Panto breaks out as PAC grills PwC and Shire
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How long will it be
before helping any individual or organisation to legally minimise their tax bill becomes a crime?
Hohoho
The things these people come up with. If it looks like avoidance then it probably is. Not quite on the Enron scale but every little helps (the shareholders).
Comment from BKL/UK200
David Whiscombe, director of tax at UK200Group member firm Berg Kaprow Lewis, sent across the following comment this morning:No-one should expect big companies to be anything other than ruthlessly commercial. If they can exploit public sector incompetence in procurement, they'll do so, of course – and have done so, again and again. Appealing to a ‘duty of care to the taxpayer’ or ‘working in the public interest’ is risibly naive. Such qualities are much more likely to be found in SMEs than in Megalithic Consolidated plc. Breaking up multi-million pound contracts into smaller ones on which SMEs can realistically compete makes sense on so many levels – risk management, competitiveness, value for money, employment and simple fairness.For my part, there are so many other aspects to this on-going drama than the technical arguments. It never ceases to amaze me that the Big Four (and some accountants) don't recognise that in the court of public opinion their evasive, legalistic explanations are doing serious damage to their reputations - and the wider profession's. At the same time, this is complicated stuff that doesn't really lend itself to public bear-bating of the kind that Margaret Hodge and the PAC go in for. At times during the hearing the MPs lost the plot, confusing intellectual property "streams" with "schemes". The PwC tax chief was able to land a pretty solid counter-punch when he reminded Hodge that it was her government that enacted the reforms that were being taken advantage of - and the MPs are ultimately responsible for the state of our tax law. Nobody comes out of it well, and I'm not overly optimistic that George Osborne's latest initiatives to clamp down on transfer pricing abuses (and the rest of the OECD BEPS package) are going to extract us from this quagmire.
Sale or advice?
It seems to me that there is a vast difference between a client seeking tax minimising advice and a promoter actively selling a tax avoidance scheme avoidance scheme for a prearranged fee. It is promoted schemes that need to be declared.
The fact that several clients are given similar advice is surely irrelevant.
You rarely
Get balanced personal views re tax avoidance, so it is best to ignore these subjective views. The best view is the objective one, namely that if it is legal and works (like the Luxembourg planning) then what's the problem? The problem if any is the law that is wrong in the first place that needs fixing to stop unpalatable tax avoidance. GAAR was brought in for this very reason re the Mayes decision and the same can be done again if the politicians et al don't like these other laws (that work to enable unpalatable tax avoidance). It is just bonkers to blame the taxpayer and their advisors, whoever they are, for doing legitimate tax avoidance that works (like MPs flipping their 2nd homes tax free).
Impossibility, and not realistic
"The problem if any is the law that is wrong in the first place that needs fixing to stop unpalatable tax avoidance."
It's impossible to foresee every dodge that tax 'advisers' come up with. Legislating after the 'dodge' is uncovered just leads to more and more complexity in tax laws. It's easy to blame the government but why don't we put the blame where it truly lies, and that is with the greedy tax advisers who don't mind bending the rules and ripping off the country (and other taxpayers) in order to line their own pockets.
GAAR may help, as if there is no commercial reason, then it must be tax avoidance, but let's face it, there are more tax 'advisers' with a great deal of influence, power, and money, due to the very large fees involved, and they have the advantage over HMRC who I imagine have to worry about the costs involved in litigation and long drawn out court action, which are paid by the taxpayer.
It's an unlevel playing field and is seriously damaging to the country, taxpayers and smaller businesses.
Keep it simple
It is up to lawmakers to make simple rules that tax in the way that they intend.
If someone follows the rules that they make then they can hardly complain about it.
Of course, the PAC distracts public opinion from where the blame rely lies and that's government.
Simple laws get widely abused
Which is why tax law became so complex in the first place.
eg. a simple law saying income is taxed at 20%, or whatever, then tax advisers make sure it isn't income, it's a loan!
ShirleyM has proved my point
About there rarely being balanced personal views re tax avoidance. Anyone who thinks a taxpayer or their adviser (whoever they are) has an unfair advantage against the UK Government has a rather extreme view of the world of tax to put it mildly.
@Justin
Would you care to justify your comments? In what way is my view 'unbalanced'?
Do you think the government (or should I say it's tax advisers that work as both poacher and gamekeeper) should foresee all the possible ways that highly paid tax advisers will think of in order to artificially avoid tax?
Do you think HMRC should be given an unlimited amount of money to bring artificial tax avoidance to an end?
Everything could be deemed artificial
A self employed person who then decides to operate via a Limited Company could be deemed artificial. It could be argued that he has no need to be a limited company?
How about transferring assets that produce income between spouses to minimise tax? Is that artificial or not?
Is any change of behaviour to pay less tax artificial behaviour?
You could view it as artifical, however
There would be a limit to the tax saved in both scenarios. Most 'accepted' means of avoiding tax do have a ceiling, eg. the limited companies will pay corporation tax, and the directors/shareholders may still pay high rate tax. It doesn't avoid tax altogether.
How does that compare to the artificial situations where you can avoid an unlimited amount of tax and pay nothing at all on extremely high earnings or massive profits?
Why the sarcy comments?
I think you put Richard Murphy to shame.
... is it because you know what I say is true and you haven't an argument to prove I am wrong?
ShirlyM, sorry, yes
I can see very clearly now from the story in the link below that you are 100% right. Any taxpayer clearly has unfair advantage over the Government (or the present Government at least). http://www.bbc.co.uk/news/education-30429884
OK
That's the second time you have twisted my words to mean something different to what was actually said.
Can't you answer my questions? Are your sarcy comments a disguise to hide the fact that you can't, or won't, answer them?
I'll repeat them for you.....
Do you think the government (or should I say it's tax advisers that work as both poacher and gamekeeper) should foresee all the possible ways that highly paid tax advisers will think of in order to artificially avoid tax?
Do you think HMRC should be given an unlimited amount of money to bring artificial tax avoidance to an end?
ShirleyM
I am simply being consistent and ignoring your unbalanced subjective (and somewhat bizarre) views.
No bias from you then?
Would you possibly be the Justin Bryant who is the principal of Blackfriars Tax Solutions?
It would explain your defence of tax avoidance schemes, but you don't have a compelling argument to back up your opinion.
https://www.accountingweb.co.uk/article/high-court-blocks-sdlt-scheme-user-appeal/559826
EDIT: Just in case people can't be bothered to read the AWeb article ... here is an excerpt ....
"The claimants were participants in an avoidance scheme created by Blackfriars Tax Solutions LLP that HMRC contended had always been ineffective. "
It appears you may be one of the people who creates and flogs dodgy avoidance schemes.
ShirleyM
My above view, based on what's right and wrong under the rule of law, is hardly biased (especially considering that HMRC win the vast majority of tax avoidance cases and I am in good company with most large law and accounting firms there and the decision you refer to is being appealed, so watch this space), particularly allowing for the fact that HMRC can and do change the law retrospectively if necessary. If I were to express a biased view it would be that HMRC should block schemes like Mayes retrospectively at a Budget if they cause a significant loss of tax (i.e. at least tens of millions) which they can do under their Protocol on such things rather than having a GAAR. Anyway, this is like debating with other very biased people like Mr Murphy (i.e. totally pointless), so I will leave things there. At least Mr Murphy does not hide behind anonymity like you do and at least I am not a hypocrite like him. See link below:http://order-order.com/2010/12/06/more-left-wing-tax-hypocrisy-from-rich...
So you persist with the personal comments!
I fail to see how the actions of others have any bearing on your actions. Are you a sheep who just follows the promoters crowd? Your scheme would have failed, with or without retrospective legislation, and you had warnings beforehand.
So, you think it is right to encourage clients to 'invest' in schemes that you cannot guarantee to succeed? Does that not smack of hypocrisy? Did you refund their fees when the scheme failed?
You will probably argue that the schemes are 'legal', but if they aren't successful then they can't be legal, can they?
Tax fraud isn't a victimless crime (and in my book some of these failed schemes should be considered to be fraudulent).
Artificial tax avoidance reminds me of the burglar who defended their crime by saying their victim didn't lose anything because they were insured!
It is extremely damaging to the country, and its citizens. Who do you think makes up the shortfall, and pays for the courts and other infrastructure so necessary for both business and taxpayers? Maybe it's the mugs who can't afford the high fees you charge?
You're the one with bizarre views if you think robbing Peter to pay Paul is acceptable, and line your own pockets at the expense of everyone else. Would you rip off your own Granny? If you sell tax avoidance that is based on falsehoods and artificial transactions, then you are, in effect, ripping off every citizen of this country ... including your own granny and your own children ....
That should be punishable, in my book.
What
A complete nutter you are. Perhaps you should email every tax partner at every accounting and law firm and tell them the same. You could start with that nice chap at PwC.
haha ...
It's clear you have no reasonable argument when you resort to personal insults.
I don't rip anyone off and I pay my dues, so if that makes me a nutter then I'd rather be a nutter than be someone like you.
OOPS
I used to work for PW in the International Tax Consultancy before they merged with Coopers and Lybrand. I always understood that PW were the "Gentleman's firm" and Coopers were up to their neck in anythng they could get from a Government Minister. Maybe I am wrong. Name and address withheld. Although I am thinking about licensing my IP to somewhere else, maybe a small country where they like coffee, books, CDs brass plates etc.
OOPS again
Should have read the post more throughly. I realise now it is about whether international companies should pay their taxes in the jurisdictions where they trade or whether, with the help of slimey accounting toves, my granny should while away the last years of her life in some suppurating puss of a horror in some arsepit care home in the North of England. I am sure my granny will be pleased that she has the full support of the accountancy profession. As it is all hypothetical, the arsepit could also be in the West of England, the Midlands, the East, the South or even mobile on your high speed train to the Great Arsepit. If you need a letter from the Luxembourg tax authorities and the Irish (or the Maltese) absolving you from any obligations to humanity, drop me a line and I'll say YES. Nothing dodgy about foreign governments - we always say YES.
Most extra tax will likely be wasted...
and will not not transform the life of your Granny. The UK government collects more tax that it has ever done, but it seems services provided by the government get no better.
The solution to all problems always seems to be to collect more tax. Some people must believe that all tax rates should be set at 100% and we would live in paradise. However I'm sure most people who would support this, only support 100% tax on incomes higher than what they themselves receive.
Turn this around the other way ...
The solution to all problems always seems to be to collect more tax. Some people must believe that all tax rates should be set at 100% and we would live in paradise. However I'm sure most people who would support this, only support 100% tax on incomes higher than what they themselves receive.
Higher taxes will certainly be the result if fewer and fewer people actually pay tax, and likewise, if everyone paid the tax that is legally due, then maybe we would see better services and/or lower taxes for everyone, not just the selfish few.
Please explain why highly profitable companies, and high earners, should not pay tax so they contribute towards maintaining the country which generates such wealth for them? Or should I describe them as freeloaders, and parasites that will eventually kill their host if allowed to grow and multiply?
I'm not suggesting that any individual or corporation should not be paying any taxes. I'm sure all are somewhere along the line. Even those companies engaging in the avoidance of taxes are still paying significant amounts of tax, as they are only avoiding some tax, not all tax.
My Granny
has lost a slipper and would like to ask Cinderella (Margaret Hodge) if she can borrow one of hers .... and her false teeth.
On a serious note there should be no doubt that the arrangements which were disclosed in the documents leaked to the ICIJ were deliberately set up to avoid paying corporate taxes in the jurisdictions where the trade took place and the taxable profits were generated. So, for example, the consequence for the UK is that HMG has to make up for this "lost" tax revenue somehow and does so by clobbering SMEs and the small people who have no means of escape. And the tax haven, whether it be the Celtic pussycat or Luxembourg, benefits from the albeit small amounts of additional tax revenue and economic activity. This is important to them given that nobody but Johnny Foreigner would want to live there - because of the snakes (Jean-Claude Juncker).
Maybe so ...
... but they so frequently spin the 'tax paid' to include VAT, PAYE tax and employees NI in the figures. UK businesses 'pay' those taxes too, in addition to CT.
The businesses who don't use transfer pricing, or pretend to loan vast amounts of money to their 'company' in Luxembourg, etc., lose out to the dodgers, as well as the country losing much needed tax revenue. Should the compliant businesses also jump on the tax avoidance bandwagon to make themselves more competitive, or should they just accept that they pay 20% more tax than their competitors? Will the compliant businesses eventually disappear?
Either way, our country (and all its citizens) lose and Luxembourg (or whatever country) gains, and that doesn't help us build roads to transport the goods the multi's are selling, support the NHS or education that is needed by their employees, or provide police, etc.
As I said, they are freeloaders and parasites. There is legal tax avoidance (tax relief as intended by the law), and there is tax avoidance made possible by artificial transactions.
I don't see that a company avoiding some tax can by definition be called a parasite. It may very well be that such a company is paying less that would have been desired, but the desired figure could well be more than what would be fair too. The so called fair amount is a very subjective matter. Corporation tax is paid on profits. If the so called avoidance schemes were not possible, then there are many other ways to reduce profits, in turn reducing CT liability. Would it be wrong for a company do spend as much money as possible on regularly upgrading its plant and machinery? Would you argue that they are avoiding tax as the older equipment was more than good enough?
Not at all
That is why such reliefs were introduced. I thought it was clear in my previous post that I have no objection to tax avoidance or tax relief obtained through using the laws as intended, but maybe I didn't make it clear enough.
I object to the artificial methods of shifting profits out of the UK, eg. 'loans' that have no real purpose other than tax reduction, 'loans' that aren't real loans as they involve circular movement of money, etc.
I understand your point, but my point is that if a process of using "loans" between entities is lawful, then this may be the best way for a company to pay the least tax it has to. If "loans" are n longer lawful for whatever reason, there may well be many other ways to minimise tax. There are some who now seem to consider any step taken to structure affairs in a manner to minimise tax are engaging in unacceptable behaviour. The point is that if "loans" are no longer acceptable, it does not mean that more tax will be raised.
Wasn't I clear enough? I can't be any clearer!
I said 'loans' that have no commercial basis. I said 'loans' of money that move in a circle.
How does that relate to a business loan, eg. where the loan may be used to buy machinery, etc.?
Isn't that the whole purpose of GAAR? To remove artificial transactions that have no commercial purpose, and only have a tax reduction purpose? Do you think those artifical transactions should be allowed to reduce UK tax, or to transfer the tax to another country?
At last, politicians are standing up to big business
Its funny some words always pitch up when tax avoidance schemes are mentioned;-
Complex
Transfer pricing
Various countries and borders involved
Unusual head office locations and registered offices.
The coin has finally dropped regarding big business, there out to screw anyone and everyone including Governments. At last someone is standing up to them, rather than hope they are doing the right thing.