Advisers torn over greater regulation of tax profession

ADVISERS are conflicted over how to address the Public Accounts Committee’s call for greater regulation of the tax profession in the wake of its caustic criticism of PwC and other large accountancy firms for the low-tax structures they allegedly put in place for multinationals.

PAC chair Margaret Hodge said the government “must take a more active role in regulating the tax industry, as it evidently cannot be trusted to regulate itself” following the committee’s investigation of tax deals struck by large multinational companies with Luxembourg.

A cache of almost 28,000 documents was unearthed last year by the International Consortium of Investigative Journalists showing the tiny EU state was facilitating more than 1,000 multinationals in tax avoidance activities. Those arrangements – which are entirely legal – were signed off by the Grand Duchy. The leaked documents primarily relate to clients of PwC.

For the PAC, the episode illustrates the need for a code of conduct, something the Taxpayers’ Alliance appears to back.

Its chief executive Jonathan Isaby said the “hideously complex tax code” makes it easier for “well-paid accountants” to “run rings around the taxman”. He added that the government holds the power to simplify the system and called for action to match the rhetoric.

However, Pinsent Masons partner Heather Self suggests such a code of conduct would achieve very little.

PAC is distracted by historic tax matters and has not acknowledged the impact of legislation such as the UK’s Disclosure of Tax Avoidance Schemes in discouraging firms from developing such schemes, Self noted.

Nor has it factored in the effect of the so-called ‘Google Tax’ or the OECD’s base erosion and profit-shifting (BEPS) project in intensifying the pressure to avoid such contrived structures.

Institutes already play a key role in ensuring the good conduct of their members, and in 2012 the ICAEW published a document giving notice that members found to be promoting such schemes could be held as bringing the profession into disrepute, and as such, face disciplinary action.

How rigorously that policy has been applied, though, is open to debate.

Self said: “Unfortunately, by dwelling on historic tax matters, the Public Accounts Committee has come up with a solution to yesterday’s problem. There is a host of international initiatives – much more powerful precisely because they are international efforts – that will deal with the promotion of artificial or aggressive tax structures far more effectively than by HMRC dipping its toes into the regulation of the accountancy profession.”

“[Major firms’] large corporate clients have a heightened awareness of the reputational risks around tax, so there is much less demand.”

Primarily, many advisers say, tax law regulates the profession, and if MPs harbour concerns, it is up to them to redraw the law.

If that can be done properly and simply – as the Taxpayers’ Alliance says – then there is no need for the establishment for something akin to the FRC for tax.

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