I’ve long argued the Big Four are shameless in their pursuit of aggressive tax avoidance, a theme Richard Murphy uses to put over his views on a recent PwC report. Andrew Goodall makes an excellent point:
The impression is given here that it is almost always new tax legislation that starts the ball rolling. But there is, of course, “new†avoidance that seeks to undermine existing law. Avoidance itself breeds complexity.
All that PwC’s report seems to have say on this is a rather weak acknowledgement that “the Government may consider tax advisers (and perhaps business) as responsible by virtue of tax avoidance for much recent legislationâ€. It goes on to complain of “layer upon layer†of anti-avoidance rules. It could have gone on to make the case for a general anti-avoidance rule but, of course, it did not.
This has sparked a series of posts, where the debate continues.
Chris Steel (no link available), makes what I think is a potent point:
Earlier this week I sat in on a Jersey government public hearing regarding zero percent corporate tax. When two witnesses from E&Y and KPMG where asked by a politician about the possible consequences of fiscal meltdown regarding massive changes to fiscal policy the reply from the E&Y and KPMG representatives was a shrug of the shoulders.
As both Richard and I have asserted in the past, the Big Four are using the politics of PR to promote and operate schemes while simultaneously railing at government. As one national director of a Big four firm recently told me: “What they say and what they do are not by any means the same thing.”
Many people see tax as legalised theft and treat it accordingly. Both by deliberate fraud or through the avoidance services of tax accountants and lawyers. It is why people will shave house prices to avoid 1%. And it is pretty much universal.
You don’t have to live long in Spain to find any number of folk who are hiding wealth. Not just Brits but every nation state represented by its ex-pat population. In the last 2 years, money has been flowing out of Spain as Germans repatriate funds having been caught out through an information exchange scheme operated between Spain and Germany. There are so many non-tax paying Brits in Normandy that certain local tax districts have launched mass enquiries, using laws regarding the allowability of costs on property capital gains tax. The US system of 7,500+ state, federal and other taxes is used to great effect by tax practitioners.
Most practitioners I know will argue that Richard’s views run counter to what they believe is their duty to provide the best tax advice to clients. Richard in turn has said that a practitioner’s first duty should be to the practice and that requires reviewing the ethical position of creating schemes. Richard’s view is entirely logical but lop-sided.
Taxation represents an implicit contract between citizens and their rulers. Part of that contract is that we entrust government to ensure that bureaucracy be kept to a minimum commensurate with the changing needs of the population. This is an issue Stuart Jones addresses to great effect. Burning Our Money addresses this with relentless irony,humour and sarcasm – pretty much in equal measure. It is standard political commentator’s fare. Rarely do I see Richard offering as robust a critique of government spending. Check out BoM’s ‘Less Government’ link list.
If the Big Four realised the extent to which they could be a force for good, I’d be surprised if there would be a need for aggressive schemes. The simplest way to do this is to recognise the power they hold. Government needs their cooperation in collecting tax. If you agree with that assertion then Government profligacy and inefficiency becomes a fair question.
Burning Our Money puts all manner of figures forward but even if its estimates are 50% adrift from reality, we’re talking huge numbers. As they say:
They spend 42% of our income, yet fail to deliver decent services. They promise prosperity, yet tax and regulate our economy into stasis. They talk up social justice, yet consign millions to welfare dependency.
These are precisely the issues with which Richard concerns himself. Is it appropriate to ask for fairness? I believe it is. Are the arguments intellectually simple? Absolutely. Are they capable of easy to understand solutions? Now you’ve got me!
Fancy joining in Richard? Anyone else?
Technorati Tags: Big Four, PwC, tax avoidance, tax evasion, tax investigations
