Accounting » Tax Research UK

It’s time to hire KPMG to tell you how to…hire KPMG

Accounting, Auditing, KPMG Comments Off

Jul 142011

Almost half of local authorities admitted they are unprepared to appoint auditors, just as the government is preparing to hand over this responsibility following the planned closure of the Audit Commission.

A survey by KMPG showed that, for 44% of chief executives, directors of finance and chairs of audit committees, the issue is “not yet on the radar”, and no one on their team had any experience of audit procurement.

So, KPMG undertakes a survey to show that local authorities need to hire their services to help them buy audit services from….well, KPMG.

Gravy train, anyone?

Just as George ordered, of course.

The government’s accounts are blatantly wrong and must be qualified

Accounting, Auditing, Economics, Uncategorized 40 Responses »

Jul 132011

The UK government has for the first time ever issued a set of consolidated accounts covering its activities today. They are, admittedly in draft, but they are also blatantly wrong, and so seriously misstated that any auditor must be duty-bound to qualify them as being a completely unfair view of the state of the government’s finances.

The reason for saying this is simple: it is an absolute rule of accounting that revenue must be recognised as it falls due and any sum not collected must be treated as a bad debt. However, the revenue included in these accounts is the net sum of cash collected relating to the year 2010/11. As such the accounts are stated net of losses to tax evasion, which the Revenue themselves admit might be £35 billion a year, and may be as high as £70 billion a year in my estimate, and they are also stated net of tax avoidance. The Revenue have admitted they have £25 billion worth of tax avoidance subject to dispute at present, and I believe that this is the sum lost annually for this reason.

As a result I contend that the top line of these accounts is understated by at least £95 billion, meaning they are grossly and materially misstated in accounting terms or, in layperson’s terms, they are just a straightforward lie about the true financial state of the government.

Unless and until the UK government can accept the fact that it fails to collect a very large part of the tax owing to it then we have no hope of economic competence being restored at heart of government. Basic recognition of this truth is the first step towards achieving that goal, and these accounts suggest that the government remains in denial on this fundamental issue that could transform the well-being of the UK government, help slash the deficit to a point where it would be of no great consequence, restore social justice in this country by giving preference to honest people over cheats, and at the same time uphold the rule of law and the democratic will of Parliament.

Right now, the government chooses to do none of those things. It prefers to leave money in the pockets of cheats instead of using it to pay for pensions, provide education and ensure the health service is secure for the future. Worse still, by stating its accounts in this way it denies that there is even a problem to address.

The government should be ashamed of these accounts and ashamed of their cowardice with regard to tax collection and I sincerely hope that the auditor of these accounts has the courage to say that they do not represent a true fair view of the government’s activities, because that is very obviously true. If they do they will be doing us all a great service: this government may demand greater transparency and accountability but unless it adopts that maxim for itself then there is no hope of it being achieved elsewhere. So far they are a long way from coming up to scratch.

There is no hope of accountability and transparency in public services without massive reform of corporate regulation in the UK

Accounting, Conservatives, Country-by-country, CSR, Tax Havens, Uncategorized 6 Responses »

Jul 122011

As the GMB reported yesterday:

Almost half of Southern Cross care homes are owned by companies based outside the UK, including hundreds registered in tax havens, according to a union dossier.

The GMB said 199 homes are registered in the Cayman islands, 43 in Guernsey, 41 in Gibraltar, 39 in Jersey, four in the British Virgin islands and one in the Isle of Man.

The union said it had established the names of 80 landlords who own 615 of the 750 homes but was still trying to find out details of the other owners.

National officer Justin Bowden said: “Southern Cross may be on its last legs but for Southern Cross’s 31,000 residents and 43,000 staff, this looks like a case of ‘out of the frying pan, into the fire’.

“These 80 landlords are a rag-bag bunch whose number includes overseas interests, tax dodgers and in some cases ‘identity still unknown’. Many themselves are in financial difficulties.

“All this spells months more uncertainty and worry for residents and staff. Where is Government in this care scandal? The ears of the 31,000 elderly and vulnerable residents and 43,000 staff must be ringing from the deafening silence from Downing Street.

Cameron says he is in favour of transparency, accountability and obligation in public services. This, though, is the reality: we get offshore companies, completely opaque, accountable to no one, with no financial information available on public record, ending up as the landlords and operators of care homes for the elderly in this country.

It’s sickening.

It’s wrong.

It’s as opaque as it is possible to be.

It lacks all forms of accountability.

There is no protection to those who need it within such a system.

Cameron wants to devolve responsibility from the state to the corporate entity. But as my research has shown, 20% of all companies in the United Kingdom disappear each year without question being asked. That is a complete failure of corporate responsibility.

In addition I’ve shown that the government does not ask almost one third of companies to submit tax returns each year. That’s the behaviour of a cowardly state.

Of those 1.8 million companies that are asked to submit tax returns, 600,000 do not submit them and they are not pursued for any penalty for not doing so. That is the behaviour of companies who know they can ride roughshod over the government: a cowardly government; a government that is not willing to enforce regulation to ensure transparency, accountability and the obligation to pay tax.

And Cameron presides over a government that is responsible for more tax havens in this world than any other, and he’s doing nothing about it.

To argue that the functions of state should be passed to corporations when regulation of corporations is so weak, and is known to be so weak, is the act of a man who is both a coward and a fool. Cameron knows that if he does what he proposes accountability, transparency and responsibility will all go by the wayside. But he says otherwise. That’s grossly dishonest.

If there is to be any further devolvement of any responsibility of any sort from the state in this country to the private sector then the rules by which the private sector operates have to be enforced and enhanced.

Companies must be made to account.

Their directors must be held accountable if they do not.

Tax havens must be shattered open and the information within them brought into the public domain.

Full accounts of every corporate entity must be on public record.

Country by country reporting must be the norm.

Corporate social responsibility reporting should not be an optional extra: it should be a requirement of all companies of any size.

Tax avoidance, and the transfer of profits generated from state funded activity to tax havens outside the UK should be banned.

Personal liability for those persons who act in breach of trust, who have committed fraud, who have deliberately assisted their companies to evade tax, and who’ve misrepresented accounting information should be rigourously enforced.

Then, and only then can the public sector be satisfied that the private sector can undertake the tasks that they may wish to transfer to it.

Until then, any transfer of services to the private sector involves unknown and very obviously significant, and dangerous, risks for the users of the services in question and that is wholly unacceptable and an act of gross irresponsibility on the part of any politician.

Which is why Cameron’s Big Society must be stopped, now.

News International proves CSR is nonsense – we need properly regulated reporting to society at large

Accounting, Corruption, CSR, Ethics 1 Response »

Jul 122011

The News International debacle has much to say about corporate responsibility in the UK or the lack of it.

Faith in major corporations was already low – and the Murdoch press for all its power was hardly popular, but there’s a dimension to this debacle that has to be pulled out here. These comments come from the NewsCorp web site:

Trust in the Free Market – Our Commitment to the Public

The marketplace of ideas is where News Corporation and its business units thrive. That’s also true of our participation in the business world generally, where we protect our reputation for honesty, transparency and fair competition. Our credibility is at the core of our success.

Providing Truthful and Complete Information in Financial Records

We maintain accurate and complete financial records, and make full, fair, accurate, timely and understandable disclosure in reports and documents that we file with government regulatory bodies or otherwise make publicly available.

We each take responsibility for recording clear, accurate and complete information on any and all Company records we produce.

We immediately bring to the attention of a manager in Human Resources or an attorney in the Legal Department any suspected fraud or financial irregularity.

Let’s be honest: we know they just aren’t true.

This company did not compete on the basis of fair competition.

It was fraudulent in its practices.

It seems very likely did not notify fraud when it found it.

Its accounts did not report what it was doing.

In the light of what has happened these statements are all very obviously ‘boiler plate’ rhetoric, but they have no credibility whatsoever.

This is true of Corporate Social Responsibility in general. The expectation that major corporations of this sort will act appropriately without regulation to make them do so is simply pie in the sky thinking that no one now takes seriously.

If News International has done yet one more thing by tearing its own reputation (limited as it may have been) to pieces it is to shatter the myth of CSR for good.

Now we need to get on and create the Courageous State that will regulate such companies properly. That’s the challenge that the News International debacle lays down for politicians. Who will rise to the challenge?

And who will also demand corporate reporting for those who have real information needs from a company but who do not engage with it as short term investors with that information being provided through the medium of properly regulated and audited statements – starting with country-by-country reporting, which would answer the questions now arising about Murdoch’s use of tax havens?

Right now the accounting profession is moving in the exact opposite direction. Only government can make the difference. But will anyone rise to the challenge?

Why will the government be issuing accounts under new and wholly inappropriate rules this week?

Accounting 6 Responses »

Jul 112011

As the FT notes:

Hundreds of billions of pounds of additional debt will appear on the government’s books on Wednesday when the Treasury publishes accounts drawn up on the same basis as those of companies.

After years of delay, the government will give the first glimpse of what the UK’s public finances would look like if the UK were a listed company such as Marks & Spencer or BT.

The continue:

The new accounting standards have required the government to consolidate information from 1,500 public bodies, and report figures using the International Financial Reporting Standards followed by big businesses.

But why should the government do this? The International Accounting Standards Board who are responsible for International Financial Reporting Standard are currently reforming their constitution. In the consultation document on this reform they say:

In carrying out the IFRS Foundation’s mission as the standard-setting body, the IASB should develop financial reporting standards that provide a faithful presentation of an entity’s financial position and performance. Those standards should serve investors and other market participants in their economic and resource allocation decisions. The confidence of all users of financial statements in the transparency and integrity of financial reporting is critically important to the effective functioning of capital markets, efficient capital allocation, global financial stability and sound economic growth.

I discuss this in more depth here, but the key point is a simple one: nothing in the way International Financial Reporting Standard are developed makes them suitable for use by government.

They are designed for reporting by a body whose capital is traded on a market for the use of those who undertake short term speculative trading. According to the International Accounting Standards Board they have no other purpose. But this is far, far removed from the role and structure of government. That means IFRS are wholly inappropriate for its use and will lead to but economic decision making and inappropriate allocation of resources.

It’s another mistake resulting from the ethos that thinks the UK is a PLC. It isn’t. And it’s about time we realised that fact.

Prem Sikka on accounting and human rights

Accounting, Uncategorized 4 Responses »

Jul 052011

Prof Prem Sikka is giving the opening welcoming address at the Tax Justice Network conference at Essex University.

His theme is accounting and human rights.

His point is that when he began to research the link between these two subjects he discovered, based on a literature search of accounting journals, that the two subjects had never been discussed.

And when he submitted a paper on this theme to an academic journal the response was ‘what’s the link between the issues’.

No wonder the International Accounting Standards Board has no idea why so many NGOs are demanding country-by-country reporting.

And yet, as Prem says, and it’s a view I share, accounting is all about the exercise of control over lives. The link is fundamental, and yet denied by the neoliberal elite.