Richard Murphy’s exposé of the Tax Gap has sparked something of a debate over at AccountingWEB with Alastair Harris describing Richard’s assessment as ‘nonsense.’ In the background, Andrew Goodall and I have been having a conversation around this issue.
There are going to be plenty of people who will argue that Richard is fueling a social and potentially political argument with theoretical accounting gobbledy-gook . They’re wrong. The fiscal system is not just unfair on the small man. It is grossly distorted in favour of large businesses that can organise their structures through competitive tax regimes . Richard and I discussed this at length .
In my day, if the client had deep enough pockets, we could do pretty much what we needed to avoid significant amounts of tax and/or defer huge amounts of NICs. That was late 1980s to early 1990s. Anyone want to disagree with that? And at the time, you couldn’t beat the boys at Arthur Andersen for great tax advice.
In other remarks, Alastair goes on about the way the Treasury is seeking to take more and more in taxation.
There is a much deeper issue at stake here. The ICAEW has not gone ahead with plans for an ethics exam . Yet we’re in the middle of one of the most intense periods of scrutiny I can remember. A new set of Accounting Standards bite this year. They’re already under attack as being potentially unworkable .
As late as 2004, Sir David Tweedie failed to understand the impact of the new standards regime on software developers. I recall giving a speech in late 2004 where I said that Sir David had created a regular mess for the industry . In the same year I noted that the massive swings in numbers in some industries applying IAS would have startling effects, with potential instability in the financial markets.
CODA has talked about the impact of all kinds of governance issues:
"Converting to the International Financial Reporting Standards was reported to have presented the largest headaches for the teams responsible for financial reporting, especially in Europe, with meeting the Sarbanes Oxley requirements also cited as resulting in significant additional workload and operational difficulties for the American companies interviewed."
Anyone whose clients report into the US already know about how hard Sarbanes-Oxley has bitten. The fact is we’re living in a new world where ethics matter.
How can we say we’re socially responsible when we’re prepared to allow the obfuscation of taxation in the reported accounts? Yet social responsibility is allegedly high in the boardroom agenda . I find that hard to believe.
So it is with a sense of irony I’m pleased to say I’ve been invited to contribute some pieces on the technology of governance to AccountingWEB . You don’t have to guess what sort of questions I’ll be raising.
If you find this offensive. Great. I look forward to the debate. Because what is at stake is the future of our business leadership. If we can’t reconcile our desire to maximise our clients’ wealth with the social need to make fair contribution then we should not be surprised if we’re faced with an aggressive tax regime.
