Accountancy Age has a good article called 'Guarding reputations: tax profession needs to clean up its act'. By seasoned journalist Sarah Perrin, it seeks to explore an issue.
I won't comment on much of what it says: there's enough of me in the original. What I am interested in is the comment by Bill Dodwell, head of the tax policy group at Deloitte, who described the TUC's 'Missing Billions' report as 'just rubbish'.
Given that I was interviewed by Sarah for this article, and presumably Bill was as well, and that my comments are fairly reflected I guess this is what he said. In that case I have to admit it's not a good reflection on him. Nor is his argument credible. It is true that, as he says:
Essentially the things it claims are tax avoidance are current tax policy of the government. These include companies claiming relief on plant and machinery, and the independent taxation of spouses, which enables legitimate income shifting.
But the report made a particular point: this is neither the common perception, nor is it clear that parliament intended these allowances to be used in this way.
If parliament had intended large companies to pay tax at lower rates than smaller companies, as now seems likely to be the case, then it is not clear why it would have created a rate differential between the two to achieve the opposite effect.
And if HM Revenue & Customs really believed that parliament intended independent taxation of spouses to legitimise income shifting I really do not think that the whole Arctic Systems issue would have been pursued as it was.
So, if tax avoidance is, albeit legitimately, subverting the will of parliament, then it is clear that the Missing Billions does draw attention to substantial tax avoidance. Rubbishing that seems like the action of a person who does not wish to engage in the debate in the hope that it will go away.
But this argument will not go away. It is abundantly clear that the tax system is being exploited at cost to the most vulnerable in society. By rubbishing this report Bill Dodwell seems to be saying that he'd rather ignore that fact, and would wish to perpetuate the exploitation. That cannot be to the benefit of his firm, or the tax profession, which he notes in the article needs to:
get involved in trying to explain their massively complicated world to the general public, to show people what tax is about
I can't see how he thinks that dismissing the alternative, and widely held view amongst the public, as 'just rubbish' is going to achieve that.
Of course, I may be wrong in my interpretation of what he says. I've never met him. I'm very willing to do so. In fact, I'm sending this blog to him to invite him to discuss the issue. Because I am as interested as him in having a well regarded tax profession, but don't think that possible unless the profession and firms accept their social duty, and that will mean we must improve the standard of debate and focus on the real issues. Otherwise the public will, rightly in my opinion, continue to hold the tax profession in low regard.
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So what you are suggesting is that the accountancy profession needs to consider its image above the needs of their clients. Interesting take on providing a service. 😕
Far from it.
It is not in the interest of the clients of the accountancy profession to abuse the tax systems of the world.
Maybe you have never suffered a tax investigation. I used to run them for clients (usually clients of other firms of accountants who had suffered their bad advice). If you have suffered a tax investigation you’ll know why abusing tax systems is not a good idea.
But accountants don’t add that risk warning when selling their avoidance services.
While your comment “And if HM Revenue & Customs really believed that parliament intended independent taxation of spouses to legitimise income shifting…” sounds reasonable, I seem to remember that the chancellor of the day accepted that, while it was not the intention, it was an acceptable result of the legislation.
If subsequent govt’s decide, after such a long time, that it’s no longer an acceptable result then they should use due process and be upfront and clear about it. They tried to implement by stealth and got caught out, now they want to try their usual legislative ‘lash-up’.
George
GeorgeB
I disagree.
It was said that the rules would not be used to prevent reasonable income splitting.
But nor were they ever seen as an invitation for ritual income splitting for the benefit of some in society, but not all.
I think HMRC were right and consistent on this issue.
Richard
[…] Dodwell, head of tax at Deloittes UK ha suggested my work on the Tax Gap is ‘just rubbish’. Well, it’s a free country, and he has a right to his […]
Whilst being sympathetic to the consequence complained of, this line of argument over the will of parliament does not work in my opinion and, if anything, is counter productive. In considering the larger corporates, there is no mileage in saying that deductions in arriving at PCTCT for such items as capital allowances and, in recent years, pension deficit funding, are not the will of the legislature. They are very patently are, and we have hundreds of pages to prove the case.
The more sustainable approach is that the will of parliament produces undesirable consequences because the executive cannot formulate coherent policy.
Directing the case towards those that make the laws, and often so badly in terms of the consequences, would be seen by many as a far more rationale and sustainable way of addressing, and arguably, correcting the consequence.
Andrew
I have some sympathy with what you say, but only some.
The requirement that ‘You shall not beat your wife’ does require considerable definition if an equitable basis of interpretation of the law is not to be used (and I note you oppose that).
When definition is required loopholes creep in.
That’s why I want a GANTIP and a equitable interpretation. Without espousing these I ma not sure your position is credible.
Richard
“nor were they ever seen as an invitation for ritual income splitting for the benefit of some in society, but not all.”
All very however. This very thing was brought up by the Labour Party when the independent taxation of spouses was brought in and at that time the government was perfectly happy. If the Labour Party was unhappy with this then rather than demand back taxes and put people’s houses at risk it should change the law. If the Labour Party was unhappy then why did the BusinessLink Website recommend using a spouses tax allowance – until this was pointed out to the Treasury team during Jones v Garnett.
Further was a change even required – There is two ways the government could deal with this – Disallow certain parties to Income Shift, or allow everyone to. A number of our competitor countries actually allow it and allow families to file joint returns for a husband and wife (so if your allowance is £5K they are allowed £10K, together). There are important social benefits in encouraging families.
In addition, their were a number of years that were under investigation in Jones v Garnett and HMRC gave up on the previous years because having investigated them it saw nothing wrong. So if nothing was wrong when originally investigated why did the Tresury suddenly change their mind and decide they was (they gave up when it got to court – what if this was someone who could not afford the fight). Maybe this is because they did decide to ignore what the law said and change the rules without going through parliament.
The government changed the rules and decided on someone who was in a position to fight back. Not everyone can. They tried that to
Paul
That’s your subjective interpretation
I stick to mine
And to my call for a change to the rules for small business that will stop this abuse http://www.taxresearch.org.uk/Blog/2007/08/09/arctic-systems-moving-small-business-taxation-on-in-the-uk/
Richard
[…] of my methodology. When The Missing Billions was published Bill Dodwell, head of tax at Deloitte described it as ‘just rubbish’. Now Deloitte have used it as the basis for their own […]
[…] of my methodology. When The Missing Billions was published Bill Dodwell, head of tax at Deloitte described it as ‘just rubbish’. Now Deloitte have used it as the basis for their own […]