosphere of public mistrust, questions must arise about the purpose of the tax system. If taxes are not providing the education, health-care and national welfare services that the public wants, will the public be willing to go on paying for them? The left-wing response is to press for more money to improve these services, make them more relevant to public needs; the right-wing response is to privatize further - and if the latter is the response you favour, then you have a wonderful excuse for withholding taxes: 'Why should I pay for services I don't use?'
It doesn't work that way though. The better off may use some private systems from time-to-time but they are still supported by a network of public systems they can and do fall back on. My elderly neighbour goes to a private doctor for her constant little ailments but if she were seriously sick the public system would take over hospital care and post-hospital home-care. By cheating on their taxes the rich are not only exploiting the system themselves but increasing the pressure on those who can't afford alternatives.
The pressure is felt on a personal as well as on a macro level. A newly divorced mother turned to a professional counsellor for help. Finding enough cash to pay even for a handful of sessions wasn't easy but she reckoned the sessions worth every penny. One day, though, sitting in the counsellor's sumptuous study she offered him a cheque instead of cash - and he replied with his customary charm and vigour, that she had to pay more if she paid by cheque. Embarrassed, she paid by cash and wrestled with her conscience all the way home. Was she colluding in his tax evading? Perhaps she should have paid by cheque after all. But if she had, he still wouldn't have been paying his tax - she would have. Why should she pay two lots of tax? Why should she, on her tiny, shaky income, be supporting him?
The fine talk in the sessions about love and understanding, give and take, began to wither on the vine. The crunch is money - and I've never met a rich man or woman yet who didn't have wonderfully imaginative, sophisticated, ways to justify hoarding yet a little more and a little more.
Juliet Kellner is a freelance journalist.