Hartnett whips up a storm at the ICAEW - Accountancy Age.
The permanent secretary for tax and commissioner of HM Revenue & Customs has never been afraid of ruffling a few feathers and Dave Hartnett did not disappoint at a recent address to some of the UK’s most eminent tax advisers.
Hartnett set out plans for a higher level of trust between the taxman, corporates and advisers at the ICAEW’s annual Hardman lecture but hit out at those still looking to cheat the UK’s tax system.
Although his speech was entitled Tax, Transparency and Trust, he still took a swipe at those salting away income in offshore tax centres.
“Few people put their money in Caribbean tax havens because they are looking for excellence in fund management,” he said.
I'm delighted at how often HMRC and the Tax Justice Network now seem to be in accord.
We have more than stating commonly agreed facts in common though. the Age note:
The mood in the audience was decidedly frosty
I have to say I am sometimes received that way - and some just won't receive me.
Hartnett is asking people to be tax compliant. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes. I think that exactly that a government should demand and exactly what a tax adviser should suggest their client do. anything else is reckless.
My experience is that business is reluctant to engage on this issue. Why is that? What is it about what they do they do not wish to talk about?
And why is it that so many tax academics - secure as they are very far from the market in their civil service employments, encountering not a moment of risk in their tenured existence, promote the idea that tax compliance is the very antithesis of good practice and that the use of tax havens is a necessary business activity?
Where did this dishonesty come from?
And when will they accept that reform is going to happen? Their only choice is to be frosty, and to therefore be excluded from the process, or to engage with it?
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Good to see the civil service retaining its strong sense of impartiality 🙄
I’m afraid that Mr. Hartnett cannot have things both ways.
He has been quoted as saying that UK companies that have submitted refund applications for corporation tax as a result of UK tax law being incompatible with EU law or for refunds of VAT as a result of the decisions in Conde Naste/Fleming are “not acting in the national interest”. All the companies are doing is to exercise their rights to pay the right amount of tax (but no more). This is the flip side of compliance. The only reasons for the refunds is that successive governments got the law wrong. To be told that they are “not acting in the national interest” when they are exercising these lawful rights to claim refunds is hypocritical in the extreme and does HMRC no favours when they bang on about compliance.
Industry wold look on Mr. Hartnett and HMRC more favourably if they were more balanced when they have got things wrong.
Richard
I’d agree with you if – and it’s a big if – companies worked with and not against HMRC all the time
But they do work against the national interest, they do undermine democracy, they do undermine the power to deliver an electoral mandate
So whilst you have a good technical argument the reality is you should not expect sympathy – and with good reason
Richard
“Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes”
Where would you say the economic substance takes place in a collective investment fund that is established in Jersey, has a Jersey board of directors, Jersey Administrator and Jersey Custodian, UK based investment advisor and global investors investing in property funds that are themselves mainly established offshore?
This is actually one of the things that drives business offshore. It is not “tax avoidance”: nobody objects if commercial property held in Paris is sold at a profit and the French government levies a property or capital gains tax. And the investors have no problem paying tax on their gains according to their home jurisdiction. But it is the intermediate vehicles that do not want to be subject to additional tax. Because if they are taxed then one of the things that initially led to the investment – the principle of risk spreading – immediately looks less attractive. After all, why buy a 1/10th share in 10 properties through a fund if you will be double taxed rather than simply buy a single property direct?
I think part of the problem is that you do not regard those sort of investments as investment at all, merely speculation. And you may be right. But the flipside of your position is surely that these transactions have no “economic substance”. They are little more than a form of online gambling.
And Dave Harnett might note that fund management is one of the activities most frequently outsourced from offshore, because while offshore can manage admin and custodian, a smaller (though growing) percentage of investment managers are offshore. Mind you, in my experience the real con artists are the onshore investment managers that clog the weekend papers with their adverts aimed solely at fleecing the moderately wealthy but wholly unsophisticated. That’s another story though.
[…] commentator on this blog has said, initially quoting me, and overall in response to comment by Dave Hartnett: “Tax compliance is […]
I was at the Hartnett meeting. The atmosphere was not frosty.
The types of firms conducting the schemes Dave Hartnett did not like were hardly represented at the meeting, namely the big four and legal and qusai legal firms.
Stephen Griffiths