Ed Troup is the new boss of HMRC, it has been announced. I wrote this of him in 2013:
What worries me is when those [like Mr Troup] who are imported into HMRC's management appear to have an ethos that does not accord with that which would be expected from HMRC management. There is some evidence to suggest that's the case with Edward Troup. This comes from an article he wrote for the FT in 1999:
Tax law does not codify some Platonic set of tax-raising principles. Taxation is legalised extortion and is valid only to the extent of the law. Tax avoidance is not paying less tax than you ‘should'. Tax avoidance is paying less tax than Parliament would have wanted. Avoidance is where Parliament got it wrong, or didn't foresee all possible combinations of circumstance. The problem of tax avoidance is reduced to the problem of finding an answer to the question of what parliament intended and making sure that this is complied with. I would not pretend this is a simple task. But recognising this as the issue and dealing with it equitably and constitutionally would be a significant step on the way to tackling avoidance effectively.
So does this come from the same article:
The pitfall that recent governments have fallen into is to challenge the tax planners on their home turf. Successively more complex sets of rules have been created, which in turn provide opportunities for exploitation. A simpler tax system, with fewer reliefs, exemptions and discontinuities would, in the long term, frustrate most of the tax avoiders' ploys .
And this, when referring explicitly to a potential general anti-avoidance principle:
Merely saying that steps taken for tax avoidance motives can be ignored or rewritten takes the analysis no further. It is merely a pious statement that that parliamentary intention should not be frustrated. But such a general anti-avoidance provision would not be ineffective. It would, of necessity, have to give the revenue authorities the discretion to invoke, or not to invoke, its operation. The taxpayer would be laid at the mercy of the bureaucrat.
And these do not appear to be views he has distanced himself from. They were quoted in a 2013 briefing to parliament on a general anti-avoidance rule without steps being taken to say he had changed his mind in the meantime.
So let's reflect on that for a moment. Here we have the head of tax policy arguing like the Institute for Economic Affairs against the complexity in legislation needed to beat tax abuse and to collect tax from modern commercial transactions.
And here we have a head of tax policy arguing HMRC should not have the power to invoke the use of anti-avoidance legislation to support the will of parliament and who thinks ‘bureaucrats' cannot make such decisions, undermining the whole logic of having a tax authority in the first place.
And a person responsible for tax settlements who sees and argues for the commercial logic and benefit to tax avoidance.
Perhaps the PAC would like to question Mr Troup on these views today and ask the question whether such attitudes are consistent with the position he now holds or undermine it. I know where I stand.
I also wrote this after he was questioned by the Public Accounts Committee concerning the article in question, because members of that Committee had read my blog:
Ed Troup was questioned on this at the Public Accounts Committee hearing in the afternoon. As the Independent have reported it:
Perhaps the most radioactive moment in Monday's often acerbic and — thanks to The Independent's campaign against tax scams — rich confrontation came when Margaret Hodge asked Edward Troup, Her Majesty's tax assurance commissioner, if he had once written that “taxation is legalised extortion”.
Well, said Mr Troup, with polite defensiveness, he was gratified that people had read old articles of his in the Financial Times, in which those words had “appeared.” (Ms Hodge, who is sometimes reminded of her own history as the firebrand leader of the leftist Islington Council, interjected: “You can never get away from your past, I can tell you.”)
It was — of course — all a matter of “context”. The article had argued that tax was not a matter for “discretion of the tax authorities” but had to be “left to the rule of law”.
Poachers turned gamekeepers are an old story, and at the time Mr Troup was back working at the top firm which had originally employed him as a tax lawyer. But was he just a little too sympathetic with the poachers he was supposed to be catching? Ms Hodge mused: “I would never dream of using those four words together.” Before going on to ask Mr Troup whether “given those views, are you really the best person to lead the fight, the people's fight against tax avoidance?”
Now we've all written things we have since regretted (me included) and Margaret Hodge was right to allow for that. But I continue to think the question is valid. Ed Troup showed no sign of regret for what he wrote and did instead defend it. That was his mistake. He only had to say “I've changed my mind” or “I got that wrong” and the matter would have been laid to rest for good. He didn't.
And that is why I am not convinced he is the man fro the job.
That, and the fact he signed off the Google deal.
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I just can’t believe this. I mean this is just bare-faced.
What a country.
There has to be a day of reckoning someday.
I am not sufficiently knowledgeable or up to date with tax law or ethos and feel more at home in general economics.
Troup is right to talk of simplification so that the laws are as unambiguous as they can be (is that possible?). But his overall philosophy seems strangely at odds with his remit.
Obviously his background helps to signal to the markets that HMG will still be ‘flexible’ with regard to taxation in the hope that it attracts ‘inward investment’ from the rich citizens of the world.
So instead of making the best products and services in the world, we now compete by turning a blind eye to tax collection in order to attract tax tourists.
I fear so
And I reiterate: if he says he’s changed his mind, I accept this word
But when given the chance to do so he never did
I predict Margaret Hodge will not be happy
I look up extortion in the OED and I find “an act of illegal exaction”, and then exaction is “the action of demanding and enforcing payment (of fees, taxes, penalties, etc)”. So yes, tax is a legalised form of demanding a payment, enforced using the power of the state, in a manner that would otherwise be illegal.
Those with a library subscription might like to read the original article in the FT archive (“Why the Chancellor is Missing the Point” – FT, Tuesday, July 15, 1997, page 22) to see the quotations in context. His central points are that tax must be raised in accordance with the law not in accordance with administrative discretion and that overly-complex tax laws create new avoidance opportunities while they seek to close old ones down. (Where does he criticise complexity “needed to beat tax abuse” as you suggest?)
That was in 1997, remember, when the UK tax legislation could be published in two or three volumes. Now it needs 8 or 9 thicker books, with smaller type and thinner paper. Few would argue that we need even more complexity now, and yet Chancellors of all political stripes keep adding hundreds of pages of new tax rules every year. We are well past the stage of needing a root and branch review.
It is fascinating to see Edward railing in that article against “exploitable distortions to the tax base” in the form of increased tax reliefs for films, which he predicts tax planners will leap on with glee, and which were then used and abused in avoidance schemes that are still being litigated.
I applaud Edward for engaging in this debate almost 20 years ago, and congratulate him on his new job. We are lucky to have someone in a senior position who actually knows something about tax, not just a civil service manager like Lin Homer.
You mean you think democracy is about extorting, not freely made choice?
Pardon?
Think about what your comment means: it is only appropriate to think as you do if it is asumed we have no power over legislation. As a matter of fact we do. This is not then extortion: this is cvoluntary payment as we can collectively stop it
And it is this lack of undertsanding that makes Troup’s comments wholly inappropriate for a senior civil servant
You’re really making my blood boil today, Richard.
Sorry
Edward Troup is absolutely correct in asserting that “taxation is legalised extortion”. Only a philanthropist would contribute to government coffers without being required to do so by legislation. For everyone else, legislation is needed to ensure the Government collects enough to meet its needs. The Government tries to get everyone to contribute according to their abilities, and proposes legislation for Parliament to enact. Inevitably, the Government will get its assessment (of the ability of persons and corporate bodies to contribute) wrong – everyone, but everyone, thinks that taxation is applied unfairly, and (nearly) everyone would seek to reduce their share – hence tax avoidance by those who can figure ways to do it.
Edward Troup is also correct in asserting that HMRC’s role is to enforce the collection of such tax as has been set out in laws enacted by Parliament and it is not HMRC’s job to make up laws to interpret the will of Parliament – that is the job of the Government. He is right to be very cautious about HMRC using anti-avoidance legislation to interpret the will of Parliament- it would be a very slippery slope indeed. I have the highest regard for Margaret Hodge, but she is not the fount of all wisdom.
He is now responsible for the GAAR
And as a matter of fact HMRC recognise that the majority of UK tax payers are compliant by choice
Just as most of us do not speed (OK, two tickets on 36 years, I admit)
Your claims just discloses your bias, not what actually happens and not what Troup has to do, where every day HMRC does, of course, have to decide what the law means. If you do not realise that then you really do know very little about the reality of tax
Re your last para- actually, HMRC does not decide what the law means – they decide what they think it means, and mostly they are correct (usually, where the law is quite clear, and not open to mis-interpretation). Sometimes, where the law is open to alternative interpretations, HMRC has to decide which interpretation to use – and they may not get it right. It is open to anyone, in theory, to challenge HMRC’s interpretation, but one might need deep pockets to do so. I know of one instance where I believe HMRC has mis-interpreted a piece of legislation, which again I believe to be clearly expressed, and which is now the subject of an appeal to an upper tier tribunal.
I’m not sure what you mean by “your claims just disclose your bias” – please enlighten me! As far as tax is concerned, it is necessary, to pay for all the things we, collectively, expect our government to provide. If we, collectively, think the Government has got the wrong priorities, or is asking for too much, we elect a different lot to govern us next time around.
Oh dear the lacking in gorm seem to have been let out to play today.
“For everyone else, legislation is needed to ensure the Government collects enough to meet its needs.”
It’s needs?
What needs are those then?
Would those needs be things like transport networks, policing, security services, defence, health services, fire and rescue, infrastructure, social services, pensions, direct and indirect subsidies for private businesses, housebuilding, social security, food security, research and development, flood defence, environmental protection, trading standards, consumer protection, border security, public services, utility infrastructure (which, whilst it has now been piratised it was paid for by public monies), and a whole lot more.
As a definition of extortion that is certainly on a par with the well known phrase “What did the Romans ever do for us.”
It would certainly be interesting to see people like Vic and Andrew putting their money where their principles are and trying to obtain all these needs on an individual atomised basis so there was no requirement to their money “extorted” from them to pay for those needs.
Alternatively, rather than freeloading off the rest of us and getting these things without paying for them because they think having to do so is “extortion” those who think this way can always bugger off somewhere else so the rest of us don’t have to subsidise their delicate little sensibilities.
The Devil says maybe the chief’s should be elected and then they will be politically correct with their statements.
In real life the lawyers see the loopholes (especially in planning law) and the Right Wing Liberals get what they want.
You’re right to criticise “taxation is legal extortion” but I don’t understand your defence of complexity in tax legislation. Laws should be as complex as they have to be but no more. Some of the growing complexity in tax law does of course reflect that in the world but many examptions have been written to benefit vested interests or are now outdated. Only those who can afford expensive tax lawyers and accountants gain from those.
I would like to see a line by line audit of the tax code, removing all exemptions that cannot be justified in the public interest and defining dates by which others would expire unless explicitly renewed.
I have no problem removing exemptions
But the real need is to remove vast amounts of anti-avoidance legislation, deliver purposive legislation and a general anti-avoidance principle
That will simplify
the answer to Richard’s initial question is to reassure the top 0.1%
Taxation is only extortion if you have an illegitimate totalitarian government that does not represent the people – so yes if the UK government were to continue on it current path there will come a point when it is illegitimate. However that will be about the time freedom of speech is non existent and those opposing the government will have been either eliminated or rounded up and imprisoned. Then I think taxation will not be at the top of our concerns!!
Troup with his atitude is quite clearly not cut out for his appointment and someone in the Treasury bneeds to be held to account for a ridiculous recruitment decision.
Taxation is part of the the social contract it is the price citizens pay for living a modern state which provides all the amenities and services expected of a civilised society.
I agree with your logic in the first para
`… someone in the Treasury needs to be held to account for a ridiculous recruitment decision,`
That someone would be Gordon Brown, who appointed Troup to a Treasury position advising on tax in the first place.