EXCHEQUER secretary David Gauke is making a stir with tax advisers and getting his name in headlines. But is it for the right reasons?
When George Osborne took over at Number 11 he ignored the accountants in his Treasury team and appointed a lawyer, David Gauke, to be exchequer secretary – effectively the man in charge of HM Revenue & Customs and most things tax.
Gauke has since garnered many a headline for pronouncements and decisions that have left a few impressed, others confused and many downright angry.
Despite being a lawyer he has shown no hesitation in going public with his views and speaking out when he feels the need. And his opinions have not always run as many might expect from a Tory minister.
He has shown a willingness to disappoint the tax profession, put tax advisers in their place and tell businessmen the way they should be disclosing their tax liabilities.
Back in November, Gauke went public with a threat to severely punish not only tax evaders but advisers engaged in aggressive tax planning and emphatically asserted the government was well aware of the difference between legitimate tax planning and everything else.
Of course, the statement placed extra pressure on HMRC to perform – so Gauke also felt compelled to defend the coming 15% budget cuts for the department insisting the government’s plan to save costs but crackdown on tax dodgers
The junior minister attracted further attention when he backed the development of a general anti-avoidance rule (GAAR) through the appointment of Graham Aaronson QC to lead a study which would “establish whether a GAAR could be framed to meet the objectives of deterring and countering tax avoidance in a fair way”. The move immediately met with criticism, especially from the CBI which loudly announced that a GAAR would introduce so much “uncertainty” into the tax system that it couldn’t be in the interest of government, taxpayers or UK competitiveness.
Gauke could be feeling a little uncomfortable with a GAAR too. The measure comes from the Lib Dem side of the coalition and pushing it further was seen as part of the effort to keep them on board as the government battled to get its proposals on higher university tuition fees through the House of Commons.
The profession also had its doubts, backing the line that a GAAR is unlikely to provide certainty. But the “study” could simply be a means of showing lip service to a policy that is in the Lib Dem manifesto and a long way from becoming law.
But perhaps the most controversial goal Gauke has imposed upon himself is that of tax transparency among big international companies.
In a recent speech to the Hundred Group of Finance Directors he said the contributions made by businesses in tax would be better understood if they were more transparent and explained “the story behind the figures”.
There was much criticism of the speech. But the overwhelming point can be summed up in a single comment. If Gauke is keen on more transparency, why not do something about it rather than simply calling on business to voluntarily do something?
One critic, Richard Murphy of the Tax Justice Network, insists the answer is country-by-country reporting.
What happens next?
Gauke will need to go on fronting difficult issues but he might take some time to refine his approach. Threatening tax evaders is easy.
No one likes them but insisting HMRC will hit them hard while substantially cutting the department’s budget opens him up to accusations of naïvety.
The GAAR policy reveals a politician being a politician – floating a policy in a bid to keep certain interests satisfied. But for many the speech on tax transparency reveals flaws that the minister will need to address or risk losing the initial credibility he had from tax advisers.
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