The Institute of Chartered Accountants in England and Wales is, according to Accountancy Magazine (not available on line) about to launch its second international regional office – in Dubai!
If the knack of getting things right is mainly about timing the ICEA certainly hasn’t got it.
Cheating is ubiquitous. Three sports – rugby, football and Formula One– are on the rack as coaches, players and drivers are discovered flagrantly flouting the rules. The world’s top banks have hidden trillions of dollars of near-valueless securities in offshore tax-havens, deceiving taxpayers, regulators and investors. The consensus is that next year’s rise in the top tax rate to 50% will raise hardly any extra revenue, for high earners will successfully cheat on their obligations.
Cheating is so common we don’t even notice.
Want an example? Take this:
HM Revenue & Customs, concerned that sports clubs and players might be using image rights as a means of tax evasion, are investigating all 12 Guinness Premiership rugby clubs. County cricket and rugby league are also under scrutiny and top football clubs could be the next target.
"It is clear that the Revenue sees this area as a potential tax loophole," said one rugby club official, who asked not to be named. "Some clubs face a potentially large bill if the Revenue finds instances of image rights being paid in lieu of salary, thus avoiding PAYE and National Insurance, but there is a feeling that it is using rugby and cricket to establish ground rules before moving on to the biggest football clubs where the potentially big money lies."
"I think there are instances where a player does not have any value to his image rights but still receives a payment," said Chris Caisley, a partner of the law firm Walker Morris and a former chairman of Bradford Bulls. "There are other examples where the image rights of a player are worth more to a club than his contribution on the field. I’d expect the Revenue to target those players whose image rights are not worth anything."
This whole thing is, let’s be candid, a fabrication. It’s normal to assign the benefits arising from your employment, including copyright and patents to your employer. So in this case, the split is artificial anyway.
And it’s more than that. It creates cheats. Clubs who cheat. Players who cheat. Accountants who cheat. And more. All complicit in what is fraud: not criminal fraud necessarily, but a deception to secure financial advantage nonetheless and fraud as a result.
The clubs say:
"What we need in this is clarification," said the Premier Rugby chief executive, Mark McCafferty. "It is about establishing ground rules, such the percentage of salary that can be paid into an image rights company."
The Professional Rugby Players’ Association are not perturbed by the investigation. "The only issue we would have is if we felt unfair penalties were being imposed," said the chief executive, Damian Hopley. "Rugby union is enjoying a high profile and young players emerging are finding themselves fêted in a way their predecessors were not. All we want from HMRC is clarity."
Let’s translate that: they’re saying “What can we get away with?”
Society cannot be built on this type of fraud. It creates cheats. It creates mistrust. It undermines trust.
And let’s be unambiguous about this: much of this is down to accountants still arguing tax avoidance is acceptable. It is not. It is outright abuse. It is getting round the law.
I look forward to the day I hear the Institute of Chartered Accountants in England and Wales, ACCA, and the Chartered Institute of Taxation say unambiguously “tax avoidance is unacceptable and an abuse of society”.
When will it happen? I don’t know. But I’m willing to work for it. Nothing else will do. And it damns the profession that none have done so.
Did Bermuda change in 8 years when no pressure was brought to bear on them?
No.
Will accountants change because I’m nice to them?
No.
Not one iota.
I guarantee.
That’s why I’ll be unsubtle.
I’m not looking for friends. I’ve got lots of them.
I’m looking for change. I haven’t got enough of that.
I did a blog post earlier this week suggesting that the Institute of Chartered Accountants in England and Wales’ budget submission suggested the ICAEW is saying:
I added:
It’s thuggish, blatantly partisan, anti-democratic and clearly anti-social in that it is intended to oppress the majority in society.
Staggering, but true. So much for ‘professional ethics’.
Mark Lee has objected, saying:
Richard it’s not ‘true’. It’s simply your preferred interpretation on a less than objective basis.
The ICAEW Budget rep seems to me to be clearly focused on the SME market place. It’s written with a specific target audience in mind. Ok so the ICAEW budget rep doesn’t seem to focus on the issues you would like to see addressed. That’s one thing. But to claim that it is TRUE that such an omission (in your view) evidences the message summarised in your seven points above is without foundation (in my view). The only thing that is true is that is how YOU have (mis)interpreted it.
We had a spat on your blog earlier this week. I’ll not get involved in another so having said my piece I’ll retire gracefully as I appreciate you won’t give me the last word twice in a week.
Now, first things first – Mark is a guy I like and respect – even if we differ – in fact precisely because we can differ and he’s big enough to say so openly and honestly. If only others in the profession had such courage. Sadly, they don’t.
But on this occasion I’m going to differ, strongly. I contend what I said is true. It is not based solely on this one submission. It is based on thirty years of reading such submissions.
I strongly contend that this is inappropriate conduct for the ICAEW. That body was set up for public benefit. This has been confirmed in repeated charters. Nothing empowers the ICAEW to undertake partisan activity.
But I contend very strongly that this is what the ICAEW actually does. In this case Mark defends its action by saying it is representing the SME market. I beg to differ. If it were to do so it would:
I could go on, and on.
But this is not what they have done. They have claimed they are serving the SME agenda when that agenda is not one related to wealth, and is one that would be well served by real reform, to demand instead stability for the wealthiest in society so they can maintain their position which, quite candidly, is designed to ensure SMEs remain small.
It is ever so in what the ICAEW and other institutes say and the reason is simply explained. They were set up in the public interest. They do not act in the public interest. They act in the interest of the largest firms. Those firms can say the things I note above, with complete freedom. That is their right. As it is mine to oppose them.
The ICAEW has no right to take such a line. It has the duty to promote the public interest – not the factional interest of some of its members. If it does not promote the public interest then it has no right to its status, or to be a regulator. And my point is that it does not act in the public interest – it opposes it, often, and continually.
What it chooses not to say is just as important as what it says. I am allowed to look at what it chooses to never say – including the fact that it never seems to put the public interest first.
I stand by my criticism. This is a public body captured for factional benefit – and its status deserves to be criticised in consequence. It is massively overdue for reform. I don’t anticipate it yet – but I have no hesitation in calling for it – and in pointing out that right now it is operated as a preserve of those who wish to protect the interests of the top 1% in our society.
And their interest unsurprisingly usually conflicts with that of the public at large.
Whilst looking at the ICAEW budget submission I noted its G20 submission.
Guess what? Not a mention of tax havens. Or offshore. Not one.
But there was this:
If regulation of systemic risks is to be effective, it must relate to the whole system. With global capital markets, the tools for managing systemic risk also need to be global in nature. This does not necessitate the creation of a new international regulator, but does require better methods of monitoring and coordinating the regulation of systemic risk across borders.
My emphasis.
In other words, let’s ignore the problems and carry on as we were. It’s a recipe for disaster.
And further indication of the abuse that the professions wish to perpetuate.
Accounting, Ethics, G20, ICAEW, Secrecy jurisdictions, Tax Havens
The economy is in extraordinary mess. We have a budget deficit. We need an increased fiscal stimulus. Massive problems relating to tax avoidance and evasion, particularly offshore, exist. Gross injustice within the tax system, ranging from the continuation of the domicile rule to the absurd fact that the poorest 10% in the UK have the highest overall percentage tax rate, blight our tax system. And as the Daily Telegraph reports:
The Institute of Chartered Accountants of England and Wales has used its Budget submission to the Treasury today to call on the Chancellor to think carefully before launching any new initiatives.
Or to put it another way, as Francesca Lagerberg, head of tax at accountants Grant Thornton (keen funders and supporters of the Conservative party) and regular ICAEW tax spokesperson says:
Please don’t do anything that increases our tax burden at the moment. We are in the middle of a painful recession and we want steady as we go. Don’t add to our bills or give us another administrative headache.
Michael Izza, the institute’s chief executive, said:
Whatever Alistair Darling announces in the Budget, it could be a huge distraction for business when they need to concentrate on getting through this tough time. Too many times in the past we have seen changes brought in with disregard for the impact they have on UK companies and their competitiveness globally.
Fair cop. Agreed. Small business does not need extra tax right now.
Banks do though.
So do unreasonable bonuses need to be taxed.
And is there any mention in here about the abuses I note or the wider economic implications? No, not one.
Amazingly the actual submission only refers to avoidance in the context of tax consultations. The word evasion does not appear, and there is not a single reference to tax havens.
There is however considerable concern that over very small bands of income the top marginal rate of income tax in the UK will in 2011 be 60% about which they say this:
raises the concern as to whether the projected increased revenue will materialise
Or in other words they raise the implicit threat that they will seek to subvert the will of Parliament through tax avoidance.
What is the message? This is what the ICAEW is saying:
This is what the Institute of Chartered Accountants in England and Wales is saying.
It’s thuggish, blatantly partisan, anti-democratic and clearly anti-social in that it is intended to oppress the majority in society.
Staggering, but true. So much for ‘professional ethics’.
