Quora Answer: What are the Downsides if the Tax Loopholes were Fixed?

The following is my answer to a Quora question: “What are the downsides if the tax loopholes were fixed and every billionaire and corporation paid what they owe?” 

There is no such thing as a perfect tax legislation.  You cannot tax everything, and you cannot account for every single scenario.  Like any act of legislation, there is a need to balance different needs and address the consequences of legislation.  For example, if you raise corporate taxes, directors might look into taking their remuneration as benefits to director and wages.  If you raise personal income tax, they would consider taking their profits as dividends.  If you raise both, the cost is either passed to the consumer, or the business moves elsewhere where there is a tax incentive. 

Examining the tax code and tax policies across multiple jurisdictions, utilising the services of tax consultants, does not mean there are loopholes.  That is a layman’s way of understanding these things.  It is a cost benefit analysis.  If people understand the rules, they can take advantage of it better.  This is neither inherently immoral or unjust.  This is business. 

A better question would be how do we ensure that wealthy corporations and individuals pay what is deemed a fair tax for the revenue generated from the country or region?  This is no longer about mythical loopholes, but having better legislation.  To have better legislation, the electorate needs to organise, and elect better candidates.  Once they are elected, they need to be held to account.  A further discussion would be what is deemed a fair rate of taxation?  That is what elected representatives are supposed to derive in consultation with stakeholders.