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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Ansbach puts Europe's bravest politician under pressure

Angela Merkel must respond to a series of tragedies and criticisms of her refugee policy. 

Angela Merkel, the Chancellor of Germany, is supposed to be on holiday. Two separate attacks have put an end to that. The first, a mass shooting in Munich, was at first widely believed to be a terrorist attack, but later turned out to be the actions of a loner obsessed with US high school shootings. The second, where a man blew himself up in the town of Ansbach, caused less physical damage - three were seriously injured, but none killed. Nevertheless, this event may prove to affect even more people's lives. Because that man had come to Germany claiming to be a Syrian refugee. 

The attack came hours after a Syrian refugee murdered a pregnant Polish woman, a co-woker in a snack bar, in Reutlingen. All eyes will now be on Merkel who, more than any other European politician, is held responsible for Syrian refugees in Europe.

In 2015, when other European states were erecting barriers to keep out the million migrants and refugees marching north, Merkel kept Germany's borders open. The country has resettled 41,899 Syrians since 2013, according to the UNHCR, of which 20,067 came on humanitarian grounds and 21,832 through private sponsorship. That is twice as much as the UK has pledged to resettle by 2020. The actual number of Syrians in Germany is far higher - 90 per cent of the 102,400 Syrians applying for EU asylum in the first quarter of 2016 were registered there. 

Merkel is the bravest of Europe's politicians. Contrary to some assertions on the right, she did not invent the refugee crisis. Five years of brutal war in Syria did that. Merkel was simply the first of the continent's most prominent leaders to stop ignoring it. If Germany had not absorbed so many refugees, they would still be in central Europe and the Balkans, and we would be seeing even more pictures of starved children in informal camps than we do today. 

Equally, the problems facing Merkel now are not hers alone. These are the problems facing all of Europe's major states, whether or not they recognise them. 

Take the failed Syrian asylum seeker of Ansbach (his application was rejected but he could not be deported back to a warzone). In Germany, his application could at least be considered, and rejected. Europe as a whole has not invested in the processing centres required to determine who is a Syrian civilian, who might be a Syrian combatant and who is simply taking advantage of the black market in Syrian passports to masquerade as a refugee. 

Secondly, there is the subject of trauma. The Munich shooter appears to have had no links to Islamic State or Syria, but his act underlines the fact you do not need a grand political narrative to inflict hurt on others. Syrians who have experienced unspeakable violence either in their homeland or en route to Europe are left psychologically damaged. That is not to suggest they will turn to violence. But it is still safer to offer such people therapy than leave them to drift around Europe, unmonitored and unsupported, as other countries seem willing to do. 

Third, there is the question of lawlessness. Syrians have been blamed for everything from the Cologne attacks in January to creeping Islamist radicalisation. But apart from the fact that these reports can turn out to be overblown (two of the 58 men arrested over Cologne were Syrians), it is unclear what the alternative would be. Policies that force Syrians underground have already greatly empowered Europe's network of human traffickers and thugs.

So far, Merkel seems to be standing her ground. Her home affairs spokesman, Stephan Mayer, told the BBC that Germany had room to improve on its asylum policy, but stressed each attack was different. 

He said: "Horrible things take place in Syria. And it is the biggest humanitarian catastrophe, so it is completely wrong to blame Angela Merkel, or her refugee policies, for these incidents." Many will do, all the same.