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The redemption of Jimmy Carr: legality, morality and the importance of responsible advisers

I met with a financial advisor and he said to me 'Do you want to pay less tax? It's totally legal'. I said 'Yes'. I now realise I've made a terrible error of judgement. Although I've been advised the K2 Tax scheme is entirely legal, and has been fully disclosed to HMRC … I'm no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr .

So tweeted comedian Jimmy Carr on 21 st June 2012. And so ended (he must fervently hope) his brief stint as the UK's Face of Tax Avoidance. But my comments here are not really about tax avoidance. Nor are they about whether it was fair of the UK Prime Minister, as head of a government that has thus far failed to sort out the scandal of corporate tax avoidance by UK companies, to have picked on a private individual in the way he did.

There are actually much bigger issues to consider than whether a comedian avoided tax, and they are all there in Mr Carr's apology.

How are we supposed to respond to things that are legal but not “moral”? Who decides what is “moral” anyway? And when we are confronted with these kinds of moral dilemmas, what makes a good adviser?

First of all, we must not overstate the importance of law in helping us to decide how to behave. We don't just do things because they are legal. And we don't necessarily avoid doing things because they are not legal. There are moral and practical reasons underlying our choices as well.

There is, one hopes at least, a fair amount of overlap between what is “legal” and what is “moral” – and what is “illegal” and “immoral”. But there are also cases where the law gets ahead of where society is, morally speaking – and cases where the law falls behind. Laws are most likely to be followed when they reflect a moral consensus. But then who is to say whether we are acting because of what the law says – or just acting “morally”?

A perfect partnership between law and morality may be the ideal. But we know, too, that different people have different moral priorities and different ideas about how best to achieve “moral” outcomes. We have all come up against laws and legal outcomes that we don't agree with or we think should not apply to us. Whether we still comply – or ignore the legal rules – may depend on many other practical and moral considerations. Am I likely to get caught? Could other people get hurt? What will my boss, colleagues, friends, family think?

Sometimes laws are required to change behaviour. Stupid and dangerous behaviour (driving while talking on a mobile phone, for instance) can seem morally acceptable because it is commonplace. Everybody does it, so why shouldn't I? So sometimes new laws can help correct perceptions that something is safe, acceptable or reasonable – when it is actually not.

But law cannot regulate every aspect of human behaviour. So law and morality is a two way street. Law can clarify or correct deficiencies in “morality” – and “morality” helps to guide us when there are gaps and inconsistencies in the law.

Difficulties arise, though, when there is no agreement as to what moral behaviour is. Behaviour that is perfectly shocking to some is sometimes perfectly acceptable to others. The Prime Minister, no doubt having sensed a shift in public opinion, now regards tax avoidance as a “moral issue”. But the fact that a well educated and apparently intelligent Conservative MP was happy to argue on Newsnight that complicated tax avoidance schemes were the moral equivalent of investing in a PEP (1) suggests that the moral debate has some way to go.

Actually, the comparison does not bear too much analysis. It should be obvious to anyone that taking advantage of a government-sanctioned tax break, implemented after proper consultation and consideration and designed to achieve a particular policy objective, is not the same as going out of your way to seek out and exploit tax loopholes.

But there is a wider point. Life would quickly become intolerable if everyone were to take the lack of a legal rule on something as positive permission, from society at large, to go ahead and do it. It simply isn't possible for the law to provide for every eventuality, to anticipate every possible course of action, and to prescribe solutions for every problem. We rely on people to be considerate and sensible.

We expect the same of our corporate sector too. “Corporate social responsibility” is based on the idea that, as corporate citizens, mere legal compliance – just satisfying the letter of the law and no more – is simply not enough. Businesses, like individuals, must consider their impacts on society and adjust their behaviour accordingly.

So if this message has not yet permeated our legal and accounting sectors, then this is profoundly depressing. Many lawyers and accountants appear to have embraced CSR. They rightly see CSR as a business opportunity – and recognise that there might be efficiency gains to be had as well. But their CSR statements and reports give few, if any, clues as to whether they think CSR ideals have any bearing on their core business of giving advice.

In terms of understanding their own role in promoting a fair and just society, some commercial lawyers and accountants clearly have some catching up to do. Finding and exploiting legal loopholes may give some intellectual satisfaction. The admiration and attention of colleagues and clients can be intensely gratifying. But, in the long run, advisers who ignore the bigger picture – who fail even to recognise, let alone explain to their clients, what the social impacts of their behaviour might be – let their clients down.

Jimmy Carr was let down. It was left to his friend and fellow comedian, John Richardson, to explain the wider social implications of the K2 Tax Scheme to Carr on the popular television panel show “8 Out of 10 Cats”. After a very enjoyable few minutes of comic banter, Mr Carr cheerfully enduring the television equivalent of the stocks, the panel turned to the question of why the Prime Minister had become involved at all. Mr Richardson wearily explained:

“David Cameron got involved because he is in charge of the economy. And he gets sh*t in the papers every day for having to fire nurses and doctors. And one of the reasons he has to do that is because there isn't enough money in the pot. And one of the reasons there isn't enough money in the pot is because not everybody pays their tax.”(2)

(1) PEPs or “Personal Equity Plans” were a type of savings account, available in the UK, which allowed savers to keep returns on their investments and not pay income or capital gains tax on them. They are now replaced by stocks and shares ISAs (“Individual Savings Accounts”). There are designed to encourage people to save and invest, but there are limits to how much you can invest in this way.

(2) Channel 4, 8 Out of 10 Cats , Series 13, Episode 9, aired in the UK 22 nd June, 2012. http://www.channel4.com/programmes/8-out-of-10-cats/episode-guide/series-13/episode-9

 

 

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Jennifer Zerk Consulting: +44 (0)1223 207305 - info@jenniferzerkconsulting.com