Fiscal Purgatory

Taxes and Justice

By Luigino Bruni

Published on on 18/03/2010

Once again, we speak again about fiscal reform and the fight against tax evasion, a disease not only of the fiscal system but of all civil life as it undermines the roots of the "social pact" between citizens. Today, in a modern democracy, we should often remember the logic of taxation. Taxes (and levies) have three goals: they serve to redistribute income and wealth from the rich to the poor; they are an instrument to encourage the consumption of meritorious goods (art, education, culture...); and finally they serve to finance public goods, like streets, security or health.

All three of these functions make sense within a society that feels itself linked by a pact, as it has a collective dimension which is greater than a sum of contracts and individual and private actions. Let´s think, for example, of public goods: if they cost 1000 and there are 100 of us paying our taxes, each one of us contributes 10 on average. But if we are 100 citizens and only 50 of these pay their taxes, whoever contributes pays 20, for themselves and for their "wily" co-citizens. That is why the social pact is undermined when tax evasion exceeds a critical threshold. It breaks the trust that keeps people and any political community together.

When We talk about the scandal of fiscal paradises - "places" where recycled money often travels, oozing with violence and blood - we should remember that fiscal purgatories also exist. They are where people who, even due to the sly person´s paradise, find themselves under too much unjust and unsustainable fiscal pressure. It´s a purgatory that transforms itself into hell when an entrepreneur that lives legally in sectors of high fiscal evasion is forced to close his business. The fiscal culture changes then over the long run, with the fatiguing art of daily virtuous actions, starting in school. It is not easy to answer a child who asks, "why do fiscal paradises exist?" but we can always wish him that his generation be the first to eliminate this collective shame.

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