Thursday 6 November 2008
What do we expect from the Pre-Budget Report?
The Pre-Budget report will be announced within the next few weeks. It may be too early to expect any radical upheaval of the UK tax system but it must surely be coming given the hugely altered economic and fiscal landscape.
With the UK taxpayer being obliged to bail out the banks, there is likely to be increased emphasis in the UK on tackling perceived tax avoidance. It seems to me that the obvious steps to ameliorate the effects of a deepening recession are to encourage investment in business and capital projects, while perhaps beginning to increase rates of personal income tax for those with higher incomes.
Thursday 1 May 2008
More tax avoidance nonsense
An article in The Independent reports criticism of United Business Media for its decision to move its base to the Republic of Ireland. Vincent Cable, the Liberal Democrats' spokesman on economic affairs, referred to this move as "blatant tax avoidance".
Has he not heard of the right to freedom of movement of capital? The reason for the move is immaterial, while the fact that the group earns between 75 and 85% of its profits (depending on whose analysis you accept) from overseas is very relevant. Why should a genuinely multi-national business put the interests of the treasury ahead of its shareholders' interests? There is no earthly reason I can think of.
Even Richard Murphy thinks this story is "a storm in a tea cup", and where tax planning is concerned, he is usually the one making mountains out of molehills - not that he can resist his usual mud-slinging, calling the company "an aggressive and litigious tax avoider". The litigation he refers to is a continuing dispute over the interpretation of the capital gains de=grouping provisions - hardly especially aggressive tax planning, but given the sloppy drafting of the legislation in question, well worth arguing if success will lead to an additional £80 million of value to shareholders.
Monday 14 April 2008
John Kavanagh in pugnacious form
Dennis Howlett blogged the following on 13 April 2008:
"John Kavanagh is in pugnacious form over the Tesco/Guardian libel match:
(Then quoting my earlier blog:)
"It seems that we have reached a stage where the rhetoric of journalists, fuelled by their constant pursuit of scandal and inspired by the tendentious writings of self-appointed experts like Richard Murphy, Prem Sikka and their like, has been so successful in persuading the public that tax avoidance is immoral and unethical that merely to state that someone is a tax avoider is seen as libellous if untrue."
The fact of the matter is that Richard is an expert in his field - he doesn’t need to be self appointed. Check the organizations that support and sponsor his research. Strike 1.
If John read what Richard and others say, he would find it isn’t about avoidance per se but the use of what Tesco already admits is a highly complex structure that has allowed it to provisionally avoid (at the very least) stamp duty. Ostensibly, that goes against HMRC’s general position of substance over form in the creation of tax planning arrangements. Strike 2.
John goes on to say:
"I rather like Tesco’s approach to this case. If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win, and only Tesco can know whether they have.
John has got this the wrong way around. Anyone remember the MacDonald’s case? As Alex Hawkes correctly points out:
"Richard Northedge has a similar view: that Tesco could be entering into a MacLibel situation.
"This battle has the appearance of a Goliath versus David fight – and remember who won that. Tesco should look at the MacLibel case: after years of dispute, the hamburger giant won but it was the protestors that gained the sympathy and McDonalds is still regarded as a representative of big bad business.
Alex then goes on to argue that justice is blind and therefore the courts will not take the moral/ethical issue into consideration. I’d prefer that it does because if you think about the basis for common law, it is built on an unwritten but well understood code of ethics. Even if the courts rules in Tesco’s favour (assuming it ever gets that far), then Tesco is in a no-win position.
If, as I suspect, Tesco is forced to reveal what it has done, then the MacLibel issue takes on greater poignancy. I see a growing concern for issues that have an ethical flavour and which go to the heart of issues around sustainability, risk, compliance and social responsibility. It seems to me that you can hardly fly the flag of supporting issues around say Fair Trade while at the same time engaging in tax avoidance on the scale that Tesco already admits. That makes you a hypocrite. Strike 3.
Endnote: You wouldn’t expect John to agree with the position taken by Alex Hawkes, Richard Murphy, Prem Sikka and myself. His bio says: “I am Director of Private Clients in the London office of Shaws, Chartered Tax Advisers. I advise on all aspects of tax affecting private clients, with an emphasis on non-domiciliaries and offshore strategies.”
My response:
John Kavanagh on April 14th, 2008 4:37 pm
Unless you are much bigger than me, Dennis, I think I am going to have to ask you to step outside! Seriously, though, I will try to address your strikes and see if I can persuade anyone reading this that I have in fact hit a home run.
Strike 1
Richard Murphy is an expert in a field which he and journalists have created - analysing the tax charges in published accounts and comparing them with the headline rate. Not rocket science, and it hardly makes him an expert on tax avoidance any more than staring into the night sky makes one an expert in astronomy, but a chap’s got to make a living. Neither, as far as I am aware, is he an expert in ethics, and it is his (and seemingly your) blunt assertion that tax avoidance is immoral and unethical which seems to me to be unproven and which should be, and currently isn’t, the subject of considered debate. Whether the Guardian is in the wrong or Tesco is in the wrong in this little spat is not such an important question to me.
Strike 2
So now you’re telling me that if I don’t like being taught ethics by Richard Murphy, I should take lessons from HMRC instead? I fear we are not moving towards rapprochement, Dennis.
Strike 3
We would hate hypocrisy to come into this, wouldn’t we, Dennis? But then if one discovers that Guardian Media Group has entered into substantially similar transactions to those entered into by Tesco, that rather pulls the moral high ground from under their feet, doesn’t it?
Thanks for the headline, though.
Regards
John Kavanagh
PS Isn’t your reference to my bio a slightly low blow from someone who“specialised in providing…(inter alia) …offshore tax services” in a previous incarnation?!
"John Kavanagh is in pugnacious form over the Tesco/Guardian libel match:
(Then quoting my earlier blog:)
"It seems that we have reached a stage where the rhetoric of journalists, fuelled by their constant pursuit of scandal and inspired by the tendentious writings of self-appointed experts like Richard Murphy, Prem Sikka and their like, has been so successful in persuading the public that tax avoidance is immoral and unethical that merely to state that someone is a tax avoider is seen as libellous if untrue."
The fact of the matter is that Richard is an expert in his field - he doesn’t need to be self appointed. Check the organizations that support and sponsor his research. Strike 1.
If John read what Richard and others say, he would find it isn’t about avoidance per se but the use of what Tesco already admits is a highly complex structure that has allowed it to provisionally avoid (at the very least) stamp duty. Ostensibly, that goes against HMRC’s general position of substance over form in the creation of tax planning arrangements. Strike 2.
John goes on to say:
"I rather like Tesco’s approach to this case. If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win, and only Tesco can know whether they have.
John has got this the wrong way around. Anyone remember the MacDonald’s case? As Alex Hawkes correctly points out:
"Richard Northedge has a similar view: that Tesco could be entering into a MacLibel situation.
"This battle has the appearance of a Goliath versus David fight – and remember who won that. Tesco should look at the MacLibel case: after years of dispute, the hamburger giant won but it was the protestors that gained the sympathy and McDonalds is still regarded as a representative of big bad business.
Alex then goes on to argue that justice is blind and therefore the courts will not take the moral/ethical issue into consideration. I’d prefer that it does because if you think about the basis for common law, it is built on an unwritten but well understood code of ethics. Even if the courts rules in Tesco’s favour (assuming it ever gets that far), then Tesco is in a no-win position.
If, as I suspect, Tesco is forced to reveal what it has done, then the MacLibel issue takes on greater poignancy. I see a growing concern for issues that have an ethical flavour and which go to the heart of issues around sustainability, risk, compliance and social responsibility. It seems to me that you can hardly fly the flag of supporting issues around say Fair Trade while at the same time engaging in tax avoidance on the scale that Tesco already admits. That makes you a hypocrite. Strike 3.
Endnote: You wouldn’t expect John to agree with the position taken by Alex Hawkes, Richard Murphy, Prem Sikka and myself. His bio says: “I am Director of Private Clients in the London office of Shaws, Chartered Tax Advisers. I advise on all aspects of tax affecting private clients, with an emphasis on non-domiciliaries and offshore strategies.”
My response:
John Kavanagh on April 14th, 2008 4:37 pm
Unless you are much bigger than me, Dennis, I think I am going to have to ask you to step outside! Seriously, though, I will try to address your strikes and see if I can persuade anyone reading this that I have in fact hit a home run.
Strike 1
Richard Murphy is an expert in a field which he and journalists have created - analysing the tax charges in published accounts and comparing them with the headline rate. Not rocket science, and it hardly makes him an expert on tax avoidance any more than staring into the night sky makes one an expert in astronomy, but a chap’s got to make a living. Neither, as far as I am aware, is he an expert in ethics, and it is his (and seemingly your) blunt assertion that tax avoidance is immoral and unethical which seems to me to be unproven and which should be, and currently isn’t, the subject of considered debate. Whether the Guardian is in the wrong or Tesco is in the wrong in this little spat is not such an important question to me.
Strike 2
So now you’re telling me that if I don’t like being taught ethics by Richard Murphy, I should take lessons from HMRC instead? I fear we are not moving towards rapprochement, Dennis.
Strike 3
We would hate hypocrisy to come into this, wouldn’t we, Dennis? But then if one discovers that Guardian Media Group has entered into substantially similar transactions to those entered into by Tesco, that rather pulls the moral high ground from under their feet, doesn’t it?
Thanks for the headline, though.
Regards
John Kavanagh
PS Isn’t your reference to my bio a slightly low blow from someone who“specialised in providing…(inter alia) …offshore tax services” in a previous incarnation?!
Even more on The Guardian and Tesco
A story by Stephen Glover in The Independent suggests that not only did the Guardian get their story about Tesco wrong but Guardian Media Group has engaged in exactly the same kind of avoidance as Tesco - or is it tax planning or mitigation when carried out by the gentlemen of the press?
Wednesday 9 April 2008
More on The Guardian and Tesco
In response to my comment on Alex Hawkes Tax Hack blog, John Adamson wrote:
"I'm not sure John Kavanagh is right on his first two points. The reality is that the whole issue of tax avoidance is now becoming one not just of public interest, but one of political interest too. I'm not sure people ARE tired of hearing about it, I actually think it's a more relevant issue than ever. So isn't it perfectly legitimate for a journalist to ask questions? And as one of Britain's largest private companies doesn't Tesco have a moral and social responsibility, let alone a legal responsibility, to be transparent about its activities? The disturbing issue here is what appears to be an over-reaction by a company under pressure, and implicit threats to any journalist that looks at the company, Surely in a democracy that is a very worrying development?"
I responded:
Despite their name, public limited companies do not owe a duty to the public in general. Their main duty is to two groups of people; shareholders and customers.
Tesco's duty to its shareholders is to maximise its profits by any legal and ethical means, including the legitimate avoidance of tax. I've no doubt that vast numbers of Tesco shares are owned by pension funds and charities. Is it ethical or moral to deny these groups the higher dividends and capital growth that result from proper management of the company's affairs?
As far as their duty to their customers is concerned, who is the Guardian to say that they would not prefer a penny off a tin of baked beans rather than to give it to Gordon Brown? I can imagine what pensioners, those on benefits and the low paid would say and I think it differs from the Guardian's view.
We need to remember that the tax companies pay is just an element in their profits; in one way or another it is always borne by the shareholder or the consumer, in reduced dividends or increased prices.
I therefore think it is for Tesco to decide, as a purely commercial matter, whether the advantages of a sensible tax minimisation policy are outweighed by the opprobrium heaped upon them by a politically-motivated corner of the press. If the press over-step the mark, as I think they have here, it is their right to seek redress in the Courts.
The major disadvantage of the form of democracy we have is that the opinion that gains most credence is often the one which is shouted longest and loudest, not necessarily the one which has been most carefully and impartially considered. I am tired of hearing just one side of a debate, especially when it is supported by claims of ethical or moral superiority which are subjective and unproven.
"I'm not sure John Kavanagh is right on his first two points. The reality is that the whole issue of tax avoidance is now becoming one not just of public interest, but one of political interest too. I'm not sure people ARE tired of hearing about it, I actually think it's a more relevant issue than ever. So isn't it perfectly legitimate for a journalist to ask questions? And as one of Britain's largest private companies doesn't Tesco have a moral and social responsibility, let alone a legal responsibility, to be transparent about its activities? The disturbing issue here is what appears to be an over-reaction by a company under pressure, and implicit threats to any journalist that looks at the company, Surely in a democracy that is a very worrying development?"
I responded:
Despite their name, public limited companies do not owe a duty to the public in general. Their main duty is to two groups of people; shareholders and customers.
Tesco's duty to its shareholders is to maximise its profits by any legal and ethical means, including the legitimate avoidance of tax. I've no doubt that vast numbers of Tesco shares are owned by pension funds and charities. Is it ethical or moral to deny these groups the higher dividends and capital growth that result from proper management of the company's affairs?
As far as their duty to their customers is concerned, who is the Guardian to say that they would not prefer a penny off a tin of baked beans rather than to give it to Gordon Brown? I can imagine what pensioners, those on benefits and the low paid would say and I think it differs from the Guardian's view.
We need to remember that the tax companies pay is just an element in their profits; in one way or another it is always borne by the shareholder or the consumer, in reduced dividends or increased prices.
I therefore think it is for Tesco to decide, as a purely commercial matter, whether the advantages of a sensible tax minimisation policy are outweighed by the opprobrium heaped upon them by a politically-motivated corner of the press. If the press over-step the mark, as I think they have here, it is their right to seek redress in the Courts.
The major disadvantage of the form of democracy we have is that the opinion that gains most credence is often the one which is shouted longest and loudest, not necessarily the one which has been most carefully and impartially considered. I am tired of hearing just one side of a debate, especially when it is supported by claims of ethical or moral superiority which are subjective and unproven.
Tuesday 8 April 2008
The Guardian & Tesco
I just posted the following comment on Alex Hawkes' Accountancy Age blog regarding Tesco's decision to sue The Guardian for libel over its accusations of tax avoidance.
"What an interesting situation.
The Guardian has effectively conflated two issues. The first is whether tax avoidance is immoral and unethical, and the second is whether Tesco has engaged in it. The first question has been in the public domain so long now that one is tired of hearing about it. The second was a confidential matter between Tesco and HMRC before the Guardian journalists stuck their big noses in it.
It seems that we have reached a stage where the rhetoric of journalists, fuelled by their constant pursuit of scandal and inspired by the tendentious writings of self-appointed experts like Richard Murphy, Prem Sikka and their like, has been so successful in persuading the public that tax avoidance is immoral and unethical that merely to state that someone is a tax avoider is seen as libellous if untrue.
I, for one, would love to see the Courts take a view on whether tax avoidance is immoral or unethical as journalists like Alex Hawkes so frequently opine. I would be utterly astonished if any Court found that it was, irrespective of what the journalists have to say.
I rather like Tesco's approach to this case. If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win, and only Tesco can know whether they have.
I am particularly looking forward to the day that the Guardian's legal advisers are forced to argue that what they have said about Tesco is not defamatory because there is in fact nothing at all unethical or immoral about tax avoidance!"
"What an interesting situation.
The Guardian has effectively conflated two issues. The first is whether tax avoidance is immoral and unethical, and the second is whether Tesco has engaged in it. The first question has been in the public domain so long now that one is tired of hearing about it. The second was a confidential matter between Tesco and HMRC before the Guardian journalists stuck their big noses in it.
It seems that we have reached a stage where the rhetoric of journalists, fuelled by their constant pursuit of scandal and inspired by the tendentious writings of self-appointed experts like Richard Murphy, Prem Sikka and their like, has been so successful in persuading the public that tax avoidance is immoral and unethical that merely to state that someone is a tax avoider is seen as libellous if untrue.
I, for one, would love to see the Courts take a view on whether tax avoidance is immoral or unethical as journalists like Alex Hawkes so frequently opine. I would be utterly astonished if any Court found that it was, irrespective of what the journalists have to say.
I rather like Tesco's approach to this case. If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win, and only Tesco can know whether they have.
I am particularly looking forward to the day that the Guardian's legal advisers are forced to argue that what they have said about Tesco is not defamatory because there is in fact nothing at all unethical or immoral about tax avoidance!"
Tuesday 18 March 2008
A waste of time and money
I spent much of this morning with a client advising him on the implications of the Budget on an offshore structure set up some time ago. I had already given him a great deal of advice about the implications of the Pre-Budget report and we were ready to make wholesale changes which in the event did not have to be made.
I can't help feeling sorry for clients who have paid for advice that turned out to be useless to them, because it related to a hypothetical situation which never existed. The amelioration of what would have been draconian changes is welcome, but how much better would it have been if the Government had not gone around flying kites in the first place? I would love to know the amounts of time and money wasted because of the Government's dithering and equivocation. It's a stupid way to run a country.
Tuesday 26 February 2008
Ramsay for Dummies
The proposed changes to CGT and residence/domicile are making a lot of work for tax planners - it's an ill wind that blows no good! As well as negotiating mountains of legislation, advisers also have to consider the case law as it applies to tax avoidance and this has been a complex and changing area. Thanks to this brilliant article by Patrick Soares, we can all save some time and leave the tax cases on the Ramsay principle on the shelf.
Monday 25 February 2008
Tax is becoming too simple!
According to an article in the FT, the Chartered Institute of Taxation is complaining that the tax system is being over-simplified! Perhaps that is a slight misrepresentation of the truth - which is that the Institute is criticising the rewriting of the complex and "arcane" provisions relating to the taxation of derivatives and corporate loan relationships. The grounds for complaint are that, firstly, the process of "simplification" is in danger of undoing the Government's previous work in eliminating the many loopholes and issues thrown up the original legislation and, secondly, there is no point in taking this risk because the legislation is only really relevant to taxpayers with professional advisers who are well able to understand the legislation as it is currently drafted.
HMRC have pooh-poohed these suggestions, saying that the majority of users/customers/victims (not sure what the current term is) of the legislation do not agree with the Institute's views. Are they mad?
HMRC have pooh-poohed these suggestions, saying that the majority of users/customers/victims (not sure what the current term is) of the legislation do not agree with the Institute's views. Are they mad?
Tuesday 19 February 2008
Welcome
If you came here following a link to http://www.uktaxconsulting.com/, either from a forum post or a search engine result, you are in the right place. If you would like to get in touch with me, please see the contact details at the foot of this page.
I will be posting more articles on this site in the coming weeks.
I will be posting more articles on this site in the coming weeks.
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