For those not familiar with it, there is what is known as the UK tax Twitterati, of which I think it fair to say I am a member. So are others from across the tax campaigning sector and the professions. Overall, much of it is undertaken with mutual respect and good humour. And occasionally some interesting matters are discussed.
One issue that came up a few days (and I am not sure who was responsible, but it might have been Heather Self) was a suggestion that tax campaigners are, in the main, guilty of criticising the current tax profession for tax avoidance that was actually promoted a decade ago. This is on the basis that the bad publicity that now arises is often related to tax cases that have taken that long to reach resolution.
There is an element of truth in this. It can take years for such matters to be resolved.
And, if I am honest, I do think that in about 2012 there was some sort of Damascene moment amongst some in the profession when they realised that the PR disaster they were engaged in had to result in a change in tack. And to a limited degree that change did occur.
But let me also be candid, I need a bit more than some PR noise to convince me of change, but that's all I get. After all, many of the firms that dominate the tax profession are also those that dominate the audit profession, and as we know, despite the change in noise there the reality is that things are, if anything, worse now than they were in 2008. What is more, there is little sign that any real voluntary change is at all likely. And I see little to differentiate that case from that of the tax profession.
As a result I am not looking for nice words, which is what the profession has offered. Nor will reformed misconduct arrangements that have to date never been used satisfy me. These are cheap. I want real action. That does not, of course, mean tax returns on line. But it does, I think, mean commitment from the major tax players, and active demand from them for a series of entirely appropriate reforms in tax.
The first is active support from the firms and professional bodies for full publiuc country-by-country reporting, inclduing intra-group transactions. Nothing less will do if these firms and their tax department are to be subject to necessary scrutiny for the consequence of their actions.
Then I want support for full disclosure of beneficial ownership of companies (defined as being disclosure of all holdings over 10%), and that has to be worldwide.
And I am looking for support for all limited liability accounts being on public record in full, without exception, worldwide. After all, that's a pre-condition for fair markets to operate. Why wouldn't the tax profession want that?
And then I am expecting their support for corporate tax reform to a unitary basis to remove the abuses that artificial structuring still permits.
Moving on from that, we need support for principled based legislation and proper general anti-avoidance principles in widespread use.
And let's not ignore that the tax base we have now is wrong: support for reform so that we get effective wealth taxation is essential, matched to appropriate redistribution, of course.
Finally, I want some recognition that tax is not about raising money: it is about managing fiscal policy and that this is a wholly appropriate government objective. This is largely absent in the tax profession right now, which often demands no tax changes over long time periods as if they have no comprehension at all of the economic function of tax.
If those happen I will believe we are seeing reform.
Right now, in the absence of such substantial change, I am not convinced.
And the case is for the profession to make: the problem is theirs, after all. Their PR disaster is continuing. It's time they addressed it.
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Some typos for you.
much if -> of
occassionally -> occasionally
pre-c0ndition -> pre-condition
ovcer -> over
Thank you
Changed
Richard,
I at last caught up with the discussion about ‘intangibles’. Presumably the authoritative statement is IAS 38 (see IRFS website)?
“An intangible asset is an identifiable non-monetary asset without physical substance. Such an asset is identifiable when it is separable, or when it arises from contractual or other legal rights. Separable assets can be sold, transferred, licensed, etc. Examples of intangible assets include computer software, licences, trademarks, patents, films, copyrights and import quotas. Goodwill acquired in a business combination is accounted for in accordance with IFRS 3 and is outside the scope of IAS 38. Internally generated goodwill is within the scope of IAS 38 but is not recognised as an asset because it is not an identifiable resource.”
An “identifiable non-monetary asset without physical substance”. I will pass over whether this proposition has sufficient philosophical rigour for the weight it is supposed to carry (a strain I suspect will increase over time). Interestingly, there does not seem to be an IFRS definition of a tangible asset; save by negative derivation? Or how money is by implication at least, being defined (does this assume the gold standard, or is money simply identifiable and non-physical)? I stand to be corrected.
Intangibles appear to include such as: goodwill, brands, patents, copyrights, trademarks and of course intellectual property (in the modern corporate world that will be almost everything). This however raises another complication of IAS 38 which your critics in the thread did not explore:
“Intangible assets are measured initially at cost. After initial recognition, an entity usually measures an intangible asset at cost less accumulated amortisation. It may choose to measure the asset at fair value in rare cases when fair value can be determined by reference to an active market.
An intangible asset with a finite useful life is amortised and is subject to impairment testing. An intangible asset with an indefinite useful life is not amortised, but is tested annually for impairment. When an intangible asset is disposed of, the gain or loss on disposal is included in profit or loss”
“Usually”’ “may choose”, “measure”, “fair value. ”“indefinite”, “useful”, “impairment”; as a test I would describe this as generous: with the robust consistency, I suspect, of soft, wilting blancmange.
This is not the end of the difficulty. There is a nice distinction between an “(external or non-internal?) intangible asset” and an ‘internal intangible asset’. IFRS describes (only) the latter as follows:
“The cost of generating an intangible asset internally is often difficult to distinguish from the cost of maintaining or enhancing the entity’s operations or goodwill. For this reason, internally generated brands, mastheads, publishing titles, customer lists and similar items are not recognised as intangible assets. The costs of generating other internally generated intangible assets are classified into whether they arise in a research phase or a development phase. Research expenditure is recognised as an expense. Development expenditure that meets specified criteria is recognised as the cost of an intangible asset.”
We may fairly draw the conclusion that while all intangibles are not “intangibles”, all are intangible.
Agreed, and thanks
Personally I don’t think these people you refer to give a damn Richard.
That is why they need to be MADE to give a damn with the use of Law and regulation. They will have to find out the hard way.
Once again Richard you are bang on the money. But the reforms you call for are a big ask. Essentially they attack the notion of secrecy. It is not for nothing that you often refer to secrecy jurisdictions. Secrecy is the abusers charter. That is why we have the PR industry. PR is what helps protect the status quo from the angry mob wielding their pitch forks and sharpening their guillotine.
Oh that there were an angry Mob! The problem with our democracies must have something to do with bromide in the water. It seems that as long as people can afford Sky TV to watch Premier League football they’ll accept any old crap.
Rod they are angry. That is why they voted Brexit.