Tax Research UK

Google: Buzz off!.

If you use Gmail read this. You need to.

Thanks to Dennis Howlett for identifying serious problems in Google’s latest offering.

Richard Murphy Dennis Howlett

On being No.2.

Dennis Howlett got me into blogging.

Now he’s ranked #2 blogger analyst in the world.

Congratulations Dennis.

And he also remains spot on with regard to accounting ethics.

Richard Murphy Blogging, Dennis Howlett

Dennis Howlett picked up on my theme of incredulity about the professions PR, noted here yesterday. He has said:

I am still firmly of the opinion that at least one of the Big Four will fail even though I know ICAEW members and colleagues who think I’m utterly wrong. I agree with Francine the weight of impending litigation is what will bring the situation to a head. The pile of lawsuits is simply too high and in the case of Satyam, will almost certainly require litigating in order to settle. That is one of what I believe will be a series of tipping points. Having said that, my opinion about which of the Big Four fails first varies depending on which news I’m reading at the time. There’s just too much bad news out there. Regardless, the die is cast.

As and when (not if) it happens, we will see a radical recasting of the profession. It will be a golden moment when it will be possible to think about how the profession might morph into something in which people can place genuine confidence once again and where a meaningful ethical compass drives the way they do business. That is for those who are not already thinking these matters through.

In the meantime, people like Richard, Francine, myself and Adrienne will keep plugging away at the issues – even if that means we individually and collectively sound like Cassandra. At times completely out of step with consensus thinking, at others apparently baying at the moon.

I suspect all four of us are optimists: we have to be or it would not be worth bothering. That’s why Dennis can write that great second paragraph. It’s what we want to do.

But sure as heck we’ve got some way to go: although it’s obvious things cannot and will not survive as they are now the majority remain with their heads in the sand.

Richard Murphy Accounting, Auditing, Big 4, Dennis Howlett

I refer to you Dennis Howlett’s piece under the above title.

I have nothing to add.

But let’s be clear – when I accuse my own profession of having blood and death on its hands in the developing countries of this world – I mean it.

Richard Murphy Accounting, Dennis Howlett, PWC

Dennis Howlett has a blog on the above topic under the title McCarthyism revista | AccMan.

I agree with him: a kangaroo court for Sir Fred is madness. The idea we might use parliamentary time to limit his pension is crazy.

For heaven’s sake - let’s get on and use the effort and anger to change the regulatory environment - to bring in tax rates that means those with high earnings pay their dues - to put effective sanctions on offshore - to require transparency in accounting - and so much more.

He’s a symbol of our failure.

Now let’s put the future right.

Richard Murphy Accounting, Banking, Dennis Howlett, Ethics

Dennis Howlett, who was the man who got me into blogging, has a thoughtful posting on his AccMan blog this morning. Reflecting on Alan Rusbridger’s essay on the problems of getting tax stories reported in the media he says:

Goodness knows it does its best in a world dumbed down by sound bites. Alan’s essay is testament to that. The harsh reality is that independent experts prepared to do the hard work for the public good are in very, very short supply. If in reading this you’re getting bored with my continuing to mention Francine and Richard [Murphy] then that’s telling you something about the lack of heroes prepared to put their head above the parapet and use their skills to unpack the real story. And if you’re thinking ‘What about Woodward and Bernstein?’ then remember they had ‘Deep Throat’ to guide them all the way. You are very unlikely to find those types of character prepared to come forward in the multi-billion dollar tax and audit world.

Collectively and with others like Prem Sikka, we have voices that are increasingly being heard. We may have slightly different agendas but on one thing I am certain we are agreed. The profession is at real risk of being relegated to history as an artefact of a bygone age. It doesn’t have to be that way. I’ve always held the view that professionals have a pivotal role to play in guiding business. But…the profession has to change. Allowing itself to be bulldozed is not a great starting point.

My hope for 2009 is that the transparency so many of us have been screaming for will finally start to become a meaningful concept in the context of business that has become dangerously opaque. If we see progress on that front, then perhaps it will become much easier to explain what’s happening to the public and in so doing, bring attention to matters which affect us all.

I’ll second that Dennis.

And I’ll also offer my thanks in advance to those with whom I’ll share this journey in 2009, noted above or not.

Richard Murphy Accounting, Dennis Howlett

Dennis Howlett has done a great job writing on the above issue.

So good, I just recommend you go over to his place and read it.

If ever there was a measure of the crisis in accounting, this is it.

Richard Murphy Accounting, Dennis Howlett, IFRS 8

It’s a fact that we cannot do without taxes. That’s because we cannot do without government. And we cannot do without markets either, at least in the world as we know it. The relationship is symbiotic: governments provide the structure in which markets can work: markets need government as their insurer of last resort: populations need governments to protect them from the excesses and failings of the market. Those who argue for one as opposed to the other will always be on a losing ticket: they ignore the obvious fact that as we have structured our society this is an indivisible relationship, not a matter of choice.

But relationship carries obligations. One is that each plays an appropriate part. The other is that outsiders are held at bay and not allowed to interfere to the point that they harm the process which ensures a continuation of the productive benefit that flows from reasonable harmony.

What’s the relevance of this? Simply that unfair taxation harms the relationship between a government and markets. Take the example of Setanta’s relocation of its subscription TV service from Ireland to Luxembourg. It has saved £17 million in VAT as a result as Luxembourg has a 3% VAT rate on such supplies, apparently. Ireland charges more. But what is absurd is that this is happening within the single market of the European Union where such anomalies are meant to be eliminated and the free movement of capital is not meant to be either encouraged or hindered by taxation.

It’s clear that Luxembourg’s VAT abuse needs to be tackled.

But there’s more to it than that. Setanta is a substantially Irish company. Half of its staff are there. That’s likely to make it the core of its activities. They’re not in Luxembourg. So this is an artificial move. As such it contravenes section 1b of the TJN / AABA Code of Conduct for Taxation which says:

1b. No incentives are offered to encourage the artificial relocation of international or interstate transactions;

Luxembourg is not honouring its international obligations to other states.

Setanta is also in breach of sections 3b and 3c of the Code:

3b. Tax planning seeks to reflect the economic substance of the transactions undertaken;

3c. No steps are put into a transaction solely or mainly to secure a tax advantage.

I also think they’re in breach of 4c and 5b:

4c. Taxation reporting will reflect the whole economic substance and not just the form of transactions.

5b. All parties shall act in good faith at all times with regard to the management of taxation liabilities;

There’s a great deal of unacceptable conduct taking place here. Relationships rarely survive such behaviour. That’s why we’re worried when this sort of abuse takes place. It’s bad for the economies that suffer, it’s long term unsustainable for the compnaies involved, eventually consumers usually lose as a result, but worst of all, it’s bad for the whole effectiveness of the market which is best sustained when each party accepts their duties and obligations to each other and to those they relate to outside the immediate relationship.

This isn’t pie in the sky stuff: this is about creating well-being. And that, at its core, is what economics is meant to be about.

It’s accountants who think economics is about market abuse.

NB: Hat tip to Dennis Howlett.

Richard Murphy Code of Conduct, Dennis Howlett, Tax management, Tax planning, VAT

Dennis has waded into this debate.

And he can see no more merit in PWC’s TTC than I can. As he put it:

[Do] PwC think we’re all idiots? A year 1 CIMA student could work out just how appallingly illogical this argument really is.

The sadness in all this is that well meaning people are being hood winked by consulting brands that are intellectually bankrupt and thoroughly discredited in the wider context of CSR. But it matters not to them. When you’re painting a picture of this kind, it is so much easier to sell GRC services tied to falsehoods around CSR. Especially if you can make the seductive, if entirely false claim that business tax is a cost of doing business.

One more nail in the profession’s reputational coffin.

(NB, GRC = gross recurring fees, the regular income that all accountants look for as their bread and butter and which is what PWC are really seeking out of the TTC).

Richard Murphy Accounting, Dennis Howlett, Ethics, PWC

There are some things that are simply worth reading this weekend and which I won’t have time to blog in detail

Please read Prem Sikka on audit failings and the sub prime crisis.

Read Dennis Howlett on the same issue.

And Dennis again on TI.

These aren’t to be missed. Your weekend will be better for them.

Richard Murphy Accounting, Corruption, Dennis Howlett, Ethics