Why tax avoidance is like porn

I know it when I see it.

I know it when I see it.                                                                                                                                                        

Justice Potter Stewart of the US Supreme Court gave one of history's least fulfilling answers when he was asked to define "hard-core pornography"; but the grain of truth contained within is important.

The same temptation to throw one's hands up at the difficulty of defining complex phenomena is everywhere. The Economist's Daniel Knowles, for instance, suggests that it applies to poverty while the Sorites paradox – a close relative – attaches the problem to bald men and heaps of wheat.

It also applies, pretty much perfectly, to tax avoidance.

We all know it when we see it. Take, for example, Polly Toynbee's column from the Guardian today:

The big sell is trusts, special ones devised for this company's clients, guaranteed to protect almost all your wealth from inheritance tax. They are right, it can be done easily. Put all moveables and all cash and investments into a discretionary trust, and it passes to your heirs without tax as soon as you die, not even waiting for probate. It counts as a gift so the beneficiaries need pay no tax either. Called a "discretionary trust", as technically St James's are the legal trustees, the discretion in fact remains in all but name with you: the company will do whatever you ask, so you still control the fund and you can still take money from it. But for reasons that defy basic tax fairness, it avoids all inheritance tax. Why?

Or this example from the New Yorker back in March:

Since New York City tax laws don't apply to people who are deemed to be nonresidents, even if they own a residence in the city and work there, Robertson was allowed to spend no more than half a year – a hundred and eighty-three days – in New York City. This exile was self-imposed. If he had paid New York City tax, which in the top bracket reaches a rate of 3.6 per cent of taxable income, he could have spent as much time in the city as he wished...

Friday nights were particularly risky, since Robertson or his wife often had social events scheduled in the city. In order to "earn a tax day," as he put it, he usually left town on Friday before midnight, even if his wife stayed at the apartment. Robertson's driver had to be on alert: as long as they crossed the Queens border en route to Locust Valley by midnight, Robertson didn't have to "waste" a Saturday as a New York day. Even one minute of a day spent in the city counts as a day of residence. (Exceptions are made for people who are in transit from one destination outside the city to another – from Newark airport to Long Island, for example, or to LaGuardia for a flight.) Robertson said he never missed the midnight deadline, although when he couldn't get his driver or a limousine service in time he occasionally had to hail a cab. On one occasion, Robertson came back from a trip and found himself crossing into Manhattan at 11:45 P.M. That mistake cost him a full New York City day, which he could have avoided by whiling away fifteen minutes at the airport.

Or the three multinationals hauled up in front of the Public Accounts Committee, about whom Richard Murphy writes:

For Amazon things were much worse. Their rep could not justify how an order made in the UK for a product in a UK warehouse, shipped by UK staff through the UK post and with a bill enclosed printed in this country could somehow have anything to do with Luxembourg when so very obviously it hasn’t. Despite this he had the gall to claim tax must be paid where the economic substance of the deal is – even though Amazon does nothing of the sort…

Google tried harder but they had created one insurmountable obstacle for themselves. Their argument was profits should be taxed where they are earned and they said US technology drove their European profits. But for their admission that the payments made from Europe for that technology never reach the USA and instead get parked in tax-free Bermuda ended whatever shred of credibility they’d tried to create.

All of these things are as clearly tax avoidance as Reader's Wives is clearly pornography. The problem comes when you try to come up with a definition which encompasses all of these examples while not also covering whatever the taxation equivalent of Last Tango in Paris is.

You can try to define it as acting to deliberately minimise your tax take – but then, what is taking out an ISA? That is an action which is performed for no other reason than the tax benefits, but it's clearly not tax avoidance.

There must, then, be some definition of the spirit of the law. Loopholes in tax are put there for a reason, but sometimes that reason is tricky to specify completely. So, for example, the loophole that investment income in taxed less that earned income exists to encourage people to invest their money (which is good for growth) – but when hedge fund managers are payed through "carried interest", that gets classed as tax avoidance, because it is technically investment income, but hasn't actually required any investment from the people benefiting.

Unfortunately, that definition doesn't work either. The absence of VAT on books, for example, is to promote an educated, well-read population; but even though 1001 reasons Britain is shit doesn't do that, we don't call it tax avoidance.

The problem persists even if you just look at specific examples of avoidance. Multinational corporations, for instance, sometimes headquarter themselves in of tax havens. Other times, they leave their headquarters where they are, but manipulate their accounts so that it looks like all their profits come from tax havens. Tempting as it is, it's very tricky to come up with a catch-all definition of avoiding behaviour in this situation.

Is it "not paying tax where you are headquartered"? Or is it "not paying tax where the money is earned"? Or is it a third, "pretending money is earned in one place, when it's really earned in another one"? Or a fourth, "paying tax in a tax haven"? Or even just "operating out of a tax haven"?

Perhaps the real solution is to just stop trying. Call out egregious examples of tax avoidance, but resist the lure to dictate a full definition of the term. Make clear to those who set policy that building a tax code which is easily abused will result in protest, and that avoiding tax will result in bad press. But save definitions for the courts, because it's a fight which seems nearly impossible.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The government must demand that Iran release Nazanin Zaghari-Ratcliffe

Iran's imprisonment of my constituent breaches the Convention on the Rights of the Child.

I grew up with a very paranoid mother. She had tragically lost members of her family as a teenager and, as a result, she is extremely fearful when it came to her children. I used to laugh at her growing up – I indulged it but often scoffed at her constant need to hear from us.

A few days ago, I was in Parliament as normal. My husband, his parents and our baby daughter were all in Parliament. This rare occasion had come about due to my mother in law’s birthday – I thought it would be a treat for her to lunch in the Mother of Parliaments!

The division bells rang half way through our meal and I left them to vote, grabbing my phone of the table. “See you in ten minutes!” I told them. I didn’t see them for more than five hours.

The minute the doors bolted and the Deputy Speaker announced that we were indefinitely being kept safe in the chamber, all I could think about was my daughter. In my heart of hearts, I knew she was safe. She was surrounded by people who loved her and would protect her even more ferociously than I ever could.

But try explaining that to a paranoid mother. Those five hours felt like an eternity. In my head, I imagined she was crying for me and that I couldn’t be there for her while the building we were in was under attack. In reality, I later found out she had been happily singing Twinkle Twinkle little star and showing off her latest crawl.

That sense of helplessness and desperate impatience is hard to describe. I counted down the minutes until I could see her, as my imagination ran away with me. In those 5 hours, I started thinking more and more about my constituent Nazanin Zaghari-Ratcliffe.

Here I was, temporarily locked in the Parliamentary chamber, surrounded by friends and colleagues and door keepers who were doing all they could to keep me safe. I knew I was going to be let out eventually and that I would be reunited with my daughter and husband within hours.

Nazanin has been detained in the notorious Evin prison in Iran for nearly a year. She only gets an occasional supervised visit with her two-year-old daughter Gabriella. She’s missed Christmas with Gabriella, she missed Gabriella’s second birthday and no doubt she will be missing Mother’s Day with Gabriella.

But it’s not just the big occasions, it’s the everyday developments when Gabriella learns a new song, discovers a new story, makes a new friend. Those are the important milestones that my mother never missed with me and the ones I want to make sure I don’t miss with my daughter.

Unfortunately, Nazanin is just one of many examples to choose from. Globally there are more than half a million women in prison serving a sentence following conviction, or are awaiting trial. Many of these women are mothers who have been separated from their children for years.

In 2010, the United Nations General Assembly unanimously adopted the Bangkok Rules - the first international instrument to explicitly address the different needs that female prisoners have. It was also the first instrument to outline safeguards for the children of imprisoned mothers.

The Bangkok Rules apply to all women prisoners throughout all stages of the criminal justice system, including before sentencing and after release. However, Nazanin’s case has seen a wilful flouting of the rules at each and every stage.

Rule 23 states that ‘Disciplinary sanctions for women prisoners shall not include a prohibition of family contact, especially with children’. Tell that to her daughter, Gabriella, who has barely seen her mother for the best part of a year.

Rule 26 adds that women prisoners’ contact with their families shall be facilitated by all reasonable means, especially for those detained in prisons located far from their homes. Tell that to her husband, Richard, who in almost a year has only spoken to his wife via a few calls monitored by the Iranian Revolutionary Guard.

Iran has ratified the Convention on the Rights of the Child and supported the Bangkok Rules, yet it is breaching both with its treatment of Nazanin. It is therefore incumbent upon our government to take the formal step of calling for Nazanin's release - it is staggering they have not yet done so.

As I pass the window displays in shops for Mother’s Day, most of the cards have messages centred around ‘making your mother happy’. If there’s one mother I’d like to make happy this year, it’s Nazanin Zaghari-Ratcliffe.

Tulip Siddiq is Labour MP for Hampstead and Kilburn