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Richard Murphy on tax and economics

Tiger Global proves exactly why we need registers of beneficial ownership for all companies around the world

Thu, 11/20/2014 - 16:46

The FT has just reported that:

A $15bn New York investment company has used anonymous offshore companies to profit from some of the largest short-selling attacks in Europe over the past three years, including the unravelling of the UK company Quindell.

A Financial Times investigation can reveal that Tiger Global, which runs one of the world’s largest hedge funds, has used Cayman Islands based shell companies to make large bets against at least 12 European companies since 2012.

As the FT says, this very obviously raises concerns about the effectiveness of new European rules aimed at forcing disclosure of those who are shorting markets.

But the reality is that what this really proves is exactly why we need publicly accessible registers of the beneficial ownership of all companies around the world, including in the Cayman Islands, who are holding out against them. This activity distorted markets. It undermined fair competition. The outcome is widely considered by many to be harmful. And none of it would have been possible if there had been an open and level playing field on which all operated, including basic data on who was undertaking trades, which is the pre-requisite of fair competition.

I’ve made the point before and I will, no doubt, make it again that what the tax justice movement demands (like beneficial ownership registers) are nothing less than the essential conditions for fair markets. It is those who oppose us who also oppose effective and fair markets, the Cayman Islands included.

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Russell Brand on Irish water and trickle down

Thu, 11/20/2014 - 10:01

Russell Brand has this one, on the Irish water tax, absolutely right. I’m not sure who briefed him, but he is spot on (and he uses my EU tax loss estimate):

 

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Make pension funds work for the UK

Thu, 11/20/2014 - 09:03

The FT ran a story a day or so ago with the headline:

PM accused of overlooking potential UK pension fund investment

To give a taste it began:

David Cameron is overlooking billions of potential investment held by British savers while asking foreign governments to put money into UK infrastructure , according to a major pension fund.

Sir Merrick Cockell, London Pensions Fund Authority deputy chairman, has urged the prime minister to help local government schemes spend money on major building projects.

Why’s this important? Because, as the article notes, despite the chronic need for for  infrastructure investment in the UK  and the fact that  local authority pension funds have £178bn of funds under management they have invested just £330 million into  UK infrastructure projects, and all of this into second-hand PFI schemes,  which in effect means that they have not created a single new asset or job as a consequence.

This is absurd, and I am pleased Sir Merrick Cockell thinks so. Perhaps he should read the pamphlet I co-authored for NEF more than a decade ago now, called ‘People’s Pensions‘, or the more recent ‘Making Pensions Work‘ in which I said (referring to the plan for auto-enrolment pensions,  but with the observation much more widely applicable):

Lastly we recommend that if enforced saving is to be required by the government then that government has a duty to ensure that the funds so saved are invested for the common good. Pension fund performance over the last decade has a been a history of almost perpetual loss making despite the enormous subsidies that pension fund tax relief has provided to the City of London and stock markets, all of which they have frittered away. Investment in local authority bonds for local regeneration, or in bonds or shares issued by a new Green Investment Bank and in hypothecated bonds e.g. to provide alternative funding to replace the inefficiently expensive Private Finance Initiative for funding public sector infrastructure projects would have prevented those losses – because all of these would have paid positive returns to pension fund investors. It is for exactly this reason that we recommend that such assets be the basis for any new state pension fund in the future.

I stand by that observation and believe that pension funds could unlock massive potential in the UK economy. Instead George Osborne wants them to be frittered away. Isn’t it obvious which is the wiser choice?

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Please note that I am still not back to normal for work purposes as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I’m definitely recovering and hope to be back to normal within a week or so.

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Citizenship as a moral ideal

Thu, 11/20/2014 - 07:59

As far as I know I have never met Dr Simon Duffy, the Director of The Centre for Welfare Reform. I have a feeling I would enjoy doing so.

What I can say is that he has written an amazing blog under the above title, which I came across via a tweet (and I can’t find who by now: sorry) yesterday. I strongly recommend reading it as a whole.

It is also full of some really good one liners, such as:

The ideal of citizenship lies submerged in our basic obligation to take care of the stranger even when they do not seem a citizen

and

A community that defines itself by its existing members and which jealously guards its boundaries will become sterile and incapable of valuing even its own members

or

Imagine a person free of all duties and you imagine someone who is utterly disconnected. The structure of our duties describes the framework within which the good life is lived. Agree or disagree, this blog is worth reading. jQuery(document).ready(function($) {$(".no-break").append('10Like Post');});

HMRC’s sinking performance

Thu, 11/20/2014 - 07:21

HMRC has sacked thousands of its staff in the last year. All of them did invaluable work collecting the tax that might prevent austerity, preserve the NHS, pay pensions and improve the quality of people’s lives. They also kept the tax system working.

This is the result of that reckless policy, taken from a report published by HMRC this morning:

Post handling at HMRC appears to have effectively collapsed. HMRC admit that this is in part because they moved staff to handling tax credit renewals. They also claim that they are receiving less post, as if this is an excuse. But it isn’t. This is simply an organisation that is now so under-resourced that it is at breaking point. And the UK can emphatically not afford a broken HMRC for all the reasons I explain here.

When will this stupidity end?

And when will we get an Office for Tax Responsibility to monitor this sort of nonsense that HMRC produces?

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There will be no tax cuts during the next parliament Mr Cameron

Wed, 11/19/2014 - 09:45

The government has just published its latest summary of short and long term independent  economic forecasts for the UK. This is a summary of the longer term forecasts:

 

Let’s summarise that. Growth is falling. RPI inflation will exceed growth, so real wages are likely to fall again. There will be more part time and low paid jobs. Our international trade position will remain dire. The deficit will fall but by no means as much as the Treasury suggests. It’s all pretty grim.

Let’s put that another way. Cameron says he can deliver tax cuts on the basis of a balanced budget in the next parliament. No one believes him. There is no way it will happen.

No wonder people don’t trust politicians.

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It’s not by chance that HMRC is not closing the tax gap: it’s policy

Wed, 11/19/2014 - 08:45

As the BBC has noted:

The Public Accounts Committee has criticised HM Revenue & Customs for its “unacceptably slow” action against tax avoiders.

Margaret Hodge, chair of the committee, said the inaction was putting tax revenues at risk: “HMRC must do more, faster.”

There is, of course, not a hope of that happening. The senior management of HMRC is only dedicated to reducing its staff number, and not to collecting tax. That is why the real tax gap is vastly higher than HMRC estimate, as I have explained here.

It is time it was realised that HMRC’s refusal to collect tax has, under this government, been policy, and not chance. How could austerity be justified if tax could be collected instead?

I am aware of how provocative such a statement is but I now think it likely to be true. HMRC’s approach to sacking staff, reducing its budget, refusing to properly calculate the tax gap and to be evasive on all issues relating to it can only suggest that there is ideological policy behind this approach, and I am sure that the ideology is that of austerity and shrinking the size of government because of a supposed shortage of tax revenues when in practice there need be no such shortage if only the appropriate resources to collect it were allocated to the task.

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It’s time to sack Juncker

Wed, 11/19/2014 - 06:53

As the Guardian reports:

Jean-Claude Juncker is facing a vote in the European parliament to declare him unfit for his post as head of the EU executive because of his alleged role in turning Luxembourg into Europe’s biggest tax haven during the two decades he dominated politics in the Grand Duchy.

Far-right and anti-EU MEPs got together on Tuesday to collect enough support for a motion of censure, which must be debated and voted on, possibly as soon as next week.

That there is a motion to censure, and sack, Jean-Claude Juncker is hardly a surprise. For years the man simply said ‘no’ to any attempt to beat tax crime (let’s leave avoidance aside: his real crime was refusing to allow effective information exchange arrangements under the European Union Savings Tax Directive to beat tax evasion) and for that he is culpable in my book. But what amazes me is that despite this fact the EU’s Socialists are not backing this move, which is coming from the far right instead.

It’s time for them to walk their talk. Juncker is not an EU leader for the 21st century. His appointment was a mistake. He has to go. The Socialists need to say so.

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Please note that I am still out of action for normal work purposes at present as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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The first tree that needs felling in the banking orchard

Tue, 11/18/2014 - 09:07

The Guardian is providing clear indication of the first tree that needs felling in the banking orchard:

Now, who’s next? And please don’t all queue to say ‘Barclays’.

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When is the orchard being cleared, Mr Carney?

Tue, 11/18/2014 - 08:20

Mark Carney has reportedly said that current banking scandals:

mean it is simply untenable now to argue that the problem is one of a few bad apples. The issue is with the barrels in which they are stored.

That’s the good news. Realisation is the precursor of change.

Now, when is the orchard being cleared, Mr Carney? That’s what we want to know now.

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Please note that I am out of action for normal work purposes at present as I am still recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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The wrong people have the money and we need to put that right

Mon, 11/17/2014 - 09:11

David Cameron has said all the signs of another global crash exist. I think he is right: they do. But from then on he and I differ.

Writing in the Guardian it is as if he did not attend the G20. There is a nod to tax reform. But he appears to be completely unaware of the commitment to raise infrastructure spending at the core of the G20 plan to turn round ailing economies. His focus is instead on highlighting problems in Europe and on signing TTIP – the trade treaty that will require the privatisation of the NHS whatever he says now. To put it bluntly, this is a man who can see a crisis coming and who must know that his austerity programme can only make it worse (anyone but a fool can see taking money out of a failing economy, as he plans to do,  is bound to make it worse) but who is resolutely refusing to recognise the issues that will cause this next wave of economic collapse.

So, let me explain as simply as possible for the likes of David Cameron why we are going to have another crisis. It’s not hard to do. And it can be summarised in one phrase. The wrong people have the money. If you want an explanation for that it is that government policy over the last few years has done all it can to make sure that the wrong people  to make a change in the world have got more of the money.

What do I mean? I mean that the people who spend least of their incomes have had the biggest pay rises and are the only ones to enjoy effective tax decreases over the last few years. These people are the highest income earners in the UK. At the same time cutting benefits for the poorest and increasing VAT (which together with deliberately enforced wage cuts have reduced the net disposable income of most people) and cutting taxes for the wealthiest this has been the inevitable outcome. And we know this outcome has not happened by chance: this is deliberate.

Wealth inequality has risen too. Again, that’s deliberate, and capital gains tax cuts and reductions in inheritance tax are all intended to foster this goal. But there is a problem with fostering wealth inequality. The rich are rich because they do not spend anything like all they have. If they did spend it they would not be rich. But what that means is that when there’s a shortage of spending in the economy to let the wealthiest get wealthier simply means that the imbalances within it get worse. And it’s imbalances that cause crises.

Corporation tax cuts and reforms to our corporation tax system that means that multinational corporations based in the UK can, since 2010, find it much easier to make effective use of tax havens to cut their UK tax bills have also made the problem worse. I reckon these cuts are costing at least £10 billion a year. What these cuts do is transfer money that would have belonged to the state to companies in the hope that they will be encouraged to invest it as a result. But they aren’t doing any such thing. The amount of the UK corporate cash pile is open to dispute (partly because company accounts are so unreliable) but what no one doubts is that it is growing. Companies are taking the tax cuts and banking them. They aren’t even giving them back to their owners. They’re just hoarding it. Like the wealthy (perhaps, unsurprisingly) large companies are simply sitting on their cash.

The tax gap is another indication of this. You don’t have to believe it is as big as I think it is to realise that what the tax gap really means is that, yet again , the wrong people have the money. What really belongs to the government is in the hands of crooks and cheats, with massive economic consequences.

That is true of all these observed facts. All mean that for differing reasons the wrong people have the money. Either, in the case of the tax gap, the money is in the wrong hands in a way that undermines economic confidence, especially amongst honest small businesses, or in the case of the other gaps (income, wealth and the gap between large and small companies) increasing amounts of cash are being given with official sanction to those who won’t spend it. And what that means is there is a shortage of demand in the economy – and most people are seeing their incomes fall. It’s not rocket science to work this out: it’s glaringly obvious, and yet the likes of David Cameron and George Osborne deny it, and suggest all mist carry on as now – absolutely guaranteeing as a consequence that things can only get worse.

What can be done? I’ve always pointed out that there are only four drivers of the economy: consumer spending, investment, net foreign flows and government spending.

Investment is not happening; business will not do it: that’s why it has cash.

Net foreign flows are broadly neutral: the trade deficit is dire but hot money still comes to the UK, although we cannot rely on that.

Consumer spending is poor and may get worse: most people do not have the money.

And that leaves the government to put matters right. It has to generate new economic activity.

How? Three ways. First, print money and use it productively rather than simply give it to banks to prop up asset values. That’s green quantitative easing. The Bank of England has conceded this is possible. This would invest the length and breadth of the UK to create new sustainable infrastructure (which is exactly what the G20 says is needed to deliver jobs).

Part of the funding for Green QE would come from the income it would generate. The IMF says investing in infrastructure pays right now simply in terms of new tax yields created.

Part would have to come from additional taxes. Big business would have to pay some. I note that in the FT there is discussion today of applying retrospective taxes on large companies, albeit in Japan. Maybe the time has come for that here too if business will not invest its cash.

And we do, undoubtedly, need to rebalance tax onto those who can pay it via increased taxes, especially on wealth, including a national insurance charge on investment income and better wealth taxation, including land value taxes. Banks mist also contribute through financial transaction taxes.

And we must close the tax gap.

Put this together and there is a coherent economic policy in play that deals with the fundamental fact that our economy is not performing as it should because money is being directed, by the nature of modern capitalism, into ever fewer hands (the drive for artificially defined productivity guarantees that) which fact is being exacerbated by current government policy and this fact has to be reversed if most people in this country, and others, are to achieve anything like their potential in the economy, in society and in their lives.

That’s my goal. It cannot be that of the current government or they would not be doing what they are.

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Please note that I remain out of action for normal work purposes at present as I am still recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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Ed Balls tackles a major General Anti-Abuse Rule deficiency

Fri, 11/14/2014 - 07:23

I will break my post op silence to note a campaign win this morning. Ed Balls blogged last night that:

Tackling tax avoidance is a key part of our economic plan. A fair and robust tax system is vital if we are to bring down the deficit, safeguard our National Health Service and maintain public support for the dynamic open economy we need.

At the moment, we are going in the wrong direction. The amount of uncollected tax – the so called ‘tax gap’ – rose again to £34 billion in the latest year on HMRC’s own estimates. It’s up by £3 billion under this government and tax campaigners have suggested the true figure could be much higher.

Having then noted Labour’s latest corporation tax plans he added:

But this agenda will only be delivered if HMRC has the powers and resources it needs to act. We have supported the introduction of a General Anti-Abuse Rule (GAAR). Those who set up abusive schemes should run the risk of being caught by such a rule.

But it is currently a GAAR without teeth. Those who are caught have to repay the tax they tried to avoid, but they do not face a penalty. There is still no disincentive to try and game the system. That is why Labour will bring in a tough penalty regime for the GAAR, with fines of up to 100 per cent of the value of the tax which was avoided. For the first time this will provide a tough and genuine deterrent to those who try to abuse the system and avoid paying their fair share of tax.

I welcome this. I included a penalty regime in the general anti-avoidance principle I wrote for Michael Meacher that was presented as a Private Member’s Bill to the House of Commons  (by, in effect, offering a clearance system for transactions so taking them outside penalty risk)  because without teeth any such provision has little more effect than a polite request to not misbehave in future.

I also highlighted the absence of a penalty regime in my commentary on the GAAR when it was published. And the very limited references to penalties in the GAAR guidance are only there because of what I tried to achieve on this issue when on the GAAR advisory panel that largely wrote this material.

But, and I have to add this but, adding a penalty regime to the GAAR is only step in the right direction for the GAAR. The ‘double reasonableness test’ and GAAR advisory panel both have to go before it has anything approaching credibility. Curiously Scotland has already achieved those goals in its new GAAR. My hope is Ed Balls will go down that path too.

But, as the person who fought hardest for this penalty regime I welcome this move: it’s emphatically an appropriate step to take and a damning indictment of the current government’s lack of willing to really tackle tax abuse that such a regime was not included in its original version – despite my very best efforts to draw the need to its attention.

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Please note that I am out of action for normal work purposes at present as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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The OECD BEPS Project – tax policies not fit for the 21st century

Thu, 11/13/2014 - 15:37

I thought this statement from the Global Alliance for Tax Justice worth sharing in advance of the G20 Summit in Brisbane:

The Organisation for Economic Co-operation and Development (OECD) project on base erosion and profit shifting (BEPS) is a 30-month process, initiated by the G20 world leaders in their St Petersburg Declaration in September 2013. The OECD has achieved consensus on a majority of the issues addressed so far. However, much remains to be done. The approach still lacks coherence, a clear direction and the will for a major overhaul of the current international tax system. It also suffers from a deficit in representation because of its domination by rich countries, mainly exporters of capital, and its exclusion of the poorest countries, which are relatively more dependent on corporate tax revenues.

Country-by-country reports must be made public and transparent

Agreement on a template for country-by-country (CbC) reporting and related documentation on transfer pricing is the major achievement in the first year, but the arrangements for access have still not been agreed. It now needs an effective mechanism to enable tax authorities in all countries to have direct access to the CbC reports, as well as the related Master File of transfer pricing documentation. This data – which normally is not commercially confidential – should be made public, as there is a widespread public interest in greater corporate transparency and accountability, and it will help to enforce tax rules.

Harmful tax practices must be curbed

However, progress has been slow on some key measures, including limiting harmful tax practices by states. For example, a proposed “economic substance” test which could curb “patent boxes” has been opposed by several states. The patent boxes provide a low tax rate for income attributable to intellectual property, thus encouraging companies to relocate ownership of patents to entities in the state concerned. A dozen European states already have such provisions. These measures have been criticized as poorly targeted and likely to encourage a further race to the bottom in tax which may result in a further decline in corporate tax revenues.

End the hypocrisy – end tax breaks for multinationals

This shows clearly that the OECD’s voluntaristic approach is not working. Countries should end the hypocrisy of loudly proclaiming their intention to reform international tax rules while quietly introducing tax breaks for multinationals. If states fail to withdraw these inappropriate and expensive tax shelters, other countries should introduce counter-measures, for example by applying rules on controlled foreign corporations to such income and taxing it themselves.

Multinationals must be recognized as unitary firms

The BEPS process must now tackle several more serious defects in the international tax system. The underlying cause of BEPS is the separate-entity/arm’s-length principle which the OECD itself has increasingly entrenched over the last two decades. It insists on treating the national operations of multinational enterprises as if they were independent of each other, whereas in reality they operate as an integrated whole under central direction. This principle creates a perverse incentive for multinationals to organize themselves as complex corporate groups with often hundreds of affiliates including many formed in convenient jurisdictions to facilitate base erosion and profit shifting.

True progress towards fair taxation of multinational corporations therefore requires the abandonment of the separate entity concept and the adoption of a different principle which clearly states that multinationals should be treated as unitary firms. This could be done by building on and systematizing existing approaches, for example the profit-split method for transfer pricing, and apportionment of joint costs such as interest, central services and headquarters expenses. Only in this way could the clear mandate from the G20 be achieved, for reforms which ensure that multinationals are taxed “where economic activities take place and value is created”.

Strengthen UN Tax Committee for more inclusive consultation and tax design

The design of a tax system fit for the 21st century will require a wider global debate, extending beyond the OECD BEPS project. As the OECD does not represent all countries, we call forstrengthening the role of the United Nations in the field of taxation. In particular, this involves an upgraded and properly resourced UN Tax Committee. The debate should take full account of the impact of economic globalization, the shift to services and the digitalized economy.

A fundamental reform of the international tax system is essential in order to:

  • restore states’ powers to tax multinational corporations effectively;
  • ensure public confidence in the fairness of taxation and provide a sound basis to finance public services and economic development;
  • end the enormous waste of resources devoted to corporate tax planning and the unequal efforts of tax authorities to combat it; and
  • remove the incentive for multinational companies (and also wealthy individuals) to exploit the international tax haven and offshore secrecy system.

High Level commitment needed now to end race to the bottom tax policies

The G20 (and other countries to follow) should therefore issue a High Level Declaration committing themselves to ending beggar-thy-neighbour tax practices which provide low tax rates for multinationals and promote a race to the bottom in corporate taxation, and invite all states to adhere to this commitment.

The Global Alliance for Tax Justice represents a new global coalition of regional tax justice networks. Our member organizations are united in the demand for multinational corporations to pay their fair share of taxes and a world where fair and accountable taxation funds sustainable development and accessible public services for all. For more information, please contact GATJ Chair Dereje Alemayehu: alemayehu@taxjusticeafrica.net

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Please note that I am out of action for normal work purposes at present as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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Institutional Investors Back Global Tax Reform Modernisation and Transparency

Wed, 11/12/2014 - 07:54

I think I am fit enough to share press releases I like. This one is from the UK based Local Authority Pension Fund Forum, issued overnight. I think this shareholder activism a big step forward:

London: In a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend.

The group including the £150B UK Local Authority Pension Fund Forum (LAPFF)**, Quebec fund Batirente, Royal London Asset Management (RLAM), Paris based OFI Asset Management & Triodos Investment Management from the Netherlands have issued a  statement supporting the initial stage of the OECD BEPS Action Plan and urging a general improvement in corporate governance, transparency and disclosure  standards around taxation issues.

“Modernising the international taxation framework cannot be separated from global financial integrity, rebuilding trust and strengthening resilience in international financial structures and investment markets.” LAPFF Chair, Councillor Kieran Quinn said.

“As international investors, ensuring sound governance practices are embedded in corporate activities, including taxation planning and associated reporting and disclosure mechanisms is a fundamental concern. Financial secrecy, opaque accounts and aggressive tax practices do not best meet our underlying objectives as inter-generational investors aiming for sustainable value creation.”

“We urge G20 Leaders to ensure transparency and disclosure, are directly embedded as core principles in relevant tax treaties and national agreements and to work towards a comprehensive multilateral agreement at G20 2015.”

“In addition, we call on transnational corporations to recognise that many existing financial practices around secrecy and taxation are not sustainable and no longer meet institutional investor governance expectations nor reflect growing civil society views of responsible, transparent corporate behaviour within a licence to operate.”

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Please note that I am out of action for normal work purposes at present as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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If KPMG want to debate tax there are some things they need to do first

Wed, 11/12/2014 - 07:47

I have promised not to blog this week, but what follows was written before I went into hospital for an online tax debate KPMG are sponsoring that is still hidden behind development passwords. No one said I should not publish my contribution elsewhere.

I think it churlish not to engage with parties to tax debate if they are now willing (at long last) to come to the table, but I am not open the suggestion that those who have created the problems can now suggest what the terms of that debate might be. The agenda for the direction of tax reform has been set in favour of disclosure, openness, information exchange, cooperation and harmonisation. There is no room for back tracking or changing any of these themes now. In that spirit my  contribution to debate with KPMG quite deliberately poses a direct challenge to them, because nothing less will do. The list was not meant to be complete by the way: it is only an indication of the easy, low hanging fruit, KPMG must deliver to prove they are to be taken seriously in any way. There is much more reform required of them if they want to stay in the debate for the long term:

————

The debate on tax that civil society has been leading for a decade has widened recently. I welcome KPMG joining the debate, and not just because 35 years ago it was in one of its constituent firms that I began my accountancy career.

Let’s be realistic though: if the debate on taxation is maturing – and KPMG’s involvement suggests it is – then so too has the nature of the debate got to change. I do not regret for one minute that for more than a decade I was one of those from civil society who argued that tax havens caused harm, some big businesses and wealthy individuals were not paying their share of tax as a result of aggressive tax avoidance and that a failure of corporate transparency, in particular, was making much of this possible due to the double layer of secrecy provided by tax havens and the opacity of much corporate reporting. We were right to say all those things. And bluntly, we have won that debate. If KPMG now want to reclaim that space their objectives are deeply mistaken: there is no political way back on those issues now. All we can do is go forward.

So, how do we go forward? I suggest there are three ways to do that to which KPMG can contribute. First, as a major tax haven operator it can use its power as a lobbyist and economic activist to demand that whatever necessary economic functions are undertaken from tax havens (and I am told there are some) are all recorded on public record in fully transparent accounts so that the benefit of those actions is clearly known about and understood by all who need to know about them, including those who are impacted by them in society at large. KPMG has been, through its lobbying activities, a major player in creating many of the existing structures of the offshore world. If it is serious about change then KPMG has to be seen to be a part of that change and it should use its enormous influence in secrecy jurisdictions to ensure that change takes place.

Second, KPMG is a major influence on the International Accounting Standards Board through its alumni sitting on that Board, its secondees to it and its funding of the body. This is because, despite its status as a standard setter, the International Accounting Standards Board remains a privately owned company, based in Delaware although operating from London, that sets accounting standards largely at the behest of the accounting profession. If, then, KPMG wishes to engage in debate on transparency it has the perfect outlet for its concerns: the IFRS Foundation says it issues International Financial Reporting Standards in the public interest and yet to dated has refused to recognise the need for transparency or information for the benefit of any user of financial statements bar the suppliers of capital. This is a massive deficiency in its standard-setting process, and if KPMG wants to make an impact on the future of transparent financial reporting then the first thing it could do would be to lobby to change this situation so that the needs of all users of financial statements are taken into consideration by this Board when financial reporting standards are set.

Thirdly, KPMG can indicate the direction of travel in which it wishes to move by transforming its own accounting. There is no reason why it could not produce worldwide accounts analysed on a country-by-country basis showing precisely where its activities are based, how much of its activity takes place in each jurisdiction where it trades, including tax havens, and what type of activity is undertaken there. If there is now an acknowledged need for transparency in accounting then there is an even greater need for transparency amongst those who are tasked with regulating the accounting process and KPMG, as one of the leading members of the big four firms of accountants, has to take that responsibility seriously by showing that it is committed to reporting exactly what it does, where, with what profit arising and, where appropriate, what tax paid so that it can be held to account for its actions so that it may be considered fit to pronounce on the affairs of others. Given that in many jurisdictions it does use limited liability to protect its interests this is a wholly reasonable expectation.

If KPMG were to undertake these three actions then it can be considered a serious participant in tax debate because it will have indicated that it is taking part with the expectation of real change resulting. Without it taking on these three roles it is hard to see what KPMG is hoping to achieve from such debate bar the generation of political noise, and that is of no benefit everyone.

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Please note that I am out of action for normal work purposes at present as I am recovering from an operation to have my gall bladder removed. I am blogging occasionally but comment moderation may take a while. I hope to be back to normal soon.

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An update

Tue, 11/11/2014 - 05:55

Many thanks to all who have enquired after my health. I trust a generic update will suffice.

I had the operation in Friday which went well although the post-operative period was, to put it mildly, excruciating. However, when the reasons for that were worked out and addressed progress began and I came out yesterday, thankfully getting away with just keyhole surgery. As my sons put it, I laid a gall stone of impressive size and lost the gall bladder with it.

I have realised that I will need a recovery period. I feel a very much younger person than I am, but also appreciate that I probably need a recuperation to reflect the fact that I am now  a lot nearer official retirement age than my thirties. I am also, pragmatically, pretty sore.

The blog may remain light on content for a day or two as a result. Work will not be addressed for a while longer. Twitter I have found to be an effective pain management tool. And I have been instructed to find out what a box set is. I am not confident that project will succeed.

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An essential read

Fri, 11/07/2014 - 07:06

I may not be around to blog this morning (even I have to admit anaesthesia is likely to silence me) but that does not mean there is any excuse to take a break from reading on tax avoidance.

I strongly recommend this paper from tax barrister David Quentin on tax risk, which I think near essential reading for anyone really trying to understand tax avoidance now:

 

Please note that I am out of action for normal work purposes at present as I am having an operation to have my gall bladder removed today. I may blogging occasionally but comment moderation may take a while. I hope to be back to normal soon. 

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A reminder

Fri, 11/07/2014 - 06:00

Could I just remind readers, and especially commentators, that as I am spending my morning in an operating theatre, out for the count, moderation on comments might take some time in the next few days.

I can only apologise – and enjoy my last cup of black tea for the next few hours.

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