Tax and morality - redeem thyself, the end is nigh

Fifty something plus ?  Made your money from the profession ?  Nice house ?  Pension fund suitably plump ?  Comfortable ?  Hey, you, too, can join the redemption bandwagon.  Jump on.

In the same week that two principals at Vantis are reported to have been charged with cheating the public revenue (and, if found guilty, can expect to be sharing one of Her Majesty's en-suites with an amorous 20 stone meathead called Shirley), we have the latest round of anti-sleaze proclamations,; inspired by Mike Truman, editor of Taxation magazine.

It is a given that Mr Truman is a well educated and knowledgeable man but he may have let himself down on this occasion.  It is not the sentiment or the objective which he seeks; being one with which I entirely agree.  But, in contrast to previous articles by him in a similar vein, he has introduced morality into his analysis.  And, as any number of judges have opined over the years, the law is concerned with rights and obligations, not morals.  Morality is for the legislature to determine by the laws it enacts. End of.

This increasing tendency towards the introduction of morality as a faux rule of construction, being hitherto the preserve of the shouty, stupid commentators, will achieve no good and, more likely, only lead to a worsening of the current situation.  Complaints about the latest “immoral” tax avoidance product only serve to advertise, and give oxygen to, that very product and its promoters and  to heighten the demand for abusive, or unprofessional, practices generally.

Those who, knowingly or otherwise, show disrespect for the law will only encourage more of the same.  And it is not only on one side of the fence; the now daily abuses of power and general disregard for the law displayed by HM Revenue & Customs, egged on by Dave Hartnett with his bloke in the pub shtick, make for some very aggressive exchanges when those of us charged with representing taxpayers’ interests have to fight tooth and nail in using the law to prevent those taxpayers from being trampelled under foot.   

But what grates is the lack of perspective shown by those who seek so readily to jump on this particular bandwagon and take the line they do.  Perhaps they should be asking whose fault it is that the “profession” has become riddled with sleazoids, ignoramuses, product floggers and general low-lifes ?   Yes, it their fault.  Not necessarily personally, and certainly not exclusively, but any and every profession is responsible for its own culture and its own evolution.  Belong to  a profession for thirty years, and some of the responsibility is yours, like it or not. Internally, in firms, the partners train the managers, and the managers train the juniors; each generation shapes the next.  Allied to the practice environment, we have the professional bodies where the elder members dictate policy, education, training and ethics etc. 

In this connection, and for the sake of illustration, step forward John Whiting.  I make no pretence that, on the mere two occasions in which I have personally conversed with him, I did not care for a man who was way too full of himself, but that is not strictly relevant.  What, however, is pertinent is that here is someone who was a partner in Price Waterhouse (as was) which was responsible for kick starting the profession into a downward spiral when the firm low-balled on an audit quote back in the mid 1980s (the memory  is fuzzy, but I recall it concerned one of the big insurers as the prospective client) and, far more recently, was a member in PriceWaterhouseCoopers who were responsible for the provision of consultancy and audit services to the banks.  Hardly a couple of career milestones for any right thinking person to be proud of.  And, at a time when there are two disclosure initiatives underway, let us not forget which firm was not only a prime mover in fuelling the Liechtenstein market  but, moreover,  which firm is now rumoured to be doing rather nicely, thank you, with its hefty fees in servicing the disclosure initiative for that very same market.   

Along the way, and elsewhere, he belonged to the generation of the supposed great and the good who changed professional education policy to fit rather conveniently with the commercial needs of his own firm, and those of the other big 3, thereby causing new entrants to the profession to lack the broad based knowledge that they need to be suitably equipped in order to best survive long term in the wider marketplace.   And now, having made his wedge and avoided being sued into obscurity, he wangles a new post as, of all things, policy director at the CIOT.   So, at a time when he’s already had his day and made his money, it’s more than bit steep for him, or anyone else in an equivalent position, to  expect to have any right to contribute to policy, let alone moralise when it comes to others.  

So, what might be the way forward ?  We know where the real problem lies and, turning back to Mr Truman, he himself has previously said what needs to be done.  It is for the product floggers and similar abusers to be removed from the market.   If the product is not available, nor the mentality, then  the demand will wither.

At one end of the spectrum, we have the big brand names who fuel the perceived abuses but do so with the cloak of credibility that comes from their size of operation and their reliance on the public perception that size corresponds to quality and integrity.   Right at the other end, we have the door to door salesman who know jack about what they are doing, save that their product “saves tax” and comes with a nice hefty, upfront and non returnable, sales commission. 

And the elephant in the room ? The involvement of the Bar, which produces the very opinions that, with every scheme and product complained of, are hawked around by the salesmen as though  they are some magic guarantee of success.   I do not understand, nor do I want to understand, any of this big pile of papers which I have to sign but how do I know it will work, will I avoid tax ?   Oh, you have a counsel’s opinion.  Well, those Bar chappies are all rather clever, so that’s good enough for me.  Where do I sign. Duh.   

And how might either the people, or their practices, be addressed ?  Well, I, for one, have no faith in the professional bodies and their credibility when it comes to governance.  The CIOT , along with the ICAEW, Law Society, Bar Council and others, are all bodies that lack independence from the commercial influences that have taken root over the past decade. 

If that much is accepted, then the only way forward is regulation,. And not some half-baked quasi legislation in the form of another Code of Conduct, and absolutely, definitely, not by anything under the supervision of HM Revenue & Customs.   No, the regulation should be by primary legislation, fully debated and voted upon by our fine (cough), upstanding (splutter) elected parliamentarians, and then put under the statutory supervision of an independent body such as the Taxation Disciplinary Board.  With tax being a pervasive subject and its practitioners being equally diverse, it would be a very tough job and there would be blood spilled in the process, but is there a remaining viable alternative for those who seek genuine change ?  

How might the ball start rolling. If the Tories come into power and are  true to their word in establishing a body to review and simplify the tax code, they could also establish a parallel, bi-partisan body to work on a regulatory agenda.  The two might have some synergy in that the removal from the market of the scheme floggers would, in itself, at least help to protect against more complexity being needed. Membership of any body charged with a regulatory agenda should be restricted to those practitioners and academics only below a certain age of, say, 45 years (which would shortly exclude the writer, sigh).   Those who are older may, or may not, have contributed to the current state of affairs but they have, in any event, long since had their chance to stop the rot and should now, therefore, be excluded in having any further say. 

Comments

[JCG Hannigan]

Justice is based upon the maxim of "just and fair" as in "equitable liability"

I do not agree that morality plays no part. It is an essential ingredient. Tax law must not be judged on the basis of delayed returns/cut off..

Hats off to the mega star Keith Gordon. Wings to Mike Truman.

Equitabile Liability continues in the shape of Greeks gifts. Lets examine the gift first , but better than bad legislation can the consultation be first. No bombs must be dropped

Peace man