TaxCorporate TaxTax: there’s no avoiding it

Tax: there's no avoiding it

PricewaterhouseCoopers says anti-avoidance measures are driving business away, as does Ernst & Young.

Deloitte thinks the measures are nothing more than a tax rise, while Loughlin
Hickey of KPMG says the tax gap can only be narrowed if relations between
advisers and the government improve (which won’t happen soon, in the context of
the anti-avoidance initiatives).

For the Big Four to come out and say anything different, of course, would be
like turkeys voting for Christmas. What is surprising is the dubiousness of the
arguments involved.

It is, for instance, a fairly basic point to say that it is not
anti-avoidance that drives away business, but high taxes. Anti-avoidance does
create greater complexity, which deters business. But some might argue that it
is a necessary feature of any mature tax system.

The initiatives are not ‘just a tax rise’ either. How can you say that the
crackdown on city bonuses, which are paid through complicated share schemes and
even more exotic currency transactions, is ‘just a tax rise’?

What tax avoidance does, and what the Big Four are perhaps ignoring, is to
hand an advantage to big businesses over small ones, which do not have access to
the same highly paid advisers.

The Forum of Private Businesses highlighted this fact last week, when it
renewed its push on behalf of small retailers going to the wall as a result of
VAT dodges through the Channel Islands.

The small business angle is, of course, just the tip of the iceberg, in terms
of the moral arguments involved here.

It’s hard to disagree with the pro-avoidance advisers, when so many are
reasonable people. Many of them were present at Cono Namorato’s speech a
fortnight ago. Namorato, who heads up the IRS’s office of professional
responsibility, displayed the moral certainty of the government figures chasing
abusive avoidance down.

If the Big Four don’t realise soon that they are on the wrong side of this
argument, we might even see the kind of fury the US authorities launched on KPMG
here in the UK.

Alex Hawkes edits the tax page

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