A short series of thoughts on today’s Public Accounts Committee hearing on tax avoidance featuring Google, Ernst and Young and HMRC, along with the Goldman Sachs ruling.
There were two things in the news today on all things tax avoidance. The first was the Public Accounts Committee hearing on tax avoidance – Google’s UK executives being hauled back before the powerful select committee of MPs. The second was the High Court judgement on HMRC’s tax deal with Goldman Sachs, which the judge ruled in HMRC’s favour against a legal challenge brought by UKUncut’s legal arm.
Previous blogposts on tax avoidance
I’ve blogged before on this subject, in particular at:
- Tax evasion, tax avoidance, tax breaks – can we get definitions right please?
- Multinationals, franchises, the superwealthy and tax avoidance
- Does a Parliament-inspired consumer boycott let MPs off the hook on tax avoidance?
Browsing through Twitter on the #PAC hashtag today, I’ve noticed that opinion has become polarised. Tax professionals have come out against the Public Accounts Committee, while activists have come out in favour.
Richard Murphy’s take on today’s proceedings makes for interesting reading. I’m particularly interested in the final points that he makes – 3) and 4), in which I broadly agree with him. The risk that tax professionals face is that their public profile is beginning to look like they are the apologists for the tax-avoiding super-wealthy. HMRC on the other hand continues to have sand kicked in its face, even though there are growing numbers who want HMRC to take a stronger stance against tax avoidance by the super-wealthy.
“Hang on Pooffles, isn’t it the job of tax professionals to reduce the tax burden of their clients? So long as that is legal, what’s the problem?”
Depends how big a world view you are taking it from. From a narrow world view, it’s a perfectly understandable and rational thing to do: taking the law as is, and trying to use it in a manner that benefits you. The two problems are:
- Tax avoidance is a very murky area, not helped by the 14,000 pages of tax code the UK currently has
- People are looking at headline numbers – things like total profits, shareholder dividends, executive remuneration and (given the economic context of austerity) are not liking what they see.
Thus what’s coming out on Twitter seems to be:
- tax professionals on one side tearing their hair out when an MP on the Public Accounts Committee is seen to make some basic errors of interpreting that tax code
- activists tearing their hair out because those appearing before them seem utterly ignorant of the wider social context of these headline figures.
So the question then is: How do you reconcile the two? (Can you reconcile the two?)
“Let’s put that in the ‘too difficult to deal with’ tray”
I gave Treasury an absolute kicking in an earlier blogpost in the section with the above title. Treasury has got to take the initiative to simplify the tax code significantly. At the same time, it needs to avoid the risk of simplifying it in favour of those who, in my opinion already have too much. (The super-wealthy). I recognise though that this is a very ’Political’ point, and that people with different dispositions may disagree.
If The Treasury won’t take the initiative on this, then the onus falls onto Parliament. There is only so long MPs can haul firms before them to be harangued. I believe we’ve already passed that point, and that Margaret Hodge (Chair of the Public Accounts Committee) has got to set in train by whatever means, a process that does the job that Treasury seems unwilling or unable to do. This also means engaging with tax professionals too.
“But Pooffles! What about my clients? Won’t someone think about the poor little rich people?!?!”
I jest – tax professionals are not simply there to see how much they can screw the taxman for on behalf of their offshore clients. Amongst other things, they take some of the burden off of small businesses when it comes to managing tax. The time spent having to manage tax issues is money not spent focussing on improving things like customer services, or products.
The problem at the moment seems to be that in criticising politicians, tax professionals are seen in the eyes of the public to be defending the super-wealthy and tax-avoiding corporations. What I’d like to see coming from the world of tax professionals are some solutions: solutions that, in the eyes of the public are seen to be socially just. Because if bigger dents can be made in the amount of money lost to tax avoidance can be made, it might have an impact on the cuts to public services and/or reduce the tax burden on the rest of us.
What about HMRC? Are they not off the hook?
Turning around HMRC is like turning around a super-tanker. What to do about them is something I’ll leave to someone more familiar with the inner workings of the organisation. But the status quo is unsustainable.