The scales of justice

There is no doubt that Richard Murphy is a controversial figure. Despite
being ever present at events entertaining the great and good of the tax world,
and being a fully qualified and paid-up member of the profession, he is treated
more like a black sheep than anything else.

Having trained at KPMG in the 1980s, he now finds himself pitted against the
Big Four on tax avoidance.

Murphy is part of the Tax Justice Network, though he can often be heard
speaking under his own steam at Tax Research Ltd or, at his new incarnation, The
Tax Gap Ltd.

He has published two reports under the latter, which have infuriated many in
the Big Four. The first report suggested that the UK’s top 50 companies were
avoiding around £20bn in tax, according to their own reported tax charges.

The second proposed that the tax charges disclosed in annual reports were
subject to significant revisions, and might even be said to be materially
inaccurate.

Apart from reaction from one or two advisers, the report attracted little
comment. In fact, some of the Big Four tripped over themselves in their rush to
say nothing.

So why would the major firms not want to have their say on work that, after
all, they had been involved in? The report, in some ways, suggested that
companies are overestimating their tax charges, perhaps because they fear a more
aggressive and complex tax regime.

Not so. Some muttered that they disagreed with the methodology, claiming that
tax is much more complicated than this.

Murphy does, however, have qualifications. An FCA, he continues to practice
with Fulcrum Chartered Accountants. But he is better known for the research
reports he has produced and his links with critics of the accounting world.

Some would say that the latter are enough to damn him. Surely he is just a
partisan and extreme critic? Not exactly. Murphy’s research, as John Whiting of
PricewaterhouseCoopers said, has many resonances with other work being produced
on tax reporting, notably by the Hundred Group of Finance Directors.

The questions he is asking are similar to those more mainstream advisers are
asking, even if he comes from a different and more critical perspective.

The debate Murphy is part of concerns a greater demand for disclosure from
companies of how they meet their tax responsibilities. The Hundred Group
acknowledges this when it talks of a ‘total tax contribution framework’ standard
to represent all the taxes companies pay.

Many senior figures in the tax world appear to believe that the Tax Justice
Network is so extreme that not even the Treasury and HM Revenue & Customs
would endorse it, despite their interest in cracking down on avoidance.

They may need to reassess those assumptions. Government figures do point out
that companies are allowed to use allowances, and that the situation is rarely
as simple as Murphy points out, but they are, in fact, receptive to what he has
to say.
Murphy is generating ideas and approaches that, even if not watertight, many see
as provocative and worth pursuing. And if the criticisms go unanswered, someone
might take them up.