Tax gap ‘will widen’ without trust

Businesses and government need to each give way in order to build trust and
reduce the tax gap, Loughlin Hickey, global head of tax at KPMG, said yesterday.

Delivering the Hardman memorial lecture at the ICAEW, Hickey said that in the
long-term ‘the tax gap will widen unless there is greater trust than presently
exists between tax collector and tax payer’.

A discussion of tax avoidance by a senior figure at KPMG, whose US firm was
fined £456m recently over its marketing of abusive tax shelters, had been
regarded as potentially controversial.

But though ICAEW tax faculty chairman Francesca Lagerberg referred to
Hickey’s ‘controversial’ topic, the issue of the US shelters was not raised
either in Hickey’s speech or in questions.

‘I believe that, fundamentally, people are well intentioned and… that people
working together are capable of great things. I believe that people ignored or
made to feel untrustworthy, in turn do not trust others’ said Hickey in an
impassioned address.

Hickey said that he was a ‘self-confessed fan’ of the O’Donnell review that
merged the Inland Revenue and Customs & Excise. The review, he said, had set
out ‘both the needs of government and the complex reasons for taxpayer

He argued that there was ‘genuine concern within HMRC and government that it
is unfair if the tax burden is not seen to be fairly shared’ but also ‘genuine
concern amongst corporate taxpayers that complexity and uncertainty will harm
the UK as a base for investment’.

Not all those in the audience shared Hickey’s outlook.

Richard Murphy of the Tax Justice Network raised the issue of offshore tax
havens, and KPMG’s role in operating there to facilitate tax planning: ‘If the
trust gap is to be reduced, shouldn’t advisers and corporations pull out of
these territories that do so much harm to the credibility of our profession and
the commercial world,’ he said.

Hickey defended the offshore havens, saying that they were merely trying to
raise money for their spending plans: ‘many of these offshore havens take their
responsibilities a lot more seriously than they are given credit for.’

He added: ‘I am proud that KPMG is in those territories. KPMG’s role is to
contribute to the efficient working of systems, both regulatory and tax. Quite
frankly if principled firms like ourselves are not in these territories we don’t
aid them.’

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