There's no avoiding the avoidance arguments
First an apology. We were wrong last week to suggest that tax avoidance could be the number one accountancy issue for 2006. Given the escalation of hostilities in recent days, there’s no ‘could’ about it.
Last week we reported on how the influential Hundred Group of Finance
Directors had urged HM Revenue & Customs to move on from the tax avoidance
debate. It followed a similar plea by PricewaterhouseCoopers a few days earlier.
We reported too on the taxman’s response, which ran along the lines of ‘not a
chance’.
This week has seen Deloitte join the fray, with an influential tax partner
suggesting that the tax avoidance crackdown is just an increase in corporation
tax by another name. ‘They’re using the closing of loopholes as a clever way of
packaging what is really a 10% rise in corporation tax,’ Bill Dodwell told
The Observer.
What’s interesting is not the position taken but those who are taking the
position. After all the CBI and its outspoken leader Digby Jones, has been
banging on about tax competition for years. As you would expect, the big firms
are also frequently vocal on the matter.
But the Hundred Group is normally reluctant to speak out on tax matters in
this way, fearing that its position would be seen as little more than the
protection of vested interests. There may be some truth in that, but the fact
that senior FDs are speaking out now is an indication of how strongly they feel.
And also an indication that they believe that their pleas are not falling on
entirely deaf ears – certainly outside of Whitehall.
So will the debate go away? There’s not a chance of that, in the short term
at least.
Recent days have brought further movement with HMRC officials writing to the
chairmen of the UK’s top 500 companies in an attempt to establish a dialogue
over tax risk. ‘There is a growing voice among large investors and
accounting/tax professionals that discussion with heads of tax and at board
level is an appropriate way of managing tax issues and, in particular, tax
risk,’ the letter reads.
The letter forms part of HMRC’s ‘Tax on the Boardroom Agenda’ programme, an
attempt to emphasise tax risk to large companies.
In the current climate of hostilities, though, the letter will almost
certainly be seen as a move to clamp down further on avoidance. Watch this
space.