Legal is Illegal.

Dreidimensionale Darstellung der eulerschen Formel
Three-dimensional representation of the Euler Formula

A short time ago, I was really scolded. Just because I wrote in this blog (Frustration Splitter – Frustsplitter) how happy it makes me to know that Uli Hoeneß has become a day release prisoner with the beginning of this year. One of the reasons is that, many decades ago, I sometimes met him when he was walking his dog. From those days, I remember him as a nice guy.

My short reasoning was as follows: Concerns get away with things for which the “common big-time tax sinner”, such as Uli Hoeneß, will be put behind bars. This follows the motto: “the truly big ones remain free and the medium-sized criminals will be hanged”. Because compared to what the concerns do, the money Uli cheated with was “peanuts”. Even if there are certainly some “tax sinners” who have to accept penalty for damage that is “peanuts” in comparison with the Uli Hoeneß operation. You have to remember that all is relative.

You cannot imagine what scolding I was subjected to. The outrage of some of my readers was immense. Basically, they said you cannot compare those things! After all, the big concerns might have acted “morally” in a bad way, but other than that, they acted totally “legally”. That is precisely the difference between the concerns and Uli.

Well, speaking of “legal”: isn’t this exactl one of the basic problems of our society? Incidentally, you cannot do all that is “legal”. This is true for many things, not just for taxes. Just think of our environment and all the things we are permitted to do, yet we certainly should not at all be permitted to do those things.

Back to taxes: no set of rules will ever be perfect enough not to make “legally possible” some things which actually are the opposite of what the set of rules wanted. Especially if we are talking something as complex as or tax legislation. As a consequence of this permanent sophistication and increase of our laws, we have an immense increase in transaction costs (not just legal and surveillance costs) and an ever stronger misconception when it comes to what we feel is right and wrong.

There is an exponential increase in amendments and new laws. More and more “legal service” and blind achievement are promoted. Only the real big ones can afford this. In fact, even now we live with a state of affairs where some laws contradict each other and reasonable interpretations and decisions are no longer possible (just think of the “data security” legislation).

It is just like with the security glitches – not just – in Microsoft software. You get ever more contradictions and one functional goal will exclude the other. You make a huge effort patching up one hole in the “firewall”, and two new ones are already in the making. It reminds you a little of the courageous slayers of multi-headed dragons: in olden days, those people made the experience that, after having cut off one head of a monster, two others grew in its place immediately. In the fairy tales, the solution lay in burning the heads with the pitch torch.

Another good example for this development is the increasing complexity of our technological and social systems. Many fear it as one of the fearsome dragons of our world. But this development, too, is very easy to explain. The systems get more and more complex because the correction of the discovered mistakes gets harder and harder. Consequently, these corrections keep increasing the complexity of the system. The next generation of errors will be even harder to handle, leading to the next increase. This is a way towards catastrophe constantly strengthening itself.

The tax evasion model is a gigantic advantage in competition for those concerns that win. They accumulate no end of net profits and can invest hugely, which again will give them new advantages. They will end up being able to remove competition they do not like (especially smaller companies) – no matter what the cost – and to steal their know-how. They can afford the most expensive marketing campaigns and, supported by expensive lobbyists, they will seek world supremacy.
This is how the wonderful spiral of power increase works!

(Translated by EG)

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