Should politicians disclose their tax returns?

It’s been quite a week hasn’t it? Allegations of misfeasance, corruption, tax avoidance and evasion have been flying around. What’s curious about the fallout from Pandora’s Panama box is actually where we have ended up. This was a mass disclosure of documents to the press, not unlike Wikileaks and the Snowden affair, but whilst the former produced a debate about US military operations and the latter a debate about Mass surveillance, with #PanamaPapers we’ve somehow gotten onto querying whether Jeremy Corbyn declared a few hundred pounds for lecturing!

How this has happened is entirely predictable in hindsight. The Panama Papers served to connect many high profile politicians and establishment type figures to corruption and fraud. David Cameron was connected by virtue of his father’s investment business, from which he benefitted, and was left in the end, having made a dog’s dinner of the explanations, with no option but to publish his tax return (summary). Nicola Sturgeon and Jeremy Corbyn thereafter sought to apply political pressure by releasing details of their own tax affairs, so now the zeitgeist is focusing upon scrutinising the tax affairs of politicians and hence the examination of Corbyn’s accounts.

This all leads to a more fundamental question-should politicians publish their tax returns? The momentum is certainly behind such a change and so it seems inevitable to some (including Jacob Rees-Mogg and former attorney general Dominic Grieve). But is this correct? Should politicians be forced to publish their tax returns?

My answer to this question is “yes”, but I accept that it is not without difficulty. The starting point, for me, goes back to the genesis of direct taxes in the UK. When income tax was introduced formally in 1842, it was against the backdrop of a 19th century Victorian conception of liberty.[1] Where a gentleman must be deprived of some of his earnings, there must be protections in place to ensure that no other person should know the full extent of his affairs. A gentleman’s private affairs should be kept to the greatest extent private. Several elements of the initial Income Tax Acts served to do so. The first was that tax inspectors would only be propertied people, so as to ensure that there would be no unscrupulous behaviour. The second was that the income tax would be self-assessed. The third was that income would be split according to its source (e.g land, dividends, from a trade etc), and a different office within the Inland Revenue would deal with each source. No one tax inspector accordingly would know how much income was derived from each source. Finally, the Inland Revenue would be bound by a duty of confidentiality not to disclose the tax affairs of any gentleman.

Today, we no longer require revenue officials to be persons of means. Self-assessment tax returns are only submitted by circa 15% of the population. We do not have strict delineation between the activities of the tax offices, much less a wall preventing officials from discussing investigations. More importantly, the ideals of the 19th century are not the ideals we hold firm today. A justification from the 19th century does not, without question, justify our approach to matters today. Rather we must always interrogate our principles in light of modern day circumstances. We no longer delve out Victorian punishment; women and people without property have been granted suffrage; a person’s sexuality is no longer a reason for imprisonment etc.

The question to be asked today therefore is whether privacy of one’s tax affairs serves the ends traditionally associated with privacy rights, namely, protection from the State, corporations and individuals. In the case of the State, the point is moot as the State already holds the information. As for corporations, the counter argument in favour of disclosure may be made, namely, that employees/workers would be in a greater position for negotiating wages if furnished with the remuneration details of others. Finally, individuals, it is granted, may use taxpayer information in order to target others for theft and robberies. In practice, this is not what occurs however. Having spent a year living in Norway where tax returns are published online, I can safely say that law and order do not collapse. On the other hand, transparency of information seeks to ensure lower levels of evasion as neighbours will effectively “rat” on each other to the Revenue if their lifestyles fails to match purported incomes.

Accordingly, the justification for privacy over tax affairs is on fairly shaky ground in general. Now, when combined with the question of publishing politicians’ tax affairs, the justification gets eviscerated by a countervailing public interest in ensuring propriety in public office. If the accusation here is that I would impose one rule for some and a different rule for the rest, so be it-it is not a question of horizontal equity. We already hold politicians to different rules and standards. For instance, the details of their expenses are already published. A bankrupt cannot serve as an MP. You cannot run if you are a member of the armed forces, police or judiciary. More importantly, if those who are in charge of the laws choose not to fix them, but rather take advantage of their loopholes or circumvent them (even if morally this might be agreeable), then why even have elected politicians?

Then the issue which remains is not one of principle, but rather one of practice. How would such a rule for disclosure work? Who would have to publish their affairs? Would it merely be elected politicians, or would it include members of the House of Lords? Would it only be politicians, or would it also include those that influence policy? What about journalists, think tank members, commentators or academics? The answer, for now, is surely just elected politicians: those to whom we impliedly consent, through the ballet box, to having a legislative monopoly by which we are all bound. It might be considered then whether we should roll this treatment out to the House of Lords who hold a residual legislative role, but it is worth recalling that their role operates somewhat in the negative: legislation is not promulgated in the Lords. If this distinction seems anomalous, it is a reflection of the very strange position that the Lords finds itself in the British Constitution, and that is a debate for a separate day.

Of course, the hand of increased transparency should not be overplayed. It will not in itself bring about profound changes to public confidence in politicians. The furore and accusations surrounding Cameron and Corbyn serve to highlight the problem which follows transparency: it relies upon an informed polity not to jump to rash conclusions. This will come in time. But it relies, in part, upon the media acting properly in the public interest and not in a hysteric frenzy to attract readers.

[1] Although the income tax was first introduced in 1799, it was during the Napoleonic Wars and as such, the need for revenue was largely accepted by the public as necessary for the war effort-the relevant act accordingly did not need to come equipped with the various elements later introduced to protect privacy


About taxatlincolnox

Tax law academic. With this blog, I seek merely to contribute to the debate. All thoughts are mine, of course.
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One Response to Should politicians disclose their tax returns?

  1. Pingback: MyWaitrose Card and Taxpayer Privacy | taxatlincolnox

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