Archive for the ‘Avoidance’ Category

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Resource usage

April 7, 2016

If you look at HMRC’s list of deliberate tax defaulters here you’ll see pubs and sandwich bars, window salesmen and an eBay trader.  You won’t see many accountants or wealth management companies and there’s nothing there that screams to me “concealed overseas assets and income”.

There’s an interesting piece of qualitative research here which looks at the attitudes of people given prison sentences for tax evasion as a result of the “volume crime initiative” – which looks at VAT fraud, undeclared income and use of fraudulent documents.

And, I don’t know about your google skills, but I can’t seem to find a more recent “HMRC most wanted” list than this one from 2013 which shows a gallery of… well, click on them yourselves.  VAT fraud, fag smuggling, a smuggler of non-EU garlic incorrectly described as ginger

I have a simple question for HMRC.  How many staff (how many “FTE” – full time equivalent – staff) are engaged on the detection, investigation and prosecution of booze and fag smuggling.  And how many are engaged on examining the Panama papers and will be allocated to investigate and ultimately prosecute any wrongdoers?

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Before the Panama papers…

April 4, 2016

I am writing this at seven o’clock on Monday evening, before Panorama airs its programme on the Panama papers, so it’s not based on any knowledge of the programme but on the various comments I have seen on FaceBook and other social media today.  I just want to say three things.

First, tax is not “a private matter” (as the PM’s spokeswoman apparently told The Guardian).  The Prime Minister’s salary is £143,462 and is widely used as a measure of what is meant by a substantial salary, not least in various shock horror stories in the press.  If he is also the beneficiary of an offshore family trust which hasn’t paid tax, do we really think this is a “private matter” or something which should be disclosed in the public interest?

Secondly, is it not time that we took the shackles off HMRC with regard to taxpayer confidentiality more generally?  As Jolyon Maugham has written today:

I could stand, smiling, on national news, next to HMRC’s Chief Executive and declare that I had paid every penny I owed and even if HMRC’s Chief Executive knew this [to be] an outrageous lie she would still not be able to contradict me.

Personally I can see no reason why tax returns should not be open to publication under the Freedom of Information Act, and particularly that MPs’ and Lords’ returns ought to be laid before Parliament (so that it would be a resignation matter were they found to be inaccurate).  But if that is a step too far, can those clever legal eagles amongst us not devise some form of unshackling that at the very least allows HMRC to give one of three responses when asked:

  • This person has made a return and their self assessment has not been audited.
  • This person’s self assessment has been audited and no major issues were found.
  • This person’s self assessment has been audited and either negotiations are ongoing or they have repaid £x tax plus £y interest and £z penalties.

Finally: can HMRC deal with the Panama Papers effectively at all?  By which I mean, do they have the resources?  Back in 2013 ARC, the union of senior managers in HMRC, put forward a Budget submission where they requested

Additional legal resources, 150 trained lawyers and 50 legal assistants, to accelerate litigation of the Tribunal backlog and accelerate yield.

Cost       £45.5m
Projected yield over 4 years to 2016/17       £2000m

Did they ever get their 200 additional legal and paralegal staff?  Are they now staffed to examine the panama papers and take forward any prosecutions that might arise?  Does the government seriously want them to, or would it rather they sat quietly on their hands, or “worked within their funding envelope”?

Take a wild guess.

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Greg Wise and the Sealions

February 8, 2016

Isn’t it time we stopped sea lioning the debate about tax avoidance?

“Sea lioning” is a useful new internet coinage that originates with this cartoon – you start off talking on the internet about something and are constantly interrupted by people – polite, reasonable-sounding people – asking you to back up your statements.   What’s wrong with that, you say?  Speaking as a trainee academic, absolutely nothing, I reply.  Except sealioning isn’t quite that…

For the person doing it, it’s a way of avoiding the issue by tying up the opponent in red tape.  Make them prove their assertions, their arguments, their premises line by line.  The earth is round, you say?  Can you cite your evidence for that, please?

For the person on the receiving end, it’s like arguing with a sponge.  It soaks up all your time and energy and gives nothing back.

Every time there’s a story about tax avoidance, every, single, time, there are the same arguments.  It’s all legal.  Companies are only maximising shareholder returns as they’re obliged to do.  The law is too complicated, but that’s the responsibility of law makers, not the tax industry.

I like following this kind of thing on twitter.  There’s a lively bunch of tax mavens on twitter but the use of a hashtag means there are all kinds of people joining in the debate.  It’s a bit like shouting at the television, but the television shouts back.

Any programme about tax, like the Dispatches programme I’ve just watched?  First random example I clicked on:

Do you think we could just park that, park all the other “avoidance is perfectly legal” arguments for the moment, the length of the tax code, the tax is theft arguments, add your own favourite.  Just park them.  Just for the moment.

There.

Now.  Some people think paying tax is voluntary.  Can we perhaps agree that this is a bad idea, and work back from that?

 

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Crickhowell: the town that went offshore

January 22, 2016

“Either we all pay tax, or none of us do!”

There are just three things I want to say about The Town That Took on the Taxman, the show originally trailed as the “Town that Went Offshore“.  I missed it when it was on BBC2 (9pm on Wednesday 20th) but caught up with it on iplayer.  If you haven’t seen it yet, I recommend doing the same.

First of all, I enjoyed it enormously.  We have seen the same material before: the production team fancies a quick weekend somewhere sunny so they pick their tax havens carefully.  Oh look, there are supposed to be thousands of companies in that little house with all the brass plates on the door… Yes, but this time the explanation of the Dutch Sandwich avoidance scheme was done by ordinary small traders from the Welsh town of Crickhowell.

Which is, really, my second point.  Arise, tax muggles!  The USP for this programme was that the avoidance scheme was devised and operated by a group of ordinary people, not tax specialists.  Crickhowell is, apparently, a small town with a unique high street ecology made up of local small traders, not multinational chains (except for Boots, who at least they managed to shame into joining in with the Christmas lights).  But by the end of the show they were also tax campaigners.

The production team set them up with meetings with tax professionals who explained how multinationals reduce their corporation tax bills with items like payments for intellectual property.  But it seems to have been the small traders themselves who came up with the idea of creating intellectual property in the form of the Fair Tax Town brand and then parking it in the Isle of Mann company they’d opened.

In other words, tax really doesn’t have to be taxing: ordinary people are perfectly able to understand tax schemes and issues when they are motivated to understand them and have someone able to communicate with them clearly.  HMRC’s stakeholder model involves talking to “stakeholder” groups: usually to tax professionals in accountancy and law firms and those employed by industry groups.  What they need to do, in my view, is talk to small traders like the Crickhowell independents, too.  One of the main grievances the group raised with Jim Harra was, indeed, the HMRC “relationship managers” large businesses have and why aren’t small traders treated to the same level of customer service.  Money, is the simple answer.  But it’s also an excuse: HMRC’s customer service offering needs a really good re-think in my view.  Good on the Crickhowell team if they can disrupt the system enough to get that done.  (And, bring back the Small Firms Impact Test!)

Finally, the elephant in the room.  You didn’t notice?  Well, there was an engaging team of Crickhowellians throughout the programme, men and women, so I suppose you could be forgiven.  But the presenter’s constant reference to “the taxman” grated, and made me notice. That they spoke to tax barrister David Quentininvestigative journalist Tom Bergin, author of The Great Tax Robbery Richard BrooksJim Harra, an actual taxmansceptical voice Richard Murphy , tax barrister Jolson Maugham

You see the common thread? #wherearethewomen?  It’s not as if Women in Tax are hard to find!

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Duck

September 16, 2014

Property again.  Was it the duck houses that irrevocably tainted the relationship between our government and the governed in the area of property policy?  Anyway, duck houses are the first things that come to my mind in connection with the idea we should reduce the administrative burden of the ATED – the annual tax on enveloped dwellings.

Because ATED is a rich buggers’ tax: it’s the “not-quite-a-Mansion-Tax” tax on houses that are owned by some kind of corporate entity to avoid Stamp Duty Land Tax.  The idea is that if you and I live in a house we own and then sell it we don’t pay capital gains tax but, if the house is worth enough, we have to pay stamp duty.  If we own two houses and sell one of them, well, we only get the CGT exemption (broadly) for one house at a time.  So if we had to sell the estate in Scotland to finance the country house in Berkshire we’d have to pay capital gains tax on the estate (pause for hollow laughter, because capital gains tax is a notoriously voluntary tax) and Stamp Duty Land Tax.  So we’d put the estate into a company, preferably offshore, and just sell the shares in the company instead, right?  Hence ATED, an annual tax on “enveloped dwellings” – houses that are put into some kind of corporate ownership rather than being owned by a natural person.

In that light, the fact that the tax only started in April last year and already the buggers are wanting the “burden” of administering the tax to be eased seems preposterous to me: the condoc says upfront that the entire aim of ATED in the first place is

to discourage enveloping, to encourage the de-enveloping of property and to ensure that those who continue to hold property in this way pay a fair share of tax

The consultation also says it should be read “by those currently within the charge to ATED… those who are likely to fall within the regime in the future, ATED practitioners and representative bodies” (Pause to boggle at the thought that there are already “ATED practitioners”)  Yes, I know that there are inoffensive businesses which have to claim exemption from ATED and it is, presumably, reducing the administrative burden on these which is the aim of the consultation.  They are listed as:

1) property rental businesses (including preparation for sale, demolition and conversion);

2) dwellings opened to the public;

3) property developers (including exchange of dwellings interests);

4) property traders carrying on a property trading business;

5) financial institutions acquiring dwellings in the course of lending;

6) dwellings used for trade purposes (occupation by qualifying employees and partners);

7) farmhouses (occupation for the purposes of carrying on a trade of farming) and

8) providers of social housing. (2.6)

You know, I might have been persuaded that there was some legitimate policy aim in here, if I hadn’t read on, past the list of inoffensive businesses to the list of those who have already been engaged in “informal discussions” with HMRC.

They’re helpfully listed in Annex A: let’s play “spot the one whose interests most closely align with your own.”

Barratts PLC

British Land Company

British Property Federation

Burges Salmon

Cadogan

Chartered Institute of Taxation (CIOT)

Clifford Chance

Council for Licensed conveyancers

Deloittes

Ernst & Young

FTI Consulting

Grosvenor

Hunters Solicitors

KPMG

Law Society

National Landlords Association

Rawlinson & Hunter

Smith & Williamson

Stephenson Harwood

Taylor Wimpey PLC

All worthy enterprises, of course, but what about the rest of us?  Isn’t this all really a bit like… asking MPs to decide their own expenses claims???

 

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I circumvent, you avoid, he -?

September 11, 2014

“…The previous rules applied only where the worker’s contract was one where he was obliged to provide services personally. It was therefore possible to circumvent the legislation by placing a right of substitution into the contract.” (from Taxation 20 August £)

And this is why we’ll never have tax simplification.

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DOTAS

July 17, 2014

If you go here, you will see that HMRC have published a list of the DOTAS schemes which are to be subject to accelerated payment, provided the government passes the legislation.

This is what the list looks like:

2014-07-16 19.55.57

What’s the line again?  Oh yes: “The problem with that proposal is that it is data, not information.”

Transparency, anyone?