Tax has always been close to the accountant’s heart. Once it was simple, the
only questions were how much tax was due and what might be legitimately done
But tax has become complicated: globalisation, money market liberalisation,
ease of access to offshore increases in wealth, and the tax authorities’ quest
to keep up with these trends have all contributed complexity to taxation.
Complexity is something accountants can handle. It’s part of their role to
manage it for others. But complexity has created two things. The first is
increased opportunity for abuse, both by the taxpayer, and in the eyes of some
at least, by governments.
Second is the need for responsibility, because the option that complex law
provides to business to structure transactions in ways that suit commercial
needs carries with it a duty not to abuse the trust implicit in that process.
Both aspects of complexity have led to confusion. Accountants who want the
flexibility that tax law provides resent the apparent volume of law that it
creates and complain that governments have been rigid in their application of
the letter of the law. Misunderstandings have arisen.
It’s now widely appreciated that change is needed. HM Revenue & Customs
and the OECD are moving to a risk-based approach to tax management.
Practitioners discuss issues such as tax and corporate responsibility. But a
framework is needed for this discussion. That is why the Tax Justice Network and
the Association for Accountancy and Business Affairs have commissioned a Code of
Conduct for Taxation.
At its core this code is a statement of six principles, each with three
explanatory notes. They specify the fundamental principles proposed as a basis
for compliance by the three different parties to this debate.
For taxpayers the focus is on the need for openness, accountability and
transparency of all transactions, wherever and whenever they arise and to
whomever they are reported.
And government is required to create purposive law backed by a general
anti-avoidance principle, and a reporting structure that ensures everything is
‘on the record’. Governments also have to improve their reporting so that they
too ares accountable. This relationship is reciprocal. Advisers must ensure they
assist complete disclosure and match tax planning to the economic reality of the
transactions on which they comment.
The principles are easily stated, but the challenge is to put them into
practice. Nothing less will do in a world where we all win from trust, openness
Richard Murphy is a tax campaigner and practising