Cheating, so common we don’t even notice

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Will Hutton in the Observer:

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 f?â„¢ted 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.