Accounting » Tax Research UK

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

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.

New on Forbes: We need the suspension of mark-to-market accounting, now

Accounting Comments Off

Jun 272011

Further thoughts on Greece from me, on Forbes where I argue that the suspension of mark-to-market accounting is vital, now.

What happens when accounts aren’t fit for purpose?

Accounting Comments Off

Jun 242011

I’ve a new blog with the above title on Forbes.

It considers the accounting implications of Nick Clegg’s proposal to give away shares in RBS – and finds accounts wanting.

New on Forbes: The Greek Accounting Tragedy

Accountancy, Accounting, Economics 2 Responses »

Jun 202011

New on Forbes – my blog on why the Greek crisis could have been avoided if only we’d had proper government accounts.

The House of Lords are incredulous: of course International Financial Reporting Standard

Accountancy, Accounting, Auditing Comments Off

Jun 162011

The House of Lords recently undertook a review of the role of auditors in the run-up to the 2008 financial crisis. The report was damning, and rightly so.

Now the government has responded and the House of Lords aren’t, overall enamoured with the response. As they note, in particular:

We were surprised by the Government’s denial that IFRS accounting standards had reduced prudence in audit. The Committee’s report concluded that IFRS has limited auditors’ scope to exercise prudent judgment. Auditors’ traditional, prudent scepticism must be promoted, whatever the accounting standards.

Too true: and it will get worse, as I have explained today.

New on Forbes: Has the International Financial Reporting Standard Foundation pressed the self destruct button?

Accountancy, Accounting Comments Off

Jun 162011

I’ve got a new blog on Forbes that looks at the proposed reform of the IFRS constitution.

The reform is wholly negative. as I say in the Forbes column about these reforms, which narrow the defined usage of financial statements to speculators in financial markets alone:

The only people who now, apparently, have an interest in the accounts of companies are investors and other market participants who are seeking to make decisions on resource allocation within capital markets. Other users of financial statements have disappeared from view. Unquoted companies are no longer of concern. Anyone seeking information for any purpose other than investment is now ignored. Any concept of stewardship on the part of the directors gone: the only issue of concern now is dealing for investment gain.

And yet this leaves massive question marks at the heart of the whole International Financial Reporting Standard process. In the space available I can raise only a few, but each in itself is enough to suggest this approach is wrong. If, as the IFRS Foundation are now suggesting accounts are only for speculators, where is the long-term investor get the information that they need? And if accounts are only for markets, where do the regulators, tax authorities, creditors, civil society, and others get their information on the activities of a company? And what about companies that will be never traded on financial markets? Are the IFRS foundation now saying that their standards are of no relevance to companies that are not quoted on markets? Or that they have no relevance in countries where financial markets have not reached that stage of development? And Why, very importantly, if IFRS are to be solely about provision of information for speculators should the resulting standards be applied to the accounts of not-for-profit organisations, and even governments themselves (who are now using them)?

What will happen?

I suggest that here.