Taxploitation and Complicity

Abstract

This article investigates the moral issues surrounding ‘taxploitation’, a term which I coin for behaviour short of tax evasion insofar as it is within the letter of the law, but nonetheless clearly morally objectionable insofar as it contradicts the law’s spirit and is incompatible with a fair distribution of social burdens. Drawing on work in law and economics concerned with the problem of opportunism, I identify a distinctive challenge that liberal commitments to the rule of law and personal privacy pose for effectively enforcing obligations to make fair tax contributions. For good economic reasons tax burdens are responsive to the purposes for which actors make their financial decisions. But a liberal state is properly reluctant to second-guess an actor’s claim about the purposes for which they are acting, and to delve too deeply into the personal financial choices of private individuals or bodies at least until there is evidence of wrongdoing. These constraints on state action in turn open the door to opportunistic decision-making by taxpayers. But, I show, while the moral limits on state action do indeed bar states from directly addressing the problem, they do not stand in the way of an indirect, but potentially equally powerful, solution: to focus, not directly on the actions of taxpayers, but instead on the behavior of the global tax planning industry that is complicit in taxploitation and whose regulation does not give rise to similar moral objections.