The public discourse on tax avoidance

Consultations - some hope!

I have spent years replying to HMRC and HM Treasury consultations through the CIOT and ICAEW. It is very difficult to get even professional tax advisers or accountants to respond to those consultations, even when the matter directly affects their businesses.

Trying to get non-tax people to repond to tax consultations is much harder. The con-docs tend to be quite difficult to follow and contain a load of intimidating questions.

I have found that to persaude a non-tax person to respond, the proposal has to affect that person directly - such as the removal of personal allowances from non-resident individuals - a proposal which was eventually dropped.

I have also tried to persaude Accountants to include a note in thier newsletters about con docs, but they rarely want to do this as they don't want to waste time explaining the tax proposal to clients, or feel that the proposal will only alarm the client unnecessarily.

caught between two stools

I really agree about the profession falling into disrepute.

I believe there is a serious risk that the whole profession of "accountant" (which is of course an unprotected title) is being undermined by unqualified aggressive practitioners at the low end and very qualified aggressive practitioners a the high end dragging down the ethics and standards of all who are desperately trying to remain competitive.

Qualified accountants are supposed to posses a sound moral barometer and have high ethics as that is what is drummed in by the supervisory bodies and that has been what most people have expected. My fear is the pincer movement I describe will taint everyone with the same brush - like it did with bankers...

My opinion which many will hate is that HMRC should have a "quality mark" for accountants who have demonstrated basic professional competence (qualified), technical capabilities (accuracy and sound accounting and tax filings over time) and high professional ethics (no dodgy tactics, no aggressive behaviour, a collaborative working relationship, a moral barometer! etc).

If the quality mark was widely advertised and promoted, anyone not using accounting firms with a quality mark would be fair game regarding questions regarding their own moral compass.

Some may say that the letters ICAEW,CTA or ACCA etc should be enough, and many I suspect would achieve the suggested "quality mark" with little or no trouble at all, but I'm afraid I think in terms of tax something radical needs to be done to really shake things up.

Both programmes demonstrated that the general public are able to understand tax avoidance issues if they are explained clearly and that, once they understand them, they are by and large furious.

Given the spin and many, many inaccuracies in each of these programmes, I am not surprised the public are furious. They are furious because they don’t understand tax and they are not being presented with the wider picture.

I finally got to catch up on the “How the Rich Avoid Tax” programme last night. It was the [***]. They made a thing about HMRC not going after these schemes. Err, because they aren’t going to waste resources on legal avoidance schemes. Don’t get me wrong though, some of them are complete shams and need to be closed.

Hear hear

Both programmes demonstrated that the general public are able to understand tax avoidance issues if they are explained clearly and that, once they understand them, they are by and large furious.

Well said cheekychappy. 

Wendy Bradley, yes, but the general public has to be given the full facts.

I saw the programme about the business folk of Crickhowell.  I have not yet watched the programme mentioned above.

We all learn at our tutor's knee that the type of scheme outlined in the Crickhowell programme is caught by the long standing 'transfer of assets abroad' legislation.  Why was this not mentioned?  Because it would have killed the programme.

Never let the facts get in the way of a good story! 

I think it is quite a simple concept to be honest, Wendy.

There is no legal basis for Google et al to pay tax in the UK. The Government should stop trying to collect tax or moral grounds, and change the legislation so that HMRC can collect taxes on legal grounds.

Expecting companies to cough up on moral grounds is cutting corners and does taxpayers a disservice.

Concerns over accuracy -dispatches

Greg Wise was very engaging but I felt that this programme ignored anything that didn't fit within the " tax avoidance is easy and everyone is doing it and getting away with it".

For example, a little bit of googling would have revealed the bankruptcy of the previous business of one of the two tax scheme salesmen filmed by Dispatches . The bankruptcy is allegedly because the schemes they sold didn't work.

A lot of the speakers have commented on the reputational damage for accountants. As is often the case, neither salesmen were actually members of any of the tax/accountancy bodies.

Public understanding not helped by solecistic journalism

The issue of legal, but often immoral, tax avoidance is an important one and should be discussed widely. To that end, much of the complexity needs to be simplified for the public to understand. But this noble cause can only be undermined when serious newspapers like the Sunday Times write front page stories in which they suggest that application of tax law for the explicit purpose for which it was designed is somehow "morally repugnant".

Yesterday's issue discussed the tax affairs of Osborne & Little (a family company in which the Chancellor has a small shareholding) thus: "The company has not paid any UK corporation tax since 2008 partly because it has rolled over losses from previous years". It went on to discuss deferred tax, an issue that the majority of its lay readership will not understand, but which makes the company's tax planning sound like that of Google.

How the use of losses brought forward to reduce current year taxable profits can be described as anything other than wholly acceptable would, I trust, be an uncontroversial view amongst tax professionals. For it to be expressed otherwise in a trusted newspaper of record can only undermine legitimate discourse and any chance of reform.

The Dispatches programme

Should have been titled "How the stupid try and fail to avoid tax", as both schemes featured do not work and the supplier benefit trust scheme is essentially fraudulent as has been stated many times before.

Legal vs. Moral

Tax is, as has been said by our learned friends elsewhere, and enforced extraction.

Given the way much of it is frittered away uselessly, it is reasonable to posit that the only thing that makes legally collected tax 'moral' is the fact that we, the proletariat at large, have sancioned it, albeit indirectly, by having our (re-)elected reperesentatives emplace it on our behalf.
It is entirely reasonable, given the cost to us of engendering law, to assume that what is written is, to a great degree of precision, what our representatives wished to happen/extract.

Morality, in this context is a temporaly unstable socio-economic more, largely fed by a relative superabundance of disposable income [relative, for example, to the occupants of the slums of Mumbai] that is to say, their economic circumstance alters their perception of what is 'moral'.

It should be remembered that theoretically it is equally 'against the law' to pay more tax than is required - the ONLY legality is to pay exactly the tax required - if only one could define that with certainty.  Morality does not really come in to it.

Tax simplification?
The offshore schemes have been widely adopted for decades because the tax authorities have very little chance of successfully challenging :- the value of intellectual property, transfer pricing, management charges nor keeping tabs on which country decision makers were located when they were performing their management duties.
Would tax simplification work if we abolished corporation tax and instead limited input VAT recovery to say 15% thus imposing a 5% tax based on turnover?

Just because you can do something...

...it doesn't mean you should.

Sorry but I don't subscribe to the black and white anything legal is okay argument.

Large companies can be heavily influenced by moral or public pressure and it does not always require legislation. The advent of ethical funds and other pressures forced companies to institute codes of sustainability and corporate governance. Starbucks did an about turn. Why shouldn't large multinationals be pressured to have a moral tax code they disseminate to shareholders and the public?

We seem to demand changes in legislation on the one hand and then pound the fist of the other on the table demanding to know why the tax code is so long!