What is accountancy doing at university?

Big thinkers take on tax

It is because accountancy has only recently become a ‘graduate’ profession
that taxation’s place in our universities has been relegated to somewhat below
stairs status. What, after all, is vaguely intellectual about bean counting, one
can imagine Dons indignantly asking themselves in the senior common room.

But Oxford’s bold initiative to open a centre for business taxation, that
will focus on taxation policies and policy options affecting business in the UK,
is hugely overdue. It is incomprehensible that the subject of tax has taken so
long to attract the attention of big thinkers.

The debate has been limited to the relative merits of a low or a high basic
rate of corporate and personal tax and which generates their highest yield,
since Hayek and Freidman first espoused the low rate/high yield argument. Thirty
years on, however, after demonstration by the Reagan and Thatcher
administrations of the soundness of the theory we find our own government urged
to increase rates again to finance huge increases in public spending.

But the political and economic arguments for and against are virtually bereft
of rigorous analysis at a macro level to help inform the debate. And absolutely
nothing has been done to take an overview of the myriad indirect taxes to assess
their impact on the wider economy.

Oxford’s new centre might also want to consider a cost/benefit analysis to
the economy of how the proceeds of tax have been spent by the government, a must
if we want to remove political considerations from decision-making in this area
and, in a similar way to Gordon Brown’s decision to give power to set interest
rates to the Bank of England.

Oxford should also analyse international comparisons and the economic effect
of low corporate tax rates on countries such as Ireland and Switzerland to find
out exactly how this translates into higher levels of growth. There is valuable
work to be done. Let’s hope Oxford’s research improves the quality of the debate
on fiscal policy and that policymakers sit up and take notice.

Jonathan Ivinson is European head of tax at law firm Hogan &

…for all the wrong reasons

Tax is seriously under-represented as a subject for study at UK universities.
And when it is, it is too often looked at as a technical issue. As such, Oxford
University’s new business taxation centre and its intention to address the
policy dimensions of taxation is welcome.

But only in part, because as was apparent at the launch event, the centre is
funded by members of the FTSE 100. And as Professor Colin Mayer, one of the two
academics responsible for the Centre made clear, the issue of real concern to
the centre is tax as it affects the competitiveness of big business in the UK.

This is unacceptable for two reasons. Firstly, it assumes that there is such
a thing as beneficial tax competition, and the economic theory that supports
such an idea is of dubious validity. Secondly, it suggests that all other issues
are secondary to that one, which is of primary concern only to 100 or so
companies all told in the UK, and who represent well under 30% of UK economic
activity. A university such as Oxford should work without such pre-conditions.

If this centre is to be of use, it has to broaden its scope. Large business
tax policy is too constrained an issue to be studied in isolation. Other
businesses should be considered as well. Business taxation policy only makes
sense within a broader range of fiscal issues, so the whole range of taxes and
the interactions between them have to be considered.

More importantly, though, business taxation is not just a tax issue. It has
significant social and economic dimensions concerning how wealth creation might
be promoted and how the rewards might be best shared. In addition, issues such
as governance, accountability and corporate responsibility now feature
prominently on the tax agenda and there was little indication that these are of
real concern to the centre.

Oxford should look at tax, but only if it is to retain its academic
credibility whilst doing so, within this much broader context. Only time will
tell if it can move beyond the constraints of its funding and do just that.

Richard Murphy is senior tax adviser to the Tax Justice Network

Related reading

The Practitioner