Most Have The Power To Pay More Taxes, Especially Philanthropists

#TaxPhilanthropy — wealth holders have the power to pay more tax right now even if governments fail to reform their policies

I have had a blog about tax justice sitting in my drafts since Rutger Bregman called out the 2019 Davos audience for trying to talk about social change without mentioning tax. In his words, “stop talking about philanthropy and start talking about taxes ~ all the rest is bulls***”. I hadn’t quite found the right way to express what I mean in more nuanced terms than that, as I don’t believe philanthropy and taxes are mutually exclusive or in opposition to one another. Now, I want to share my thoughts, because although it’s been over two years, and a global pandemic since those comments, it’s obvious from Elon Musk (the richest man ever)’s latest ridicule of both tax and philanthropy that not much has changed.

What Musk argues (that holding his wealth in shares rather than being paid a salary means tax is simply not payable) is a problematic framing of wealth holders being at the mercy of the government when it comes to paying taxes, suggesting they would be paying more if it weren’t for the policies and practices outside of their control. Forgetting for a moment the influence wealth holders can have over policy, the suggestion that they have no agency when it comes to their tax exposure does them — and everyone else — a disservice. No one needs to wait for tax reform to pay more tax — we all have the power to do it ourselves right now.

The debate around tax policy is as old as money, but discussing taxation as a social good rather than an annual inconvenience or throttle on business success is rare. Tax reform remains focused on how to enforce wealthy people paying their fair share, and a handful of billionaires and millionaires suggesting the rules should probably be changed. There remains a huge middle ground of wealthy citizens and businesses that exploit loopholes and make use of legal tax avoidance schemes, to the tune of £12.4 billion every year in the UK. This ‘tax gap’ — an impressive 1.5% of the country’s budget — is more than the UK’s total spend on Environmental Protection, Culture, or contributions to the EU, and more than the country’s total charitable giving too.

It’s entirely possible to make small decisions (or brief your wealth managers to do so) that result in a reasonable tax bill, rather than structuring your assets in ways that proactively reduce (or negate) it. And whilst this might seem like an outlandish notion, what if we reframe the payment of tax as a form of philanthropy? Many people structure their wealth to give some of it away to achieve social or environmental impact, usually through civil society, and so ‘Tax Philanthropy’ could be giving away tax advantages for the purpose of achieving social or environmental impact through government.

As Bill Gates said, ‘if people want the government to do more, it needs to be funded’, and paying marginally more tax is a minor change in financial management that could lead to huge shifts in the capability of a government to support a thriving society. So, why aren’t the smartest, most investment-minded philanthropists and social investors making use of their tax bill as a part of their overall impact portfolio?

Whilst the loss of power or control and sometimes lack of trust in government come into play: money paid in taxes is allocated by decision makers who are — at least theoretically — democratically accountable, subject to scrutiny on their priorities, working with unprecedented access to data and analysis on public needs, and mandated to make decisions in the public interest. History also shows diverting money from the government through the normalised attitude of ‘try to pay as little tax as possible’, makes austere policies and harmful practices even more likely for the most vulnerable. Paying tax just makes sense.

I’m not suggesting that people start donating to HMRC or the IRS instead of charity (although did you know that you can?), but those who amass enough wealth to be philanthropists have the power to pay more tax right now even if governments fail to reform their policies. At I.G. we’ve already seen some inspiring examples of our younger philanthropy clients pushing their wealth advisors to structure their wealth in less tax-avoidant ways, and we’re seeing a new ethos among some wealth holders and their financial advisers: ‘wealth minimization.’

If capitalism is the game we are playing, we need a movement of people who don’t play on easy mode, and are proud of their high tax scores when they achieve them. We need pioneers who pledge to give back to society, as well as civil society. Philanthropists who ensure all donated pounds are fairly earnt, and charities aren’t being funded simply to prop-up struggling public services that taxpayer funding could enable to flourish.

This is what a pledge to become a Tax Philanthropist could look like:

• Commit to an outright rejection of tax avoidance schemes and incentives that you don’t need, in particular ensuring your assets and pay are held and structured in a way that results in a fair tax bill.

• Find wealth advisors who are transparent about their ethics on tax avoidance, and challenge them to support you to understand where you could contribute more tax. Ask them to articulate the social impact of your tax contributions, in the same way they might report on the ESG ratings or impact of rest of your portfolio.

• Act philanthropically with your time, power and influence by joining initiatives like Proud to Pay, urging the UK Chancellor to raise taxes to reduce inequality, support stronger social care and the NHS, and to ensure that we’re building a more just and green society.

• Embark on a learning journey through initiatives like Good Ancestors Movement, Resource Justice, Patriotic Millionaires, Millionaires for Humanity, and Tax Justice Network.

• Explore the breakdown that HMRC already provides for UK taxpayers on what your tax as funded in the last year, and join others like #WeCrowdfundedThat in celebrating and seeking to grow those contributions as a society.

• Start vying for the top spots in The Sunday Times Magazine Tax List as well as the Giving List and Rich List — as both an indicator of success and value to society.

• Push for tax to be on the due diligence check-list when doing business too: PwC has a Tax Transparency initiative for businesses, and the Fair Tax Mark is a kitemark for businesses that pay their fair share.

Whilst I am no Elon Musk, I’m an early stage giver in #taxphilanthropy, and alongside my existing charitable giving, I will be doing what I can to ensure my tax bill is the maximum it can be, and taking pride in the amount I contribute to our public infrastructure. I hope you will join me in doing the same to ensure the cost of COVID-19 recovery does not fall on those with lower incomes, and so we can build a thriving society through public and private good.