Two months ago when “John Doe”, the whistleblower released confidential papers from Mossack Fonseca — (Does the firm still exit, I wonder?) there have been revived calls for more, if not complete, transparency of personal tax information for the general sake of public morale.
Finland, Norway and Sweden already do so, its proponents saying that it reduces dishonest form-filling and reduces using convoluted schemes to minimise the taxes they pay. Also, transparency of incomes of different jobs helps young people to decide on which careers to aim for. It’s very much on the side of social mobility.
Those who oppose tax transparency say that it intrudes too much into personal privacy. It would be better for the government to spend more on tax investigators than rely on nosy neighbours or employees with a grievance and thus with social shaming.
But those who have very high incomes don’t at all mind paying for the protection of their wealth when it’s in danger — cheerfully paying well over 90% income tax in wartime — if the system were fair.
If we had a flat tax on earnings then high earners would pay less on earnings but more — usually the maximum they can afford — on visible wealth for status reasons, such as houses, cars, fashionable clothes and personal ornaments. Also, with higher incomes, they would spend more in buying these things initially.
It is a get-out to say that rich earners save more — and thus invest more — money than do lower earners proportionately, and thus ‘do more good’ for the economy. But while the more dishonest among the rich continue to persuade government politicians and senior civil servants to avoid status-linked taxes then they can continue to evade their full payment of personal taxation. Hopefully, the Nordic countries will also lead the way on this in due course.