Adam Afriyie is the Member of Parliament for Windsor.
The tax practices of international corporations have brought the debate on tax avoidance and wealth creation sharply into focus. Yet the moral outrage directed at Amazon and others may well be misplaced. If our tax laws are not being broken, then any blame for a failure to collect what is "felt" to be a proper proportion of tax lies firmly at the door of governments and politicians.
Tax evasion is a crime which must be rooted out, but the avoidance of unnecessary taxes is a moral duty for individuals, families and company executives who must serve their shareholders. The current UK tax regime is doing exactly what it has been “designed” to do. The problem lies in the lack of any coherent design.
The answer to the tax avoidance dilemma lies in building a sane tax system which recognises that wealth creation is an economic, social and moral good. The goal must be to allow the least advantaged in society to have the chance to get on in life by creating a stream of new jobs in a dynamic and competitive market. And to create jobs, we must unashamedly back British enterprise. Removing barriers to prosperity is a sound, age-old Conservative ideal, and it must be at the heart of the current economic strategy.
Thomas Hobbes wrote that “riches are gotten with industry”, and if we are to allow industry to flourish, we must heed the argument that it is the role of government to create an environment in which citizens are free to function as they see fit as wealth-creating individuals.
The aim of the tax system must not merely be to raise more money for the Exchequer, it must be to drive enterprise and job creation. A Conservative tax system must at its core promote wealth creation by incentivising those with money to invest and have the confidence to reinvest. A decent job in a thriving business is the best way of helping the least advantaged in our society.
Conservatives and socialists might differ on how government revenues should be spent, but it cannot be disputed that it is private enterprise that creates the wealth in the first place.
Recent headlines suggest that an unwelcome sentiment has crept into the debate on tax avoidance. The legitimate avoidance of tax is steadily coming to be considered as corrupt as tax evasion. Yet the blame for some of the more notorious examples of tax avoidance falls firmly on the shoulders of legislators. If our political leaders were to create a tax framework which recognised wealth and job creation as a moral good, the temptation to smear law-abiding individuals, philanthropists and corporations would evaporate.
The Conservative-led Government has managed to do a reasonable job of reducing taxes within the constraints of coalition. Corporation tax rates have fallen consistently and are soon to hit 21%. The signal to investors and wealth creators at home and abroad is a positive one. The jobs that follow will be welcome. And by raising the tax-free threshold an equally powerful signal is sent to lower paid workers and those seeking to come off welfare dependency.
But there is more to do to realign our tax system to support wealth creation. We must move quickly to a lower, flatter and simpler tax regime if to we are to give the least well-off the jobs, incentives and increased incomes to get on in life. The desire to create wealth, reduce tax and maximise family income is a natural instinct, and it is exactly what is needed to kick-start the economy.