Let me begin with a confession. I have for twenty five years been a Guardian reader. It started when someone passed a copy around at a party, and after reading Nancy Banks Smith I was hooked. They knew what they were doing though. She doesn’t write as much any more, but once you’ve formed the habit you’ll accept less strong fare but more of it. As time went on I’d read the comment pages, occasionally nod in agreement (never at Simon Jenkins though. I’m not an animal). Sometimes I think that if they ditched the Saturday Review section and Marina Hyde left I’d be away. But for what it’s worth I remain a Guardian reader. And subject to the stereotypical views attributed to all of that class. I am though less certain in my views, finding life complicated. Messy.
Which brings me to Panama .
My gut reaction is similar to that of most people. I feel queasy about it, uncomfortable with the mechanisms used. But…
You see, there’s always a but. Mechanisms to minimise or even avoid tax are common. You are even encouraged to use them. For example, various mechanisms are put in place to encourage avoidance of certain taxes, eg to encourage saving and investment UK tax law allows a tax efficient device the ISA which allows investment (subject to limits) with no income tax due, or the rules on Potentially exempt transfers (PETs) in inheritance tax where lifetime transfers giving away part of the estate more than seven years before death are not caught and those within the period are caught at tapered rates. In relation to the latter I spent time advising clients in executries and wills and estate planning. If I did not advise on the use of PETs and using the spousal exemption to the maximum or in certain cases using a discretionary 0% rate trust (to allow the estate to maximise the amount passing without tax) I’d potentially have been negligent. Is this legal? yes. IS it moral? I don’t have a problem with it (it allows families to retain assets), but others will, as the net effect is to deprive the exchequer. The Panama situation is, on one view, this on a larger scale using the flexibility that different legal systems give you.
Is it the use of a “foreign” legal system that makes us uncomfortable? Even here, the use of foreign systems is something that happens regularly with no problems. People use different legal systems all the time in day to day business. For example, many Scottish businesses (advised by their lawyers) use English law in their contracts because it is easier to raise finance on English contracts rather than the more convoluted and formalistic Scottish rules (which requires notification of any transfer of a right to enforce the contract (and claim any payment under it) to the debtor in the contract). Is this use of a “foreign law” to circumvent the restrictions of Scots law legal? Yes. Is it immoral? Should the Scottish business be forced to use Scots law and as a result incur greater costs and place their business at an economic disadvantage relative to non-Scottish competitors? I, again, have no problem with this. I know a number of lawyers in other jurisdictions across Europe who use English law – sometimes to use the English courts, sometimes to use English contract law – and each time for the financial advantage of their client business. There is a growing business in Europe where companies verging on insolvency seek to change their centre of main interests to England in order to make use of the law of administration, corporate rescue. These actions all involve (to some extent) the circumvention of domestic rules for advantage. But this does not attract moral opprobrium. It doesn’t make us queasy.
So why do the revelations of the Panama papers make us uncomfortable in a way that using PETs or a Scottish business using English law doesn’t? where are the boundaries of morality when a course of action is perfectly legal? What is the qualitative difference between the Panama revelations and these other mechanisms and approaches detailed above? I am interested in exploring this because subjectively they feel different. My moral sensitives are pricked. But I am struggling to explain why.
Because real life is complicated. It’s messy.
And the more I think about this, the more I incline to a view that if you want to prohibit someone’s freedom to act in particular ways this should be done explicitly – rather than relying on condemnation derived from a nebulous moral sense that may differ from person to person.