Dodges can sneak through the smallest crack. Which makes it infuriating when London and Brussels fail to tackle the gaps systematicallyIn any discussion about tax-dodging,the same old images crop up: squeezing a balloon, pumping a punctured tyre, or playing whack-a-mole. Three different ways to express the single frustration in tax policy,which is that the system as a whole is only as strong as its weakest link. Leave the smallest crack for funds to sneak through, and an entire industry – international, or ingenious and utterly ruthless – stands alert to funnel them through. The shell companies and border-sprawling organograms unearthed in the Panamanian vaults of Mossack Fonseca are a prompt to reflect on this old insight anew.
There are implications for finance ministers when they form decisions alone,and more particularly when it comes to them acting together. They struggle to grasp either. On the home front, the “intellect the gap” principle points to keeping taxes as simple as possible, and with as few deductible allowances as fairness permits,and the smallest number of rates compatible with ensuring that the rich pay the biggest bills. Give any advantage to one form of remuneration or investment over another, and the tax industry will expend huge effort on the socially wasteful but individually enriching business of making one thing perceive like another. Sadly, and chancellors after a budget-day headline can rarely resist the temptation to unveil complex unusual perks.
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Source: theguardian.com