Fortune has an interesting article entitled: Tearing up the Jack Welch playbook. The article proposes a fresh set of business rules where for example being number 1 is replaced by ‘agile is best.’ One of the new ‘rules’ says shareholder value is replaced by ‘the customer is king.’ It’s kicked up quite a storm, with much criticism of Neutron Jack’s approach to business management. This plays directly to an idea I’m playing with termed ‘new rules taxation.’
In the ‘new rules taxation’ world, the accountability that is purportedly encapsulated in Sarbanes-Oxley compliance and the transparency that pervades lofty statements around Corporate Social Responsibility (CSR), are directly incorporated into an ethical approach to corporate tax mitigation. In my mind this requires the active audit of tax schemes.
Advising academics will say this is unworkable because it represents a direct conflict between public accountability and the CEO/CFOs mantra of maximising shareholder value. I see this as a paradox. Even if shareholder value remains the guiding principle, it has to do so within the context of the customer as king – whether anyone likes it or not. After all, what business can survive without customers? Think how long Gerald Ratner lasted after his ‘we sell crap’ gaff. Management protected shareholder value by removing Ratner. The fallout was horrific for the Ratner Group.
If this argument stands up, would this work as a starter for 10:?
- Notes to the accounts detailing the precise tax and cashflow impact of offshoring profits
- Audit reconciliation of deferred tax to both liabilities, payments made and identified timing differences.
- Notes to published accounts that identify the component parts of deferred taxation
Maybe I’m dreaming. As Richard Murphy succinctly points out in relation to ICAEW Practice Assurance:
And why, did my Inspector opine are the Institute unable to undertake review on the quality of work done? Why – because the members of the ICAEW don’t want that to happen, that’s why. Which begs the question in whose interests is this being done? Clearly not the public.
Which makes a mockery of the advert: ‘You Can Count on a Chartered Accountant.’ I suspect that in the context of current tax and audit practices, that advert infringes advertising standards. It’s a blatant mis-statement of truth. Unless of course YOU believe the words of Eric Kench:
When hiring an expert for any job, a client wants to know they are buying expertise based on quality, honesty and efficiency. It is also vital that the ‘expert’ is suitably qualified, has undergone the correct training and is subject to some kind of regulation to ensure a high quality of service.This is true of doctors, teachers and lawyers….and ought to be for accountants too. Chartered Accountants have all these qualities…
Do they? We may never know given PA inspectors’ remit. But as Vinnie says in comments to Two best salesmen- Sarbanes and Oxley:
I think we should expect more from auditors. It is a crying shame we have rewarded them with more fees even as they missed the problems in the 90s.
There is another solution: Recognise the conflicts that are inherent between tax/audit and split tax practices away from audit. I can almost hear it now from the ICAEW dominated Big Four: In your freaking dreams.
Technorati Tags: tax avoidance, tax evasion
