Readers will be aware that I have frequently bemoaned the low quality of media coverage of the recent plethora of tax avoidance stories, and the consequent and understandable public confusion about the issues concerned. Thus it is a pleasure to find within the pages of the August issue of “Economia” three rational articles on the subject that demonstrate a deep understanding of the issues and an ability to discriminate between the various shades of grey in this complex area.
First up is Institute of Chartered Accountants in England and Wales chief executive Michael Izza. Having spent my life comparing the ICAEW unfavourably with my other professional Institute, the Chartered Institute of Taxation, it is a pleasure to find a senior ICAEW representative nailing his colours to the mast in no uncertain terms. I quote:
“So when we read about aggressive tax avoidance schemes that we suspect don’t work – like the Jersey-based K2 scheme, which recently put comedian Jimmy Carr on the front page of every newspaper – I think most of us would regard them as unacceptable. There is a difference between aggressive tax avoidance and responsible tax planning.”
“There should be no place in our profession for people who are involved in designing or maintaining these sorts of aggressive tax avoidance schemes. They must be well aware that what they are doing is beyond the bounds of what is reasonable and responsible tax planning, and that they risk bringing discredit not just on themselves but all members of the profession.”
“I know that the terms (i.e. avoidance and evasion) have a basis in law but I do think it’s time we started using different language that draws a clearer line between reasonable and responsible tax planning and that which is not. The writing has been on the wall for aggressive tax schemes for a number of years and the pressure on those who promote and advise on such schemes will continue to mount.”
Great stuff – I agree with every word he says, unlike Ken Frost, who comments that Mr Izza has missed an opportunity:
“To stand up against the media and political witch hunt that is threatening legitimate tax avoidance and the profession itself. Instead of calling for the simplification of the tax system, which would kill many complex tax avoidance schemes stone dead, he kowtows to the pressure of the media and political witch hunt and implies that ICAEW wants members who offer legal tax schemes which ICAEW does not approve of to leave ICAEW.”
With respect, I think Mr Frost misjudges professional and public opinion. Even those, nay particularly those, who understand the issues very well find aggressive and artificial tax avoidance unacceptable, and I think it is inaccurate on the basis of my observations to suggest that this is not the case. And calling for tax simplification reminds me of the inevitable pledge of incoming governments to cut waste and bureaucracy; it is a very easy thing to say and a very difficult one to achieve.
Next is BDO senior tax partner Stephen Herring, who has this to say:
“There is a broad consensus across individual taxpayers, businesses and their advisers that abusive tax planning products need to be stopped.”
This is a strong statement from a large firm tax partner, which shows to what extent the wind has changed in this area over the past few years.
Finally comes Richard Murphy, co-founder of the admirable Tax Justice Network:
“Unlike tax planning, where a taxpayer decides between options clearly made available in our law, tax avoidance means getting round the law. The result is, almost invariably, that the legal substance of what is declared does not match the economic substance of what happens (as is invariably true when tax havens are used) and tax is not paid in either the right amount, or in the right place or at the right time as a result.”
“Accountants can play with the semantics of this to justify their gain from such abuse if they so wish, but what society has shown is that it has an uncanny ability to hold in contempt those who make such excuses, and rightly so. Which is why it is time for the accountancy profession to make clear tax avoidance is unethical – and reason for being excluded from our institutes.”
So thank heavens for an informed debate, which reflects the reality that I find on the ground among tax practitioners and promises a more level tax playing field in future, with far more taxpayers paying their fair share of the UK tax burden. Not, I suggest, an outcome to which anyone can reasonably object.