When is it OK to avoid tax? And when should taxpayers refrain from actions that will cut their bills, even if their actions are perfectly legal?
As the European economy remains sluggish, the public mood has turned against those who seem to be paying less than their fair share of tax. Last week, for example, saw Goldman Sachs abandon an idea to switch UK bonus dates to cut its employees’ tax bills and an escalation in the row about Greek tax cheating.
The cases are, of course, very different. In Greece, tax evasion – which is against the law – is rife. The International Monetary Fund’s latest review on the country, published on Friday, says that the “losses to the state from tax evasion are enormous”. It estimates the black economy is 25 percent of GDP.
Three years after its financial crisis began, Greece has made little progress in cracking down on tax cheats. Although Athens did adopt a strategy of focusing on priority areas, the IMF says implementation has been stalled in part because the tax administration remains unreformed: “Anti-corruption efforts have been minimal, and efforts to remove underperforming staff have met stiff resistance.”
But the rot extends beyond corrupt tax officials. In recent months, Greek politics has been transfixed by the scandal over the so-called “Lagarde List”, which contains the names of more than 2,000 Greek citizens who had bank accounts at a Swiss HSBC branch. Christine Lagarde, then France’s finance minister, passed the list to George Papaconstantinou, her Greek opposite number, in 2010.