Earlier this year Mike Truman, the editor of Taxation magazine, wrote a bad-tempered and ill-judged article in which he claimed Margaret Hodge MP was the 'tax prat of the year'. Mike proved himself the rightful recipient of the aware he had created in the process of doing so.
But he did something more significant than that. What he drew attention to was the arrogance of the tax profession in the face of rightful criticism of its conduct.
And he drew attention to the courage of Margaret Hodge. As the Observer noted yesterday, more calmly than Truman, and more appropriately:
Illumination about the true state of the UK's financial affairs has been helped by the work of the public accounts committee, chaired by Margaret Hodge, an invaluable fiscal watchdog.
And that is precisely what she has done, and the UK is rightly shocked by what she has found. Truman may not be, but in making his comments he said the following:
As was mentioned in the PAC, David Gauke [MP, Exchequer Secretary] was tax personality of the year at the 2011 Taxation Awards. (For reasons inexplicable to me, that got a laugh from the committee.) The citation on the night highlighted the policy of cooperation and engagement with the profession as one of the reasons for his success.
On precisely equal but opposite grounds, I have no hesitation in awarding Margaret Hodge the title of Tax Prat of the Year, for her attempts to destroy that cooperation and engagement.
And in those two comments we get to the nub of why the top of the tax profession hate Margaret Hodge: she is an obstacle to their takeover of tax policy at HMRC. And they really don't like that. After all, what has democracy got to do with their right to set tax policy, make cosy deals and have their tax burden reduced? Nothing at all in their view.
No wonder we need to demand a moral crusade against tax abuse.
Maybe we should describe it as a democratic one too.
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How can i help? Reading your book right now. The unfairness of it all make me angry. It feels like David v Goliath.
Shout, regularly, to all who will hear
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The economic case against tax havens must be hammered home; this should drive a wedge between SMEs and Big Business!
As a member of the tax profession, I dislike Margaret Hodge’s position (I’ve not met her, I have no idea whether I’d like her or not) because she is simply jumping on a bandwagon and shouting uninformed slogans.
Rightful criticism is fine be me. There are people in the tax world I think are ripe for some rightful criticism. But that isn’t what Hodge is doing.
I entirely disagree
I know. It’s your privilege to applaud what I consider to be empty rhetoric, if you consider it to be a worthwhile use of time and money.
But I’d be very interested to find an example of Hodge doing anything constructive about tax avoidance.
Cameron would not be tackling the issue but for her.
Enough said, I think
I think this is an interesting issue. I am a first year tax professional, sitting ICAEW exams and working in corporate tax in one of the big four. From my position, it seems that the tax profession dislike Margaret Hodge because she seems to talk from a contentious position of, perhaps, ignorance.
Take the PAC meeting today, where Mark Britten is being taken to task. Fundamentally, google have broken no laws in their tax strategy. In my opinion, this means they have no case to answer. If the govenment don’t like poeple obeying the law and benefitting from it, surely they should change the law?
Tax is not a moral issue, but a legal one. If businesses should start volunteering more tax than they are legally obliged to pay, surely this is a slippery slope? I do agree that companies should pay their fair share, but director’s have a fiduciary duty to maximise profits, and streamlining tax strategy is a key way to do this. I believe it should be legislation that ensures companies pay what the public feel they should, not companies volunteering.
Too many times has it been reported in the media numbers that are just wrong. BBC news this morning quoted that Google paid £2.4m tax from £2.5 billion in sales, thus paying an effective tax rate of less than 0.01%. Apparently unaware that corporation tax is paid on profits, not sales. And also that Corporation tax is just one of the taxes paid by companies.
It feels like a misguided crusade against companies, and Margaret Hodge is the focal point, as chair of the PAC.
I don’t believe it is a case of affecting government tax policy, but companies and tax professionals obeying the law and being punished for it.
There seem to be too many people weighing in on this issue with little knowledge. Tax law in this country is the most extensive in the world, at a little over 8,000 pages, and, as someone trying to learn it all, I can assure you that it is not all based on common sense!
In Margaret Hodges case, and maybe my own, a little tax knowledge can be a dangerous thing…
Anyone who can say tax is not a moral issue has clearly failed any ethical test at the first hurdle….
Sorry – all else can be ignored from then on
“anyone who says tax is not a moral issue”
Please try and appreciate what I mean when I say that. The difference, in legal terms, of mallum prohibitum and mallum in se.
Mallum in se, is an act that is wrong or evil in itself. Taxation doesn’t fall under this category.
Mallum prohibitum, an act which is wrong only because it is prohibited, which is clearly where taxation resides.
I appreciate the argument that paying attention to the moral issue of societal contribution is an important one, but the fundamental points of my argument were:
The amount of tax a company should pay is up to the legislation. Tax avoidance, a perfectly legal thing, is not illegal, and not ‘mallum in se’. If it were illegal, it would be ‘mallum prohibitum’, something completely different. Having companies try and estimate what would be an ‘appropriate’ amount of tax to pay is unsustainable and impossible to regulate.
Secondly, it is my belief that the tax profession is annoyed by the weighing into the argument of people who don’t understand the laws, code of conduct and regulations regarding tax, of which Margaret Hodge is an obvious focal point, as she is the most vociferous in her attacks on tax professionals, as well as being very public.
I agree, taxation, in an intellectual debate, is an ethical issue. The implementation and adherence to the law, however, isn’t. It is a legal issue. As long as companies are obeying the law, why is there an issue? I don’t think companies and tax advisors should be castigated for obeying the law.
Please don’t do me the disservice of dismissing my views out of hand, but engage with them. They are valid points which I would be interested in hearing your stance in addressing them. It is very dispiriting that myself, as relatively early in my career, comes up against someone who won’t even listen to my point of view instead of calmly and reasonably explaining why they feel differently.
You’re wrong
Hopelessly wrong
There are choices in tax – and morality guides tose choices
Tax avoidance is not necessary at all
Doing it i a choice
Please do not pretend otherwise
Your argument fails all ytests of ethics
And Margaret Hodge has a wholly valid and completely proper right to argue her case
How dare you say only those who are trained can argue?
That is an argument against democracy itself
And as for arguing that adherence to law is a legal issue – again, that’s trite and arrant nonsense
Hi Richard, thanks for the reply
Tax avoidance, may be a choice, but it is also a legal right. In fact, the legal standpoint couldn’t be clearer.
set out by the House of Lords in 1936 in the case Duke of Westminster v Commissioners of Inland Revenue. To quote Lord Tomlin, “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be compelled to pay an increased tax.”
Paying what you owe, not overpaying. That is a legal right.
Commenting that I fail all tests of ethics I feel is incorrect. My viewpoint is perfectly legal, a strict adherence to law. I do not believe there is any moral obligation to go beyond the law. There is a moral choice, but this is a choice. You do not have to give money to charity, but you may feel morally obliged to. You do not, legally, have to donate extra money from your pay cheque to HMRC, but you may choose to.
Margaret Hodge does indeed have a right to her opinion and free speech, as we all. Her case, unfortunately, seems to rely on certain misunderstandings of tax law, and complete ignorance of other elements, as well as deliberately ignoring those who have been trained, and can offer reasoned, informed advice and guidance.
and that brings me on to “how dare you say only those who are trained can argue”
indeed, that would be an awful, anti-democratic thing to say, and I apologise if that is how it was interpreted, it was certainly not what was meant.
My standpoint is:
Most of the population are not experts in corporate tax, and indeed have no real technical knowledge of the subject
It is the duty of the media and those in a position of power, like Margaret Hodge, to help bring knowledge into the public domain, so that the population can make informed, reasoned decisions on the issue. Instead, both the media, politicians and the PAC seem to be relying on empty, and often misleading or downright incorrect, rhetoric. When the 4 heads of taxation at the big 4, all undeniably tax experts, were brought before the PAC, instead of being listened to, they were chastised like schoolchildren, by a committee who do not fully appreciate all the intricacies of tax law.
Therefore, why are we, the public, taking our information on this issue from the uninformed? What is wrong with consulting the experts?
Finally, that obeying the law as a legal obligation is trite and errant nonsense. Again, I refer you to mallum prohibitum and mallum in se. Murder, assault, theft, kidnapping, all morally disgusting. Mallun in se
gambling, parking fines, copywright infringement. not moral issues, but legally prohibited. malum prohibitum. I feel that the implementation and collecting of taxes comes under this issue.
Taxation is a moral issue, and the legislation should come from a moral background. But collecting and implementation? legal issue. You cannot say someone is being immoral if they are paying the amount of tax they owe.
Read the General Anti-Abuse Rule – section B
It is not longer a legal right
I am proud to have helped remove that right
And for all your latin – what you ignore is Google made choices that were immoral, abusive and knowingly so
Respectfully – and straightforwardly – undermining democracy, free-riding the system, seeking to abuse monopoly power and undermining markets is wrong
And nothing – not one thing – you can say can contradict that
Because, actually, I’m right
And you ought to learn a little tax, because anyone who can say there’s an ‘amount of tax you owe’ is clearly in need of an education
Richard
Thank you for your reply and (some) constructive arguments
I have now had a quick look at GAAR, and I agree, my position was somewhat outdated. However, it still remains to be seen whether Google were in fact breaking the law, or using statutory incentives and reliefs that are freely available for them to use.
Secondly, there is no evidence that Google has done any of the things you claim. immoral abusive decisions etc. As as it is seen by many people, they merely arranged their global company in such a way to maximise efficiency and profits, as is their fiduciary duty. If they are, in fact, found to have been selling in the UK, then they will pay corporation tax on the 1% of transactions that it is done so. Not exactly undermining democracy is it?
That brings me on to that point – you use a lot of emotive, powerful phrases – underming democracy and markets, abusing manopoly power, free-riding the system, – but you haven’t even attempted to prove that, merely stated them as if they are obvious fact, which I assure you they are not. Assuming is not the same as proving. You clearly have a lot of experience and knowledge, but that doesn’t mean the conclusion you have reached are universal or objective fact.
The simple thing is – I don’t think that they have committed the crimes that your vociferous accusations warrant. I am not the only one who thinks this.
Finally, once again my clumsy phrasing has left me open to a somewhat cheap insult. When I talk about ‘the amount of tax you owe’ I really mean the minimum legal amount that you must pay. This is a quantifiable amount, although lies in a grey area of calculation and interpretation. It is my opinion that google are paying this, the minimum they can. Minimising tax, in theory, is no bad thing, otherwise we would all feel compelled, as I assume you do, to pay not only the PAYE income tax in our payslips, but an additional donation in order to assuage our moral conscience.
There is no fiduciary duty to minimise tax
Sorry – but your argument simply falls apart when you claim there is
For the rest – read my blog on comments
Additionally, Richard, I am a little disappointed at the speed at which you resort to empty rhetoric and personal insults. In the past, when debating either in competitions, or generally, this is only done when my opponent has an argument with foundations built on sand, or in fact no argument at all. I highly doubt that this is the case with you. Could you address my points, not me. I am not under attack and I don’t think you are on a soap box preaching to the converted.
See my blog on comments