2008 – a year in prospect

Posted on

I've suggested 2007 was a good year for those working on tax justice issues. What does 2008 hold?

Given that the role of taxation in development is a key feature of our work a great deal of effort will go into the UN's conference on finance for development planned for Doha in November 2008. I know that this will not deliver all I want: I remain hopeful none the less.

I do believe that the Tax Gap will become a major issue in the UK. The attention it will get in the US presidential campaign will help promote it around the world. Major reports on this issue will be published during the year.

The UK's tax system will remain high on the political agenda, and until a consistent, logical and ethical basis for taxation is established that will remain the case. The absence of that ethical approach is the most obvious problem in all the current proposals the government is making. The failure of the tax profession to either appreciate this, or to seek remedy for this obvious defect is the clearest indication of its own continuing malaise.

I suspect that the ethical malaise of the tax profession and of accountancy in particular will become ever more obvious as turmoil in the City continues throughout the year (as I expect will happen). Until the profession learns how to add value for its clients on the basis of a clear ethical framework I suspect the accounting profession will remain in decline, both in status and in terms of financial reward for many involved. Dennis Howlett has much to say on this, and is worth reading.

Tax havens will continue to attract considerable publicity, especially as people realise to what extent they have been used to obscure the reality of financial transactions which have real cost to society. They will also have a torrid year financially as the securitisation, hedge fund and private equity markets that provide serious quantities of business for some havens have a tough time financially and all become subject to demands for substantially enhanced transparency, which they will not be able to satisfy whilst working from tax haven locations.

The EU Savings Tax Directive will continue to bite at havens, as will the EU Code of Conduct on Business Taxation. The IMF reviews of havens will be tough going for many of them as it becomes very obvious that their compliance with international requirements is token, at best. The OECD will rebound on the tax haven issue and will develop serious new initiatives to tackle this problem.

NGOs will do much to keep all these issues in the public eye with targeted and effective campaigning on tax issues.

The debate on corruption will make progress, and the supply side will be increasingly taken into account when this issue is debated and written of.

Progress on country-by-country reporting will continue at a pace faster than anyone anticipates.

The domicile issue will remain on the agenda, and demand for its abolition will continue.

The UK's small business taxation regime will be legislated upon, unsatisfactorily and this will cause serious electoral problems for the Labour Party. It's open to debate whether the government will listen in time to the genuine concerns of the small business community for genuine reform in the way their profits are taxed so that a level playing field between large and small companies and between the employed and self employed is created. It is possible. Will they do it? I really hope so.

But I guess that's the nature of such predictions. They're all just hope.

However, I think there is one reality we all expect in 2008. The economy will have a difficult year, and the financial sector will have the worst year it has had for a long time. Much of this will be because of its own past abuse. It will be a tough time, but it does provide the opportunity for building a better future. That's what we have to grab in 2008.