Hodge warns against ‘two-faced’ tax policy

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The chairman of the Commons Public Accounts Committee has warned against countries “adopting a two-faced approach” to tax policy by signing up to international standards while engaging in tax competition.

Margaret Hodge, addressing the committee’s London conference on tax and globalisation, welcomed the UK government’s plans to stop companies moving profits offshore. Last month George Osborne indicated that his autumn statement on 3 December would target technology companies that “go to extraordinary lengths to pay little or no tax here”.

The allocation of taxing rights between countries, in relation to the profits of companies doing business in countries where they have little or no taxable presence under existing law, is a key issue being addressed by the OECD’s base erosion and profit shifting (BEPS) project. G20 leaders will discuss the OECD’s findings at their Brisbane summit next month.

‘A race to the bottom’

Hodge said the UK, like many other countries, had “found it hard to resist the temptation to engage in a race to the bottom on tax”. She cited the patent box, which provides for a lower rate of corporation tax on patent income.

“The success of international efforts to tackle tax avoidance depends on all countries being prepared to play by the same rules, and not adopting a two-faced approach where they sign up to OECD standards in principle, but try and undercut one another in practice,” she said.

At this week’s Berlin conference, where 51 jurisdictions endorsed a new standard on automatic exchange of information, the chancellor “came under renewed pressure” to modify the patent box. But the UK Treasury was “confident of a successful outcome” on BEPS issues, according to the Financial Times.

The paper reported that tax experts at the PAC conference predicted that the patent box would be “redesigned to make it less attractive and more complex”.

Several attendees tweeted from the conference, using the hashtag #pactaxconf. The speakers included business representatives, campaigners and tax experts.

ICAEW chief executive Michael Izza said an international conversation on tax was already taking place. “Countries recognise the need to reduce burdens on business in order to attract inward investment, while at the same time trying to protect their tax income to help pay down public deficits.”

The committee said the conference would influence its work for the remainder of the current Parliament: “The PAC plans to produce a conference report which can be used to feed back views and ideas to key policymakers.”

Tax and morality

Hodge told the PAC conference that exploiting the complexity of tax law to avoid paying a fair share of tax was “morally reprehensible”. Last week a Christian Aid report on tax and theology suggested that “multinational companies may have a moral duty to pay more tax than the letter of the law strictly requires of them”, the charity said.

Dr Rowan Williams, the former Archbishop of Canterbury who is now chairman of Christian Aid, said in a foreword to the report that “tax justice” was “crucial to the goal of setting many nations on the path to greater self-determination and ending their reliance upon aid”. The report noted that while an action may be technically legal, “that does not make it moral”.

Tax experts have argued that appealing to fairness or morality to counter tax avoidance may not be helpful in finding practical solutions. In a report for the National Audit Office in 2012, the Oxford University Centre for Business Taxation said it was not suggesting that all legal avoidance was “unproblematic”.

However, it was necessary to have a legal definition of what is to be taxed, and at what rate, to “ascertain what tax is actually due in a way that is practical and enforceable by society”.

The authors added: “The answer to those questions must ultimately depend on the law. There is no other way of determining the tax due.”

PwC’s global chairman Dennis Nally said in an interview earlier this month that tax advice had a moral dimension. Professional services firms had a role to play in helping companies think about “what’s acceptable and appropriate”, he told the FT.

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31st Oct 2014 14:10

"two faced"

Politicians espousing  the adoption of a "Moral Tax Code" strikes me as a more than a little hypocritical when they are happy to go to extreme lengths to protect our borders to prevent the importation of Tobacco or Alcohol on which duty (tax) has not been paid. The tax take, per HMRC`s 2014 annual accounts, for each of these is roughly £10Billion ie £20Billion  in total and when ever they face a challenge to help reduce the impact on the NHS of smoking and alcohol related illness their response is not to restrict supply (or even ban the sale of these products) but to increase the tax knowing full well that people addicted to both will continue  to find ways to continue their consumption. I am all for a moral tax code but we do not live in a universal utopian society and so its down to those we elect to do the best they can to represent all of the Citizens on this Country given that every decision they take is more than likely to have a knock on effect in numerous  unexpected areas. If politicians and others   continue to conflate the Tax Code of this Country with morality then it opens the way for every Citizen to take the same moral stance in deciding whether they should pay tax on the basis that the Government is, say, supporting a foreign regime not to their liking.  My thoughts are hire some decent "lawyers" who know what they are about to draft legislation that is not riddled with holes and then beef up HMRC both in numbers and in training to implement the letter of the law. I don't see eye to eye with Mrs Hodge on many issues but when she states :-

   “The success of international efforts to tackle tax avoidance depends on all countries being prepared to play by the same rules, and not adopting a two-faced approach where they sign up to OECD standards in principle, but try and undercut one another in practice,”

I find myself in some sympathy with her and that's a first for me.  

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By awoodj
03rd Nov 2014 11:41

Sympathy??

mikefleming3028 wrote:

Politicians espousing  the adoption of a "Moral Tax Code" strikes me as a more than a little hypocritical when they are happy to go to extreme lengths to protect our borders to prevent the importation of Tobacco or Alcohol on which duty (tax) has not been paid. The tax take, per HMRC`s 2014 annual accounts, for each of these is roughly £10Billion ie £20Billion  in total and when ever they face a challenge to help reduce the impact on the NHS of smoking and alcohol related illness their response is not to restrict supply (or even ban the sale of these products) but to increase the tax knowing full well that people addicted to both will continue  to find ways to continue their consumption. I am all for a moral tax code but we do not live in a universal utopian society and so its down to those we elect to do the best they can to represent all of the Citizens on this Country given that every decision they take is more than likely to have a knock on effect in numerous  unexpected areas. If politicians and others   continue to conflate the Tax Code of this Country with morality then it opens the way for every Citizen to take the same moral stance in deciding whether they should pay tax on the basis that the Government is, say, supporting a foreign regime not to their liking.  My thoughts are hire some decent "lawyers" who know what they are about to draft legislation that is not riddled with holes and then beef up HMRC both in numbers and in training to implement the letter of the law. I don't see eye to eye with Mrs Hodge on many issues but when she states :-

   “The success of international efforts to tackle tax avoidance depends on all countries being prepared to play by the same rules, and not adopting a two-faced approach where they sign up to OECD standards in principle, but try and undercut one another in practice,”

I find myself in some sympathy with her and that's a first for me.  

 

You do know that her family business has a turnover of 2.1 Billion in the UK pays 0.01% in tax through similar methods to those companies she is referring to? I would say the prize for Hypocrisy goes to Margret Hodge more than listening to much she has to say.

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03rd Nov 2014 14:10

Alcohol and tobacco

mikefleming3028 wrote:

Politicians espousing  the adoption of a "Moral Tax Code" strikes me as a more than a little hypocritical when they are happy to go to extreme lengths to protect our borders to prevent the importation of Tobacco or Alcohol on which duty (tax) has not been paid. The tax take, per HMRC`s 2014 annual accounts, for each of these is roughly £10Billion ie £20Billion  in total and when ever they face a challenge to help reduce the impact on the NHS of smoking and alcohol related illness their response is not to restrict supply (or even ban the sale of these products) but to increase the tax knowing full well that people addicted to both will continue  to find ways to continue their consumption. I am all for a moral tax code but we do not live in a universal utopian society and so its down to those we elect to do the best they can to represent all of the Citizens on this Country given that every decision they take is more than likely to have a knock on effect in numerous  unexpected areas. If politicians and others   continue to conflate the Tax Code of this Country with morality then it opens the way for every Citizen to take the same moral stance in deciding whether they should pay tax on the basis that the Government is, say, supporting a foreign regime not to their liking.  My thoughts are hire some decent "lawyers" who know what they are about to draft legislation that is not riddled with holes and then beef up HMRC both in numbers and in training to implement the letter of the law. I don't see eye to eye with Mrs Hodge on many issues but when she states :-

   “The success of international efforts to tackle tax avoidance depends on all countries being prepared to play by the same rules, and not adopting a two-faced approach where they sign up to OECD standards in principle, but try and undercut one another in practice,”

I find myself in some sympathy with her and that's a first for me.  

I have some sympathy with your point about restricting supply of alcohol and tobacco, but not about banning the sale of these products.

In my opinion, alcohol should not be sold in supermarkets or corner shops and should not be sold at knockdown prices. It should only be sold in pubs, clubs or off licences. Tobacco should only be sold from tobacconists and again not at discounted prices. They are both very addictive drugs.

However, I cannot agree with banning them altogether. This was tried in the land of the free and the home of the brave under prohibition, and led to the upsurge in the mafia.

The real hypocrisy of our wonderful politicians is that they only incease the tax by enough to raise revenue but not to kill the golden goose entirely.

A cost-benefit analysis re smoking was done by Enoch Powell when he was Health Minister under Supermac and ironically imported loads of nurses and doctors to keep the NHS from collapsing. He found that overall it would be financially better for the country to make smoking compulsory because people would die earlier and not draw as much pension. Of course, we do not look at things purely in terms of money - people's health is important.

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31st Oct 2014 17:46

What puzzles me about UK tax

Tax in England started in 1086 with the Doomsday Book.  So that's well over 900 years that English tax law has been in existence.  I think 900 years is a very reasonable timeframe for lawmakers to make any aspect of law pretty much black and white if that is their desire.

Hence the grey areas on issues like employment status, transfer pricing and so on are in my view largely deliberate on the part of policymakers.

Hence they should either legislate or shut up.

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17th Mar 2015 17:35

.

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By Lords
03rd Nov 2014 11:31

Lady Hodge

And where does she place her family company in all of this?

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By Mehmet
03rd Nov 2014 12:22


Miss Oppenheimer should really be reminded of her family history on tax.

I am actually surprised no national media has caught up on this?

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03rd Nov 2014 11:42

Hodge should not be making pronouncements on morality. Similarly, the clergy should not be preaching politics (as unelected politicians)

If we ignore these distinctions then we undermine the hard-won checks and balances of our mature society.

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By hiu612
03rd Nov 2014 11:49

Christian Aid

I wonder how much the church (England, or Catholic) is worth as compared to Google, Amazon or Starbucks? And what tax contribution it makes to the country out of that not insignificant wealth. I think that if I were part of the church, I'd keep my head down rather than get involved in a moral rambling on the amount of tax global institutions ought to be paying.

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By hiu612
03rd Nov 2014 11:49

Christian Aid

I wonder how much the church (England, or Catholic) is worth as compared to Google, Amazon or Starbucks? And what tax contribution it makes to the country out of that not insignificant wealth. I think that if I were part of the church, I'd keep my head down rather than get involved in a moral rambling on the amount of tax global institutions ought to be paying.

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03rd Nov 2014 12:00

Margaret Hodge

 

 This dear lady is entitled to say whatever she likes, it is a "Free" country,

 Unfortunately both the ICAEW and the ACCA are not prepared to publicly answer her back.

 This in the interest of maintaining a "working relationship" with HMG.

 Presumably there are some compensations for being a Poodle.

 If the two main UK organisations who represent through their members millions of UK taxpayers

 are not prepared to robustly answer her, she will continue to mouth off.

 One does not stop a (verbal) bully by keeping quiet.

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03rd Nov 2014 12:03

Hodge is just another self-righteous moron who won't distinguish between tax evasion and tax avoidance.

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05th Nov 2014 14:18

simplifying tax laws

Why not go back to the basics? Let entities be taxed fully on their accounts without any adjustments for losses or other sideways movements. If they have to make claim for relief on losses, etc. they can do so by separate claims which HMRC can argue against if they will.

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03rd Nov 2014 13:00

Moral Codes? We got lots of 'em!

So, let me get this right...

When businesses cooperate to fix prices, it's a cartel and that's bad (and I agree), but when countries don't cooperate to fix tax levels that's also bad?

Oh yes, and as others have said ... *cough* Stemcorp *cough*

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03rd Nov 2014 13:56

If I remember rightly.....

If I remember rightly, wasn't the main defence of MPs on the expenses scandal that they were just following the rules?  That they had done nothing illegal?

As for Stemcor, criticism is surely unfair as thet are just follwoing the rules and doing nothing illegal.

 

The trick, you see, is that it is OTHER people who  should have regard to the morality of the situation and not the likes of Hodge

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03rd Nov 2014 15:40

Friends again please

 

I again ask, speak as you are, professional persons.

 Margaret Hodge is an intelligent woman, with a career to protect. She has been handed or taken on an impossible task.She has therefore ended up as the meat in the sandwich.

 On the one side is HMRC, who are not funded either with quality of management and or enough money to carry out the tasks demanded of them.

 Clearly if Ms Hodge were to state this truth obvious to most of us in public practice, she would would lose her job.

On the other side are approximately six hundred plus members of parliament who demonstrably do not understand the workings and or principles of a working tax system, and so pass tax legislation willy-nilly, of the same quality as the stuff I pass when I go out for a curry and a pint of lager.

 Again, clearly if Ms Hodge were to state this truth obvious to most of us in public practice, she would would lose her job.

 Her very human error is that she does not recognise that when you are in a hole, stop digging.

 Our collective fault is that demonstrably and collectively, we are not prepared through our representatives to put our heads above the parapet.  "Not my job mate!"

 

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04th Nov 2014 15:54

Margaret Hodge

David Gordon FCCA wrote:

 

I again ask, speak as you are, professional persons.

 Margaret Hodge is an intelligent woman, with a career to protect. She has been handed or taken on an impossible task.She has therefore ended up as the meat in the sandwich.

 On the one side is HMRC, who are not funded either with quality of management and or enough money to carry out the tasks demanded of them.

 Clearly if Ms Hodge were to state this truth obvious to most of us in public practice, she would would lose her job.

On the other side are approximately six hundred plus members of parliament who demonstrably do not understand the workings and or principles of a working tax system, and so pass tax legislation willy-nilly, of the same quality as the stuff I pass when I go out for a curry and a pint of lager.

 Again, clearly if Ms Hodge were to state this truth obvious to most of us in public practice, she would would lose her job.

 Her very human error is that she does not recognise that when you are in a hole, stop digging.

 Our collective fault is that demonstrably and collectively, we are not prepared through our representatives to put our heads above the parapet.  "Not my job mate!"

 

I agree with most of what you say.

I would disagree that if she was really to tell it as it is, she would first of all lose her job as Member of Parliament - that is up to the electors of Barking who have elected her for the past twenty years. Secondly, she is elected by her fellow parliamentarians as Chair of the Public Accounts Committee, probably the most powerful and important Select Committee Chairmanship.

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By Oppco
03rd Nov 2014 16:28

Time to wind up the family trusts then, Margaret

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03rd Nov 2014 22:15

Tax Haven

How's that  HMRC sale and leaseback deal with Mapeley going then Ms Hodge?

The very same PAC, in 2010 reported on the £170m tax saving obtained by use of a blatant tax avoidance structure by the Revenue's new landlord. I suppose this is OK though to Ms Hodge as it was Edward Leigh who was chair in 2010. While on the Labour Party subject, perhaps they can also explain how they managed to avoid a ton of VAT on buying their VAT-opted HQ while in Government?

As someone said, any politician preaching on about this is somewhat of a joke.  As it is customary for the chair of the PAC to be a member of the opposition, one does feel the current PAC, while making some good points, has, as its main objective, an open book to embarrass the current government.  A joke of a different nature.

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04th Nov 2014 10:54

Hodge sound bites

Another soundbite from someone who wants to maintain a public image of being seen to be doing something, even if that something is usually just hot air.

This is a fine case of pot kettle black.  Maybe if her own family had her seeming 'morals' (which change with the wind) then she could argue from a position of strength.

Anything for a headline- if only they actually got on with something and got anything done or suggested fully costed and worked out solutions, rather than continuing with sound bite politics.

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By Lords
04th Nov 2014 12:01

Lady Hodge

I presume she is aware of the tax avoidance schemes that her family uses?!

Or maybe she does not regard the schemes as tax avoidance. 

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05th Nov 2014 11:50

If there's a problem with the tax rules then maybe we need to review the law, but we should not be bullying anyone, corporate or individual, into paying more tax than is legally due. That is an established principle of English law and it is essential for an environment in which people want to do business.

Hodge is a labour politician, out to make a name for herself on the public accounts committee.

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05th Nov 2014 08:09

Hodge
I heard a while ago that the press had been warned that the family trusts were a non-reportable subject.

Another example in my field of double standards. Years ago there was a big case about tour operators and the VAT they should have been paying. The VAT would have contributed to the UK coffers. However the UK effectively introduced a state sponsored artificial avoidance structure so that the industry could avoid VAT.

Last year ruled to be illegal, but I believe the UK has allowed the industry to ignore. Tax avoiders supreme!!

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By redboam
05th Nov 2014 11:29

It's not a race to anywhere

What is this idiot on about when she talks of a race to the bottom? The fact is that for years politicians of pretty much every stamp have screwed more in tax from businesses than is good for the economy and even now when Osborne allows a little respite for once, local authorities continue in the same old pig-ignorant way.

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05th Nov 2014 12:37

John MacDonald

 

Sorry John, I did not mean to imply she would lose her seat as a member of parliament.

 I meant to imply, she would lose the lucrative additional post (with income and expenses) given to her.

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05th Nov 2014 16:13

Margaret Hodge

David Gordon FCCA wrote:

 

Sorry John, I did not mean to imply she would lose her seat as a member of parliament.

 I meant to imply, she would lose the lucrative additional post (with income and expenses) given to her.

David, what additional income and expenses would she get for chairing the Public Accounts Committee?
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05th Nov 2014 14:34

@David Gordon

 

I'm afraid I don't share your sympathy with Hodge.

You state that she is in a difficult position because on one side of her is HMRC and on the other are MPs and she is caught in the middle?

If tax law is in a mess, what's her solution? Overhaul and reform?  Educating the public & MPs about current tax law?

No, her response is to launch vitriolic, ignorant attacks on the accountancy profession and law abiding companies seemingly to grab headlines and stir up the mob.

If that's a reasonable summary it smacks of political cowardice.

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06th Nov 2014 12:45

HMRC Hopes and wish-full thinking

Extract above

'But the UK Treasury was “confident of a successful outcome” '

 

Best of luck with that one, that will be a first if they pull it off.

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11th Nov 2014 00:07

Land Value Tax

It may not be possible for this to be the single tax as campaigned for about a century ago but which then got lost in the heat of WW1 and its aftermath (at the very least sin and nudge taxes will be needed), but it should be the principal tax in the system.

May not be good for accountants or lawyers though, at least not the tax kind.

Rarely gets a mention though.

Henry George - Poverty & Progress.

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