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.
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.
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.
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.
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.
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).
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