Simon Sweetman, an adviser to the Federation of Small Business in the UK (which has recently been undertaking interesting work with the TUC) had an article in the Tax Journal in the UK this week. The conclusion said:
There is no problem with low-tax economies if they are real economies. If there is one thing we should have learned by now, it is that the smoke-and-mirrors economies built over the last 30 years are an illusion and that they lead to the situation we are in now, where billions of dollars/pounds/euros of taxpayers' money have been poured into the banks without it having any discernible effect on the availability of credit for those who need it.
There is a problem for the rest of us with secretive tax systems, because they are by their nature likely to shelter evasion just as much as avoidance: and there is always a problem with governments that discriminate in tax terms against their own citizens in their enthusiasm to attract rich foreigners (and oh, that seems to ring a bell with our very own rules on non-domicile).
In my view it is time that the OECD, the EU, or whoever, did begin to take the sort of actions against tax havens that Barack Obama (and rather more vaguely Gordon Brown) seems to be suggesting. One might recollect that de Gaulle brought Monaco fairly swiftly into line when he offered to cut off its energy supplies.
And will we drive out the greatly talented non-domiciles? That being the people who have contributed so greatly to our current tribulations? You make your own mind up as to whether that looks a serious threat any longer.
There are those offshore who like to argue that all in the professions are on their side. That’s not true. A great many are not. Many (unlike independent grey-haired’s, like Simon and me) live in a climate of fear where it is difficult to criticise just how corrupt many firms and employers are (imagine working for a British bank and seeking to criticise their tax evasion promoting activities in the Channel Islands and Isle of Man, let alone Liechtenstein — or the nightmare of having a conscience and working for the Big 4) — but these people exist.
And for those who read this — you can help change the system — and beat the abuse of your human rights that tax havens create. All volunteers are welcome — and publicity is not part of the work if you don’t want it. The likes of Simon and I can take the flak. But research assistance is always greatly appreciated.
In this context, thanks to the partner in the firm in Ireland who drew Simon’s article to my attention.
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I think we should start building a campaign within the ICAEW against Tax havens. But don’t forget the Black Economy within the UK.
I have long been convinced by (most of) your arguments – reading your blog first thing every morning has been an integral part of my day for over a year. I agree totally that fairness in taxation, national and international, is something all professional accountants should subscribe to — if only because it’s no more than enlightened self-interest to change the public view of this profession from being part of a greed driven financial elite to being drivers of fairness for the vast majority of our populations.
But first, disclosure of where I am now.
My small CA practice serves predominantly small local businesses. While it may indicate a lack of bottle on my part, my perception is that I am expected to advise my clients to take advantage of national law and make the choices presented to them in terms of how their businesses are set up and so pay the minimum amount of tax (for the avoidance of doubt, I’m talking of the obvious tax advantages of incorporation with the law as it currently stands). Bluntly, if I don’t provide this advice, there are plenty of competitors who will and that would knock the heart out of my practice and put 4 of us out of work.
Having acknowledged this “sin”, I will say in my own defence that I’m also focussed on making sure each and every client plays by the rules because I’ve no doubt whatsoever that most, if not all, want to sleep as soundly as possible.
This practice does not and will never advise on demonstrably abusive tax planning exercises, eg schemes based on artificial but apparently legal transactions and implemented solely to save tax. That’s written into our terms and conditions of business.
I believe it’s ludicrous that UK law is so badly structured that a choice as to business form can have such a significant effect on total tax payable. I also believe it ludicrous that, while the vast majority of employed people have virtually no control over their tax bill, the self-employed and those who trade via limited companies have far greater flexibility. We need a much more level playing field but, until that’s written into law, commercial reality forces people like me down a road we’re not comfortable with.
As well as the law, someone like me is also greatly compromised by the fact that the body of which I am a member seems to have little or nothing to say on the ethics of self-evident unfairness, national or international. As a result, CAs are seen not to care about fairness, only on creating maximum advantage for those prepared to pay high, so-called value-based, fees. In short, I suspect the general view of our profession is that we are part of the financial elite who believes itself to be above any sort of morality.
Fortunately, there are many more of the little guys than the big ones, even if we can’t and never will enjoy the power and influence they do. Perhaps a majority will go with the approach that building their own wealth is more important than being able to look at themselves in the mirror each morning. But I suspect there is at least a significant minority who, by virtue of their choice to work in small practice, demonstrate that money isn’t their driving or only concern.
If you consider my position and thoughts consistent with your aims and objectives, I would love the opportunity to contribute positively to your campaigns for fairness. Any pointers as to how I could contribute would be greatly appreciated.
As De gaulle once was reported to say:
“Pour faire le blocus de Monaco, il suffit de deux panneaux de sens interdit.”
i.e. to blocus Monaco all you need is a couple of “No Entry” roadsigns.