Why Tax Avoidance isn’t All Bad

Before my inbox gets flooded with messages blasting me for what appears to be some elitist views concerning tax, please read this post all the way to the end. You’ll realise that I’m in no way an elitist and I’m every bit for the fair treatment of the average man on the street, quite simply because I am indeed the average man on the street myself. All this platform is is a channel through which I can share my experience in my field of expertise.

So why is tax avoidance not all bad then?

What is tax avoidance?

Before we get into the meat of the matter it’s perhaps pertinent to first clarify exactly what we’re talking about in reference to tax avoidance. So tax avoidance is NOT tax evasion, which means it’s NOT illegal. Tax avoidance is merely making use of legal tools and constructs of the financial world to avoid paying tax on some money which you may have. It must be made clear that there is no way of legally avoiding paying tax altogether, so you might apply some tax avoidance tactics to a certain portion of your wealth, but never to every single penny you have.

An example of a tax avoidance tactic is that of spending less than the taxable time defined in your country of residence, which is typically around 90 days in many countries. So if you spend less than 90 days in that country then you’re exempt from paying income tax.

There are many other tax avoidance strategies used mainly by big corporations and this is what I’m going to focus on as the subject of this discussion. I understand that big corporations in particular are the entities which come under fire for their tax avoidance exploits, but this is exactly why I want to demonstrate why tax avoidance isn’t all bad.

Forced Corporate Social Responsibility (CSR)

In most cases any tax avoidance tactic used by a company requires them to redirect the money they would have otherwise paid in taxes to some sort of CSR project. To give you a simple example, if you want to pay less tax on your profits for a specific financial year you could qualify for your tax exemption by perhaps donating a certain sum of money to a charity. This is where the importance of what I’m trying to communicate comes to the fore because what’s happening here is that instead of handing the money you would have paid in taxes to the government, what you’re rather doing is putting it to use directly within the community.

The government officials in charge of handling the tax revenues have less of a burden to have to deal with and the red tape and bureaucracy of the money first having to go through the national treasury is cut out completely.

This spills over into technological developments and advancements in general. For example, the parent company of Google, Alphabet, has a direct channel through which to develop technologies that are for the good of the masses such as Google Maps. Would the US government have allocated funds collected through taxes to the development of a project like Google Maps?