Sex and drugs tax jibe upsets business

Businesses rallied behind the CBI this week in a row with the Inlandrnation. Revenue over the definition of illegal tax activities.

The dispute centres on controversial remarks by Revenue chairman Nick Montagu in which he compared tax crime to drug trafficking, prostitution and protection rackets.

Nicholas Dee, chairman of the CBI’s taxation committee, accused Montagu of threatening to implement a tax clampdown on multinationals by bracketing tax avoidance measures with illegal tax evasion. ‘Globalisation is uncomfortable for multinationals and the Revenue,’ he said.

Earlier this week, Dee confirmed he had requested a meeting between tax experts and the Revenue to ‘clarify what is sensible tax conduct’. He said: ‘The Revenue may just have a problem of presentation and not policy. But we are concerned by the prospect of a more adversarial Revenue with new powers.’

A spokesman for the Revenue rejected Dee’s comments on tax evasion: ‘He knows perfectly well there is a difference between tax avoidance and tax evasion. The Revenue has no wish to take a vindictive approach towards taxing multinational companies,’ he said.

Business pressure groups endorsed the CBI’s position.

A spokesman for the British Retail Consortium said: ‘It’s completely irresponsible to compare drug trafficking to tax avoidance. Tax exists as a cost, and so it is legitimate for companies to minimise their tax burden.

‘We’re right behind the CBI on this one. Business retailers increasingly believe the Revenue is sometimes in it for the money, not the equity.

The issue of tax evasion is political dynamite,’ he continued.

Individual finance directors are unlikely to speak out against the Revenue over fears of being ‘shot down’ for tax evasion.

Ernst & Young tax partner Patrick Stevens said: ‘If the Revenue tries to blur the distinction between tax avoidance and tax evasion the accountancy profession will shout long and hard.’

Richard Baron, deputy head of policy at the Institute of Directors, said: ‘It would be better if the government introduced new tax avoidance provisions rather than getting tough with the taxpayer.’