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EY boss defies Osborne’s tax challenge

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3rd Oct 2014
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The UK and Ireland boss at one of the big four accountancy firms has sent a defiant message to George Osborne, declaring that the firm will not change its advice to US technology groups accused of aggressive tax avoidance.

EY’s UK and Ireland chairman and managing partner Steve Varley said it was up to ministers to change the law if they wanted different outcomes, Patrick Hosking, financial editor at The Times, reported yesterday.

On Monday George Osborne told the Conservative party conference: “While we offer some of the lowest business taxes in the world, we expect those taxes to be paid – not avoided. Some technology companies go to extraordinary lengths to pay little or no tax here. If you abuse our tax system, you abuse the trust of the British people. And my message to those companies is clear: we will put a stop to it.”

Varley’s comments will strike a chord with some tax professionals, who argue that attacks on legal tax avoidance strategies undermine the rule of law.

Globalisation and the increasing sophistication of tax planners have opened up opportunities for multinationals to “greatly minimise” their tax burden, the OECD said when it set out the G20/OECD base erosion and profit shifting (BEPS) action plan last year.

“This has led to a tense situation in which citizens have become more sensitive to tax fairness issues,” it said.

But in January Pascal Saint Amans, director of the OECD's Centre for Tax Policy and Administration, said it was up to governments to change the law.

During an OECD webcast he said: “What we say, and I think we want to insist on this, it is too easy to put the blame on businesses, on corporates – saying ‘you're not doing the right thing’.

“The rules as they are facilitate double non-taxation. It's legal. If governments are not happy with something which is legal, it is their responsibility to change the law.”

‘Our clients make the decisions’

Hosking reported that when asked whether EY – whose clients include Apple and Google – would alter its approach in the light of the chancellor’s attack, Varley said: “We’ll carry on as before … Parliament should legislate if they want a different outcome. I don’t think it’s up to us to get embroiled in politics.”

Asked whether he thought the firm was responsible for the low UK tax paid by some companies, Varley said: “Our clients make the decisions. We’re the advisers.”

The chancellor is expected to announce in December measures to tighten the UK corporation tax regime. Heather Self, a partner at the law firm Pinsent Masons, warned against “unilateral moves” in advance of the BEPS project being finalised. “The UK should of course take the lead on tax avoidance, but only where it is sure that others will follow,” she said.

The OECD itself has warned that “replacement of the current consensus-based framework by unilateral measures [could] lead to global tax chaos marked by the massive re-emergence of double taxation”.

The OECD presented the first seven BEPS “deliverables” to G20 finance ministers last month. This week it published a revised timetable for consultation on the BEPS project.

“Work on the remaining elements of the BEPS action plan is ongoing, through technical working parties, enhanced and targeted engagement with developing countries focusing on their priority BEPS issues, as well as dialogue with business, civil society, academics and other international and regional organisations,” the OECD said.

Osborne said in March that the BEPS project, if successful, would fundamentally change the international tax landscape and shift the balance of the rules in favour of tax authorities, “enabling us to clamp down on those who refuse to play by the rules”.

This week Financial Times columnist John Gapper observed that the OECD was making faster progress  than might have been expected towards fixing “gaps” in the system. “If progress continues, multinationals that have exploited distortions such as the ‘double Irish’ will pay more – although not as much as politicians suggest – and the system as a whole will endure.”

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By User deleted
03rd Oct 2014 11:02

Steve Varley - Accenture ...

Partner - Andersen Consulting / Accenture
1991 – 2005 (14 years)

mmm ...

Just type into Google '.. Accenture computer failure ..' and see what appears (NHS is just one UK area in their considerable catalogue of disasters)

Bearing in mind the ethos of Andersen / Consulting / Accenture and the EY logo at the top of the page 'Building a Better Working World' and the track record of IT delivery by his previous firm, where he was a partner - what price credibility?

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By Ian Sunderland
03rd Oct 2014 11:33

Where is the profession's public interest duty?
How can aggressive tax avoidance be said to accord to overriding duty of all professions: ie to act in the public interest?

Sadly the accountancy profession has had to redefine "public interest" to make IFRS - and their focus on short-term stakeholder decisions - consistent with this new definition of public interest. Traditionally, serving the public interest meant acting so as not to benefit any person or group of persons at the expense of the wider community.

Aggressive tax avoidance is against that traditional definition of "public interest". Moreover, advising entities to transfer their profits abroad to be taxed at lower rates is against the national interest.

Although professionals have a duty to act in the best interests of their clients, that is subject to contravening neither the public interest (as traditionally defined) nor the national interest.

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By Jekyll and Hyde
03rd Oct 2014 11:48

‘Our clients make the decisions’

I personally and professional do not agree with aggressive tax avoidance schemes, however what a true and absolute statement ‘Our clients make the decisions’

I am glad one of the big firms have come out and voiced this. We are seeing more articles where accounts 'should be doing more!' or are to blame for their clients decisions on their business. We can advise, we can highlight errors, BUT it is not our decision to make the change. This can be seen with Auto-enrolment, CIS and agency workers, IR35, Aggressive tax avoidance schemes, and a whole lot of other issues that surround our industry.

Well done and well said.

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Replying to Wanderer:
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By B Roberts
03rd Oct 2014 13:43

Cop out

Jekyll and Hyde wrote:

I personally and professional do not agree with aggressive tax avoidance schemes, however what a true and absolute statement ‘Our clients make the decisions’

I am glad one of the big firms have come out and voiced this. We are seeing more articles where accounts 'should be doing more!' or are to blame for their clients decisions on their business. We can advise, we can highlight errors, BUT it is not our decision to make the change. This can be seen with Auto-enrolment, CIS and agency workers, IR35, Aggressive tax avoidance schemes, and a whole lot of other issues that surround our industry.

Well done and well said.

The clients do take the final decision, however this is based on they advice from E&Y et al.

The clients would surely be unaware of such aggressive schemes if it were not for such advisors bringing them to their attention.

I wonder how many businesses or HNWI pay for such professional advice and then decide to do something different ?

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By GuestXXX
17th Mar 2015 17:37

.

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