The summer of avoidance

Summer 2012 was a watershed moment for the profession – a time when tax avoidance hit the headlines and came home to roost.

Ever since Chancellor George Osborne declared in his Budget speech that aggressive tax avoidance was “morally repugnant”, the issue has remained a fixture on the news agenda. By May, after packs of baying reporters had unpicked Osborne’s Budget measures, Philip Fisher asked whether tax was the new football and plucked out eight “prime-time” tax stories.

The list included the much debated “pasty” and “granny” taxes, charitable donations tax relief, top rate tax reduction, the publication of cabinet minister tax returns, the sharing of tax return information for claiming tax credits, tax issues at Rangers and Portsmouth football clubs, and finally Harry Redknapp’s high profile tax trial.

But it was the following month that the single issue of ‘tax avoidance’ stepped into the spotlight. The ensuing media maelstrom would make sure the profession, and how the profession is widely perceived, would never be the same again.

The Times led this charge with “naming and shaming” some of the country’s top celebrities and politicians, and their legitimate tax avoidance arrangements.

AccountingWEB discussed the revelations, looking at schemes involving loans to employees, an Employer Funded Retirement Benefit Scheme (EFRBS), personal service companies and film partnership schemes, among other legitimate tax planning.

Politicians from all parties weighed into the debate, and it wasn’t long before Jimmy Carr, Gary Barlow, Terry Venables, Moira Stuart, Frankie Boyle and others received a dose of unwanted publicity.

This tax avoidance fad has turned the spotlight on the accountancy profession. A few years back tax campaigners such as Richard Murphy became the scourge of the profession when he said accountants should be more ethical and get people to pay an appropriate level of tax, and not just the bare minimum they can achieve by exploiting clever avoidance techniques.

This point continues to be a hot topic on the pages of AccountingWEB where leading tax commentators such as Rebecca Benneyworth and Simon Sweetman have adopted this position in recent months. The ICAEW Tax Faculty recently issued guidance on what accountants should bear in mind when reviewing tax arrangements. 

Times have changed to the point where we’ve now got a Conservative chancellor proselytising about "aggressive" tax avoidance and “moral repugnance”.

LexisNexis director, Chris Jones, took an interesting view on the avoidance debate in Tax Journal, suggesting it could actually be an opportunity for tax professionals.

He said taking a stand against behaviour that brings the profession into disrepute was to be welcomed: “The real issue for most advisers is the increased perception by the public that the tax profession is a threat to the tax revenues of the UK. Nothing could be further from the truth.

“The tax profession is a vital component of the UK tax system. Under self assessment the burden of administration falls on the taxpayer, as does the responsibility to interpret the law. Tax professionals meet both these needs for the taxpayer. Whilst HMRC is responsible for enforcing our tax system, the accountancy, tax and legal profession make it work.”

Now the issue has gained so much public attention, perhaps it is time for the profession to set its moral compass and take charge of the avoidance campaign.

 

Do you think tax avoidance has been the issue of the year? Will the introduction of the long-awaited General Anti-Abuse Rule change our tax landscape forever?

Comments

The GAAR is a threat. If it

Ted Numbers | | Permalink

The GAAR is a threat. If it was the GAAR proposed by Graham Aaronson I would welcome it but it looks like being much wider than that. It could leave the profession with a lasting legacy of uncertainty over what is/isn't acceptable.

 

Still time for the profession to respond, unless that's what everyone actually wants following the "summer of avoidance"....

Still don't get it

angehodgson | | Permalink

HM Treasury and its advisors, like so many governments across the planet, fail once again to understand the nature of the problem.

The fact is, in a global age, it is no longer appropriate to use domicile as a basis for taxation. I've argued this for years: if you are active in a particular territory, then you should pay tax in that territory according to its rules rather than those of the territory in which you are domiciled.

A move from domicile to activity could be an opportunity to reduce a lot of the anti-avoidance rhetoric (a bit rich coming from a front bench of millionaires, some of whom themselves benefit from offshore investments) and would have relatively little impact on SMEs and most individual taxpayers if sensible safeguards (such as a minimum overseas activity level being specified for additional registrations in overseas territories) are attached.

After all, what is the alternative? GAAR? Frankly, a 'general' rule which is open to interpretation and abuse by an over-zealous official anxious to meet a notional collection target is no help to anyone except tax lawyers and instead of increasing revenue, will create the uncertainty which even the dimmest of government ministers must surely recognise will cause investment to flood out of the country.

We all know that getting governments to agree with each other on finance is like herding cats, but this is not a new idea. The EU has done it with VAT, so why not other business and personal taxation?

Agree with ange

moneymanager | | Permalink

I am sure there would be howls of disagreement from international groups, but the ability of Kraft, that well known US manufacture of such (non) foodstuffs as Pilladelphia 'cheese' to declare profits in Switzerland is absurd.

 

Every chocolate purchaser should know (how about labels on the wrapper like ciggy warnings) that as a result Cadburys and  Green & Blacks contribute barely a fig to the UK. True they pay PAYE etc but I would suggest that's small beer. Especially as I doubt the above named brands have great sales in the land of the cuckoo clock!

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