Mark Lee is a man I respect. He has published a piece on UK Uncut saying that for eight reason it has got its arguments on tax wrong.
Given I am not responsible for UK Uncut's arguments on tax This is something on which I can stand back and offer dispassionate comment. So let's look at what Mark argues:
1 - Who is to blame for the UK's complex tax system?
Labour, Mark says.He argues the Coalition Government have promised a new approach and the evidence todate is that they will do as they have promised.
2 - Who let the Big Companies reduce their tax bills?
The unpaid taxes that UKuncut complain about relate to the 13 years that Labour were in power. You can't blame the Coalition Government for tax avoided before they were elected.
3 - The Coaltion Government are taking action to reduce aggressive corporate tax avoidance
The Coalition Government has announced numerous anti-avoidance tax rules to further reduce the opportunities for aggressive tax avoidance. They aren't ignoring the issue.
4 - Who is the bad guy here?
Either UKuncut is protesting about the Coaltion Government's cuts or about tax avoidance being allowed to continue. Either way the complaint is against the Government rather than against the workers and customers of the stores being attacked by the protests.
5 - There is a degree of naivity at stake here - especially by protesters who don't pay tax
Only a minority of the protesting students have ever paid tax on their earnings. Most employees who pay tax through the PAYE system are understandably frustrated at how much of their pay goes in tax. They want to pay less. If they could, they would. The tax rules for employees make this more difficult than for the self employed and for business owners. But it's still a natural reaction. Those who've not paid tax to date seem not to have conisdered what their reaction will be to the payment of tax.
6 - And there are clear double standards too
Almost every self employed person and small business operator in the UK expects their accountant or tax adviser to help them pay less tax than they otherwise would do so. I wrote a piece recently: Doesn't everyone try to avoid or evade taxes? Common requests are "What can I do to pay less tax?" "What can you do to reduce my tax bill?"and so on. As long as such tax avoidance is within the rules they break no laws. Why should big businesses be held to a different standard?
7 - What about tax avoidance by footballers and football clubs?
Not only do top players receive outrageously high salaries but their contracts invariably entitle them to payments for 'image rights'. Substantial amounts of tax are avoided (legally - most of the time) but no one seems to care, except HMRC who regularly petition Governments (old and new) to change the rules to limit the capacity for such tax avoidance. However it seems no one wants to protest outside football clubs though to make these "wealthy tax avoiders pay!".
8 - No one pays tax unless it is due
If an individual or a company arranges their affairs so that less tax is payable than would otherwise be the case, that is all they will pay. Paying more than this isn't an option. If there was a way in which you could change things and be liable to pay extra tax in future years, it's likely to take some time to make the necessary changes to your business structure etc. Simply stated, no one should be expected to make excessive payments to the taxman. And even if they did, HMRC's computers would simply show such sums as overpayments and then refund them at a later date!
I hate to say it but Mark really has missed some very important points here.
First, let's be quite clear that no one is I hope saying tax compliance is wrong. Mark seems to have argued for the difference between tax avoidance and tax compliance on a number of occasions - a difference I explain here. Of course people are allowed to organise their affairs how they will within the constraints of tax compliance - but that still means the economic substance is consistent with the form in which transactions are reported for tax - and that does, for example, by definition exclude offshore structures where almost without exception this cannot be true. In that case, with the very greatest of respect to Mark he is choosing to utterly miss the point in what he argues, or the fact that there is a valid and invalid spectrum of choice within the tax system, and instead resorts to the standard "it's legal so it's OK argument" of so many in the tax profession. I expected better of him and his Network.
Second, Mark shows undoubted political bias in many of his opening comments. First, of course Labour created a great deal of legislation - but vast amounts of it were to tackle the concerted attack on the tax system from the tax profession. Much of the 2004 Finance Act was designed to create the Disclosure of Tax Avoidance Schemes arrangements that have been very successful in tackling a great deal of abuse. Over many years a great deal was done to tackle trust abuse, as well. I could go on, and on. The point is that Mark was one of those from the ICAEW arguing regularly for tax simplification but never for a general anti-avoidance provision. The real motive of the ICAEW approach was little different at the end of the day from the flat tax brigade - it was a way of arguing for rolling back the tax frontiers that were bound to reduce the burden of tax on business and to increase it on the employed. I'm sorry Mark - but your argument is disingenuous. The reality is that tax legislation expanded to tackle abuse, and not to create loopholes. And the abuse came from the tax profession.
Third, to argue that the Coalition is showing signs of tackling this issue is at the very best wishful thinking. The have said they will look at a general anti-avoidance principle and maybe at the domicile rule - both issues I persuaded the Lib Dems to look at and which they have now in turn brought into the Coalition. But lets also be clear - looking at these things is far from the same as actually introducing change - and I think Osborne's commitment to these things shallow to say the least. I think his plans to reduce tax on the overseas earnings of UK companies, to weaken the controlled foreign company rules to the point where they are meaningless and his new patent tax rules are clear indication instead of his great desire to make massive new opportunities for tax abuse. To put it another way - whilst Labour does not have enough to write home about - and also was responsible for some absurd tax decisions to appease the corporate lobby and its friends in the profession - and I was critical of it in office - the argument that the Coalition is somehow superior is unsustainable on the basis of current performance. Its clear lack of commitment to country by country reporting - unlike Labour - is another clear indication of its lack of interest in tackling tax abuse.
Mark is right on one point, of course, that most students don't pay tax. But who says the UK Uncut protestors are all students?
And let's also be clear. UK Uncut did not as far as I can see "attack" anyone. I have no truck with violence and these were non-violent protests. I sincerely hope they are never anything else. People exercised their right to demonstrate. To call that an attack is irresponsible - the exercise of a democratic right is not an attack - it is something that generations fought for the right to be able to do. The use of the word "attack" is in this case an attack on democracy and hyperbole. It is not in any way objective commentary. Sorry Mark - please be objective when making your case is my point.
Finally - so what about football clubs? Is Mark actually saying they should be the subject of the next protests? Is that the point? I don't get it.
What I do get is that this is not a series of arguments. This is a series of unsupported statements that do not amount to an argument. They do amount to a political statement that is without logical foundation, but no more.
And whilst it is undoubtedly true that some of the arguments of UK Uncut have been over simplified by some - for example it is not true that tackling tax avoidance and evasion can prevent all cuts - this again misses the pint entirely. UK Uncut has played to an audience in the media and like it or not (as I have said to the media quite a lot of late when they have asked why corporate entities are being picked on) the fact is the media demands stories of this sort before they'll give an issue attention. I wish they would not because the reality is that the problem we are facing is a systemic one, but that's a much harder story to sell to the press. And whilst change is affected by attention gathered through the media no one can blame UK Uncut for working its media audience with some ability and with examples which most members of the public resonate with.
So let's move on a little. Mark's arguments are weak, or just wrong. I have no love of our current government, and think that to say it is somehow going to be tougher on business than Labour when big business are the only people facing the prospect of tax cuts is obviously wrong. But Labour too was ensnared by the corporate lobby and that's the real issue here. There is nothing wrong with business. I stress that point and will continue to do so. But business does not have a right to avoid tax through offshore - not available to the vast majority. Big business should not be the agent for widening the wealth and income gaps in the UK. Big business should not seek to get round the law when we grant it its licence to operate.
In other words we can expect big business to show respect for the communities that host its activities.
We can expect it to be tax compliant - which still lets it tax plan - but which ensures it seeks to pay the right amount of tax in the right place in the right time (which is not always straightforward, but where actions speak loudly of intent). And we can expect it to be accountable for what it does and does not pay in tax, and where.
This is about the accountability not of some neutral, insignificant entities each of no consequence to the UK (the type of entity beloved of the economic theorists who promote the mantra that tax is bad), but of the accountability of major corporations with significant power which they can use for good or harm, not to be too blunt about it.
And some are saying - and I think rightly so - that some corporations are not exercising best judgement and if that is the case then reform is essential to protect the poorest and ost vulnerable in society who will otherwise bear the price these corporations should be settling. A society is judged on how it treats the weak within it, not the strong. Few are stronger in our society than big corporations. To ask them to use that strength benignly is a reasonable request in a democracy. That is what I think UK Uncut are doing - although I do not want to put words into their mouths. And if they do so peacefully that's fine. Because this is about systemic failings, not party political ones, and about ethics, not petty point scoring.
I don't think Mark rose to that debate.
But if he wants to come back here and post a full reply he'll be welcome to do so.
In the meantime I think UK Uncut are showing the greater perception of the issues, and that's why as some corporations told the Observer pre-Chrsitmas, they have no idea how to respond to this issue.
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Why don’t students pay tax? Of course they do. Or don’t they ever pay for electricity?
The issue about ‘students don’t pay tax…’ is an insidious attempt to tell the poorest of our society (ie those who don’t earn enough to pay income tax) that they are to be excluded from debate about how this society is run. It’s an ugly attempt at to tell the poor to sit down, shut up, and be grateful for the air your breathe, because in any other sense you don’t count, you don’t matter and you have no say in this society.
It’s disgusting. The poor have votes, they have a voice and they are netitled to have their say. We do not live in the 1700s and I hope we never return to such an undemocratic nightmare ever again.
I have just heard some nasty gossip that George Osborne has avoided paying 1.6m in tax. Clearly, if there were any truth to the story, it would make a mockery of the line “We’re all in this together.”
It does make me wonder if that Labour were so committed to stopping the abuse on the tax system by tax advisors why didn’t they introduce a GAAR.
You seem to believe that it is the panacea for tax avoidance, over 13 years the Labour Government did not (even the 1998 review on GAAR rejected it).
There will always be conflicting and emotional support and resistance for the view that a GAAR will solve the tax avoidance problem – the past government and The Tax Law Review Committee rejected it.
I must take issue with your assertion that Osborne is planning to weaken the CFC regime – you know jolly well that the revamp of CFC was started almost 2 years ago by the Treasury and HMRC.
I respect you too Richard.
I also admire your commitments to tax justice, to blogging and to explaining your position which you do with such clarity. On occasions though you seem to infer a belief or a view that is contrary to that held by the author of commentaries on which you pronounce judgment. Sadly that has happened again here.
Taking your points in turn:
Firstly:
I don’t recall ever arguing “for the difference between tax avoidance and tax compliance”. On the contrary I have endorsed your distinction on at least two occasions on the TaxBuzz blog. My comment that ‘no one pays tax unless it is due’ was a reference to the arguments proposed by UKuncut that tax which has been avoided in the past should now be paid over to the taxman. I simply explained the fallaciousness of that suggestion.
Secondly:
The key point I made here is a simple fact that UKuncut are campaigning against Big companies for tax they avoided paying while Labour were in power. And at the same time the inference they seek to give is that the complaint is with the Coalition for allowing this tax avoidance in the past.
I’ve never been a political animal and doubt I have voted for the same party in consecutive elections. Having been at the coalface as a tax adviser throughout most of Gordon Brown’s time as Chancellor I am aware of the damage he caused. It was one of the key factors that drove me to give up giving tax advice in 2006. Whilst some of his tax changes were intended to counter tax avoidance even these were rushed through without effective consultation.
You’re right; at the time the DOTAS rules were introduced in 2004, I was Chairman of the ICAEW Tax Faculty and very much at the heart of discussions about the effectiveness of the proposed legislation. I well recall a meeting at which we explained to the Revenue officials that the draftsman had left a lacuna in the legislation and this needed to be closed – or else the rules would be ineffective. As so often happened the drafting had been done under too much time pressure due, we were told, to GB’s unwillingness to consult effectively. The best that could be achieved was to revise the wording of supporting regulations. It didn’t have the desired effect.
Re GAAR – I may not be a campaigner like you Richard but I have written about the subject objectively on a number of occasions. I am open to arguments both for and against and note that there is no consensus either outside or within HMRC and the Treasury. I’m pleased this Government is examining the arguments for and against.
You know as well as anyone Richard that I have been blogging about the risks and downsides of adopting artificial tax avoidance schemes for almost 3 years now. A minority of tax advisers remain actively involved in that world arguing that ‘anything is fair game if it’s legal’. It’s not a view I share and I’ve explained why on the TaxBuzz blog many times.
Thirdly:
The signs are there Richard whether you want to believe them or not. And the consequential legislation will be more effective as a result of the Coalition’s ‘new approach to tax policy making’.
As regards the impact of the Coalition’s early performance and likely future policies we will have to wait and see.
My point though is that if UKuncut have a problem with the Coalition’s cuts and policies this is quite different to complaining about the tax that big companies avoided whilst Labour was in power.
Football clubs
Large businesses are an easy bogeyman that the public can be encouraged to ‘attack’ (using the word in its widest sense). Yes, I do think that many clubs would be legitimate targets for similar campaigns. And the tax issues at stake are far less complex than are those that result in large corporates paying less UK corporation tax than might otherwise have been the case. There are also a large number of ‘wealthy tax avoiders’ involved in football. By focusing only on the business world, the UKuncut campaign reveals its political roots.
Finally
I see nothing wrong with raising awareness AND staying on the fence. Some issues are so complex that there is no easy solution. I prefer to leave it for those better informed than me re potential solutions to lead the way. But when those less informed seek to do the same thing I speak out.
I am not sure UKuncut’s tactics of obtaining publicity for their cause by obstructing the operations of businesses is going to be fruitful in the longer terms. The public in general do not like demonstrators and it is easy to associate UKuncut with other, possibly violent, groups, even if it is not true.
The causes of the problems with tax really lie with Parliament, which is by and large corrupt and frequently does the bidding of big business. Those who say the tax code must be simplified have a point but simplification is not enough – taxation must be made fair and consistent, and must be perceived as such as well. If it was perceived as fair then fewer people should seek to engage in, or be able to justify, tax evasion/avoidance. Simplification, including harmonisation of tax rates and allowances over all sources of income, will help remove incentivess to avoid/evade. Fairness requires that the incidence of taxation falls equally on everyone whatever their class or position in society.
Unfortunately, I doubt that our political class has the moral, or perhaps even the intellectual, strength to produce a new tax code which is perceived to be fair by all and which is simple. It is a daunting task.
Given this, I suggest that the onus is on others to formulate and advocate proposals that meet the twin objectives of fairness and simplicity. As the saying goes, “It is better to light a candle than to curse the darkness”. By proposing, a candle is being lit. Opposing the existing inequities is cursing the darkness.
@Mark Lee
Mark
It’s very hard to argue with that – which illuminates your original comments and contextualises them in a way that the original blog failed to do
The reality is we have to accept the ambiguities in much of this
I do – although those of absolutist mind deny it (but since neoliberalism assumes all people of fixed mind forever, which makes it pretty hard for them to recognise ambiguity when it hits them)
Re Football – Christian Aid looked at this as part of Christian Aid week this year…..and no one noticed at the time
@Helen
How many people hold the same views that they held when they were students? Students want everything paid for them but at soon as they start work they realise how much tax they pay. I know, I was one of them – and a lot of my contemporaries now have the same view.
[…] flawed on facts and context. On January 2nd, Richard Murphy posted a robust response entitled: Has UK Uncut got the arguments wrong. I’m mostly with Richard on this but regardless of what you think, I urge readers to peruse […]
[…] my exchange with Mark Lee on UK Uncut I notice that Dennis Howlett, another accountant I respect, has aso joined the […]
Why has my comment been censored? 👿
I went to see a “Topshop protest”.
I pay tax but as a Chartered Accountant I obviously save my clients paying too much tax. Everything I do is legal as is the case with the big name tax advisors. The difference is that I draw a line and advise my clients not to step beyond it for numerous reasons.
But I am sick and tired of seeing wealthy individuals and companies avoiding huge amounts of tax through artificial schemes which are ONLY available to them (because of their wealth).
Sitting on the fence has NEVER been an option for me.
Scrapping the tax avoidance “industry” would not affect any of my clients other than they may pay less tax because others are paying the right amount.
Keep up the good work Richard and UKuncut and if I (a 57 year old, politically right of centre, Chartered Accountant) am banned from a shopping centre for taking a photo of a Topshop then the protests must be worrying someone.
@gadgetman
I suspect because it did not add to debate or was offensive
Either way, my decision is final
That’s the joy of editorial freedom for you
Not censorship at all
Just a human right
@John R
Firstly, many students are already working and paying tax, to survive whilst they study nevermind pay for their actual course. Therefore it might be possible that they already aware of the taxation system? Moving on from that, it’s perfectly possible that some/many may believe, and will continue to believe, that ‘pulling up the drawbridge’ is a somewhat iffy, at best simply selfish, stance? I got a fully free uni education, and many of my contemporaries decry the move away from that system; whilst accepting that the present system is not sustainable, nonetheless there is no wish to impose vast debt on anyone’s children, even yours, before they’ve got going in life.
Secondly, more importantly, you have missed the point. Helen asks why should anyone (that’s ‘anyone’, not specific to their present employment or career status) (with or without a vote) who pays tax in a variety of indirect guises, be disenfranchised (be denied a say in the politics of the day) because they do not yet pay one specific tax (namely income tax)? Not sure why your anti-student soundbite was posted as a response to Helen.
You are right about views/opinions changing, compared to those held as a student, but in my case and in many instances with my contemporaries, not in the direction that you imply? Let’s call it an unspecified ‘score draw’ – I’ll be kind to you.
[…] Jones is another one who does so. As he has said on this blog today: I went to see a “Topshop […]
@Mark Billing
You are so right
The idea that people move Right during life is an urban myth but one the Right love
I always presume that’s because many of them were once the sort of Lefties those with more sense would never be
@Richard Murphy
Of course it isn’t an urban myth. I can prove it.
The highest proportion of left-of-centre voters is the age 18-25 bracket.
The highest proportion of right-of-centre voters if the over 55s.
Of course some people move Left – but mainly once they’ve made their fortune and sold up (like Richard). But many more people shift Right.
[…] my exchange with Mark Lee on UK Uncut I notice that Dennis Howlett, another accountant I respect, has aso joined the […]
[…] Jones is another one who does so. As he has said on this blog today: I went to see a “Topshop […]
@John Rawson
I made up my mind as an undergraduate
If I moved left it was then – and the reason was opposition to the Thatcherite right and the understanding I had acquired of the absurd nature of right wing standard economic theory
And how left? Oh, well within the main strand of UK politics, unlike most from the right who comment on blogs
Sorry to say your claims are (as is so often the case with such things) without foundation
As a working class kid I always voted Labour until I made the terrible mistake of voting Tory in 1979. I move a little bit more to the left every year now and have decided to join friends in the Communist Party when I’m about 80 and past active campaigning.