Yesterday I noted, based on a reading of the government's new policy document on tax avoidance and tax evasion, that it intended to take action to clamp down on the abuse of the tax profession.
I wish to apologise. I was wrong. They said this:
Today, the government also announced it is asking the regulatory bodies who police professional standards to take on a greater lead and responsibility in setting and enforcing clear professional standards around the facilitation and promotion of avoidance to protect the reputation of the tax and accountancy profession and to act for the greater public good.
In my desire to finally find something I could praise the government for my optimism carried me away. What this actually disguises is the fact that yesterday they also issued a minute in response to the PAC report on PWC's involvement in Luxleaks in which the PAC said that the tax arrangements PWC promoted in Luxembourg bear all the characteristics of a mass marketed tax avoidance scheme and recommended that:
HMRC should set out how it plans to take a more active role in challenging the advice being given by accountancy firms to their multinational clients, with a particular view to the mass marketing of schemes designed to avoid tax.
To which the government response was
1.1 The Government disagrees with the Committee's recommendation.
1.2 The department already challenges non-compliance by multinationals very effectively. The tax
affairs of the 2,000 largest businesses in the UK are managed by Customer Relationship Managers
(CRMs) in a special Large Business directorate. CRMs are experienced tax professionals trained to
the highest levels of tax compliance, who “man mark” these complex and high risk taxpayers and lead teams of highly skilled specialists to manage their compliance.
1.3 Large businesses are inherently high risk because of their potential impact on revenues and their ability to structure their affairs in tax-efficient ways. That is why the department invests in direct engagement with them so that its tax professionals have in-depth knowledge of their business model, business and tax disputes, appetite for risk in tax planning, and internal governance.
1.4 Through this approach, the department secured £31 billion extra tax from large businesses between 1 April 2010 and 31 March 2014.
In my opinion this provides very clear indication that the Treasury lives in a little bubble where fantasy is permitted and reality need not intrude precisely because of the over influence of the Big 4 accountants, of which PWC is one, and of big business. The schemes revealed by Luxleaks worked. HMRC did not recover more money as a result of them, and they were tax avoidance on an industrial scale and the government is saying it will not take action to stop it. They cannot be clearer in their willingness to permit abuse to continue. As for the claimed numbers, I have already shown them to be works of fiction.
But worse was to come. The third recommendation of the PCA was:
The Committee believes strongly that the Government must act by introducing a code of conduct for all tax advisers, as the Committee recommended in its April 2013 report. The Committee further recommends that the Government should consult on how it should regulate the industry and enforce such a code, including through financial sanctions that could be imposed in the event of non-compliance.
This is a long overdue move. Despite what was put in the tax evasion and avoidance document the government has rejected this obvious and vital step:
3.1 The Government disagrees with the Committee's recommendation.
3.2 The Confederation of British Industry (CBI) has published a draft Statement of Tax Principlesto promote responsible tax planning. This initiative is a valuable contribution to the ongoing national and international debate around corporate tax transparency.
3.3 The ICAEW has also developed its own Code of Ethics, which it expects all of its members to follow. This Code encourages members to comply with its fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
3.4 Compliance with either the Code of Ethics or the Statement of Tax Principles will not determine whether or not firms can access government contracts. However, the Government has published separate guidelines to give departments the discretion to terminate contracts with suppliers that have engaged in tax avoidance themselves.
So, if you've published a code of ethics apparently all is well in the world. The fact that there is no policing of that code, especially in the case of the CBI, and that as far as I know there has never been an ICAEW case of misconduct for the selling of industrial scale tax avoidance (or any at all, come to that) the government sees no need for action.
Four things follow.
First this government has declared firmly on the side of corporate tax abuse. No wonder they are forecasting real deceases in the corporate tax take.
Second, their policy document yesterday is now shot through.
Third, we now know why their goal for collection of additional tax from evasion and avoidance is so small at £5billion.
And fourth, they confirm business has totally captured the tax process in the UK. We desperately need an Office for Tax Responsibility to break that.
The time for real change has come. And the tax profession and big business must be stopped from tax abusing.
They have told the FT they intend to take no action in response to government comments.
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I distinctly heard on radio on budget day that the govt were going to crack down on advice given on tax evasion. My immediate thought was, surely avoidance.
We’ve said it on this blog before, Richard, but when you read that big businesses/MCNs are dealt with by customer relations managers (CRMs) it tells us everything we need to know about how utterly skewed the relationship between HMRC and said businesses has become.
I remember back in the 1990s when I taught government and politics to undergrads and the “citizens as consumers” debate entered political – and thus academic – debate. In those days it took my second and third year public admin students about five minutes to work out why a citizen is not always and everywhere a customer (as some, including successive governments in the UK) would have us believe (as do myopic cheerleader organisations such as the CBI). And the same applies to an organisation.
There were things to be learnt from the CRM movement, just as there were from organisations that had already mastered the processes and techniques of being “customer focused”, and anyone who had dealings with a range of public services of the time knew that to be the case. But the wholesale adoption of these practices to many public services is entirely inappropriate and has been a significant factor in the destruction of a public service ethos, and equity of treatment for all citizens (as the HMRC case proves). Unfortunately, once an organisation moves down the CRM road there are plenty of IT and management consultants on hand to flog them software “solutions”, and advise them on the various CRM processes – most of which are actually common sense.
But of course, ultimately and fundamentally what the responses from government you note above demonstrate unequivocally is that government and public services are run for big business, and largely by big business. Many politicians positively welcome that development – and this Tory government more than most. But the saddest thing is to see once great departments of state, such as the Treasury, turned into apologists, PR functionaries and lapdogs for commercial interests, with any idea of, or commitment to, a wider and deeper PUBLIC interest, completely removed from their thinking. That’s the real scandal at the heart of the neoliberal state we live in.
Agreed
Ordinary folk are abandoned by Westminster. Time to remind ourselves then that Small is Beautiful and start up local currencies and farms. We have to look after ourselves now, and I’m sure once the idea takes hold we’ll do a much better job of it than our preening, self-serving and increasingly irrelevant politicians have ever done. They don’t care about us? Fine; we’ll get on with it ourselves then.
I trust that you mean collective farms Mr Kruse. Setting up farms makes us sound like survivalists from the USA.
I’m not sure of the distinction between collective and survivalist farms. My thinking is there’ll be no paying for food from distant parts with local currencies so we’ll need local produce.
Ivan, have you been dealt with by an HMRC CRM, or are you extrapolating from the title? In my experience it’s not a cosy relationship at all. They spend a lot of time getting to know your group, what’s going on in your business, and what the tax implications might be, and they aren’t afraid to challenge robustly.
I like having CRMs, and I think there should be more of them, but that’s because I think they give much more effective scrutiny of a taxpayer’s affairs than the lean processing approach used in the bulk of HMRC. They also allow you to get certainty over an unclear position much more readily than by filing a return with supporting documents and hoping someone reads it, or bunging in a non-statutory clearance and hoping HMRC reply.
Your answer reveals a truth very well
This arrangement suits an elite very well
It does suit them very well, yes. As I say, knowing that your affairs will be scrutinised promptly by someone who knows what he’s doing means that you get rid of a lot of uncertainty.
And as a member of the public, I’m glad that HMRC is undertaking that scrutiny properly.
It should be available to everyone, not just large businesses, which is why I’m glad HMRC are rolling it out to more companies – but I wish they could go back to the old days when you knew who your Inspector was.
The latter has always been my point
It worked well, for a lot of people
Andrew. No I haven’t and clearly you have, and its useful to hear of your positive experience. But my point, (as I thought was clear from my comment, but perhaps not) is not with CRM specifically but with the reduction of all relations between the state (in whatever form) and citizens to that of customer. This very narrow (re)definition of citizenship – for that is what it is – fundamentally alters the dynamic between state and citizen and thus what used to be called the social contract.
As I acknowledged in my original comment, much that is good has been imported into government and public service from what we might refer to as the customer focused approach, including CRM. But the obsessive belief in “private good, public bad” that has bewitched successive government has led to the unquestioning and uncritical adoption of this philosophy, and its practices and processes where a more measured and balanced assessment would have distinguished between what was appropriate or not. To my mind referring to the relationship between a taxpayer (of any size or worth) as a customer of HMRC is one such example.
I got your point
It was clear
Ivan, your point was clear, but I think misguided, You seem to think that HMRC actually do consider taxpayers to be customers, and treat them as such (with connotations of deference, eagerness to help, and so on). My point is that although they call people “”customers, they still treat them as taxpayers – the talk bears no relation to the walk.
What irritates me about HMRC calling taxpayers customers is not only that it is the wrong word for the relationship, but that it shows that mere lip service is being paid to the concept of treating people fairly. The Charter would be a much better way of achieving that aim, were it followed more closely.
I’m afraid you heard right, Carol. It’s all part of a scheme to de-criminalise tax evasion so that the next time HMRC and the govt are embarrassed by pesky people like Falciani they’ll resort to financial penalty rather than prosecution! After all, it’s too big to jail bankers we’re talking about, so why not bring tax evasion to the same place as every other fraud perpetrated by bank, which invariably results in a fine if the plebs start poking their nose into the business of their masters?
As depressing as it is to say it, why would anyone believe a word this government says. Their entire policy approach, to everything, seems to be no more than to calm the masses with reassuring words and then calm their supporters with alternative information that will reach, and be understood by, a very resticted audience.
I happily own up to being a leftie, to which many would react to my comments with a lazy and dismissive “you would believe that, wouldn’t you”. But this isn’t just about politics, it’s about principles, truth, integrity, ethics. It depresses me to have witnessed over the last 30 years or so a continuous and accelerating descent into the gutter of dishonest manipulation of which, in my opinion, the current government has proved to be the most egregious exponent.
Just as depressing for me, ICAEW and the other professional bodies seem more than prepared to support the prevailing narrative, mouthing some appropriate words but unprepared to actually do anything to upset the status quo. Once upon a time, I thought I’d retire with some pride in having been a part of ICAEW. It seems increasingly unlikely that wish will be fulfilled.
Agreed re ICAEW
Deeply depressing
And I still need to be a member
Nick, assuming Richard can be classified as a leftie that makes two of you in the ICAEW. There will be a revolution next 🙂
Me? A lefty?
I think so
Please don’t be too hard on yourself Richard. You were being hopeful. Nothing wrong in that. But at least the truth has now been revealed.
So, as to the cause of your/our disappointment, how’s this for quote from Frederic Bastiat:
“When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorises it and a moral code that glorifies it”
As I understand Bastiat, he was a proto liberal economist and he may actually have been talking about the State.
However, stripped of any context, Bastiat’s statement could easily apply to big business in equal measure.
Good quote
If anyone thinks that having a CRM for a large business is an easy ride, they should think again. The CRM’s role is to bring coordination to all HMRC’s activities across a taxpayer’s activity and to ensure that all aspects of any enquiries (in the sense of general questions on activities rather than questioning a specific transaction) are dealt with from corporation tax to VAT to employee taxes to excise duties and the like. You have to have all the facts and explanations to hand.
Having worked with CRMs for the best part of 9 years (from mid 2006 onwards) in a large listed business, we ensured that we briefed them assiduously and regularly (at least twice a year) on all aspects of the UK and international business. This was on top of the detailed tax specific meetings that my heads of department held with their specific HMRC tax counterparts on a more frequent basis (VAT meetings visits took place monthly). HMRC’s approach was to challenge (constructively) and require proof of what we were telling them (an example being the recent employment tax review that was undertaken – 9 months of detailed questioning and follow up). On several matters, we agreed to disagree constructively and on one occasion this went to litigation. When we briefed HMRC on forthcoming transactions, we fully explained the technical analysis for them without exception to get their agreement in advance of undertaking the transaction.
CRMs are no patsies by any stretch of the imagination. Their coordination role is vital for HMRC