The UK head of tax at Ernst & Young, the accountancy firm that audits Google, Amazon and Facebook, has admitted that international guidelines that allow online firms to pay much lower corporation tax than their rivals are outdated and in need of urgent reform.
John Dixon told a committee of MPs that the Organisation for Economic Co-operation and Development (OECD), which drafts the politically contentious rules, was facing a "difficulty … [it] needs to address" because the codes established decades ago never envisaged an explosion in online commerce.
Confronting Britain's top four tax experts at Thursday'shearing, Margaret Hodge, chair of parliament's public accounts committee, said: "What really depresses me is you could contribute so much to society and the public good and you all choose to focus on working in an area which reduces the available resources for us to build schools, hospitals, infrastructure."
She joins a long list of top politicians around the world prepared to publicly attack the tax industry. Last week David Cameron joined in, using a speech at Davos to rail against "an army of clever accountants … [helping] companies navigate their way around legitimate tax systems". However the prime minister has also expressed enthusiasm for taking UK corporation tax to "the lowest rate of any major western economy".
While he declined to comment specifically on Amazon or any other client, Dixon told the committee: "In modern parlance, the way contracts are usually made is online … If the contract is made online, and the server is based outside of the UK, that is not creating a taxable liability in the UK."
In a thinly veiled reference to Amazon, Richard Bacon MP asked if this could be true even if a UK consumer buys goods from a ".co.uk" website and the product is delivered from a warehouse in Britain. "Absolutely," said Dixon. "In the context of corporation tax, it is the location of the server [that matters] … The effect of the OECD principles … is that as far as the inbound part of the supply chain is concerned – into the UK – a small amount of the profit is currently allocated to that activity. And that is what the OECD needs to address."
In the meantime, suggested Hodge, "you have exploited the loophole". Dixon replied: "Sorry, I don't agree."
Dixon's comments contrast with those of Google boss Eric Schmidt, who recently brushed aside criticisms of the group's elaborate corporate structure, which involves an international company in Ireland and a parent company in Delaware and has seen it shift revenues of about $9.8bn (£6.2bn) into a shell company in Bermuda, where they are sheltered from tax. "It's called capitalism. We are proudly capitalistic. I'm not confused about this," said Schmidt.
Dixon appeared alongside counterparts from PricewaterhouseCoopers (PwC), Deloitte and KPMG – each of them stoney-faced while taking a volley of brickbats from angry MPs of all parties for two and a half hours.
All the tax experts from the big four agreed the OECD rules governing how multinational firms were taxed in different jurisdictions were outdated and needed changing – though each denied accusations that they had helped clients exploited the weaknesses at the expense of the UK taxpayer. Proposals for reform are expected from the OCED later this month.
Hodge – who once worked for PwC, though not in tax – noted that between them, the big four make almost £490m annually from public sector work. "I think it is questionable whether you should get public contracts," she said. Dixon disagreed, claiming the four companies were "one of the biggest contributors to tax in the UK."
The MPs grew increasingly frustrated as the accountants attempted to explain some of the arcane and linguistically perverse tax concepts at the root of some the controversy. "A warehouse is not a 'permanent establishment'," explained Dixon at one point. "An internet-based business, where essentially the website and the server are based outside the UK, is also not a 'UK permanent establishment'."
Internationally, Dixon said the accountancy group employed 29,000 people offering tax advice, for which E&Y receives revenues of $6bn – just over a quarter of group revenues. As well as advising Google, Amazon and Facebook – each with controversial tax structures that result in little UK tax – E&Y are auditors to pub group Greene King, which was named by MPs because of an avoidance scheme defeated at tribunal by HMRC.
E&Y is also the auditor to Hewlett Packard, which was recently savaged at a US senate committee hearing for its aggressive approach to tax avoidance. Parliamentary committees in Australian and New Zealand are now expected to launch their own inquiries into multinational taxation.
PwC's Kevin Nicholson attacked the complexity of tax rules and suggested it was up to politicians to change the 1970s and 1980s guidelines on so-called "transfer pricing" – OECD principles governing where economic value is said to have occurred in cross-border trading within a multinational group.
"One of the challenges now is we're seeing a lot of discomfort, unrest and unhappiness around the fact that businesses are selling a lot in the UK but they are not seeing the profit [in the UK]. And part of the reason for that is the way the international rules were designed puts the value in different places. One of the debates we need to have now is how do you get tax and profits in the right places."
But Hodge challenged all four tax experts on their firms' relationship with government, waving two brochures from KPMG that she said offered advice on minimising tax. She noted that the tax experts cited in pamphlets entitled Controlled Foreign Company Reform and Patent Box: What's in it For You named KPMG tax experts Robert Edwards and Jonathan Bridges respectively, both of whom had previously worked on secondment at the Treasury, advising on the relevant legislation.
Hodge said this was "inappropriate and wrong … It is poacher, turned gamekeeper, turned poacher again." KPMG's head of tax, Jane McCormick, denied this characterisation, saying advice had been offered to government. Bill Dodwell, head of tax at Deloitte, noted experts from his firm were frequently seconded to government without payment.
Separately, Oxfam published a report on Thursday suggesting tax evasion – illegal non-payment of tax due, as opposed to tax avoidance was depriving the UK economy of at least £5.2bn a year, or almost £200 for every household. The charity said the unpaid tax could go a long way towards helping "rescue millions from the poverty trap"
Friday 1 February 2013
Bank boss waives bonus
The chief executive of Barclays bank,
Antony Jenkins, is to waive his bonus for last year
He said it would be wrong for him to receive a bonus, given what had been a "difficult" year for Barclays.
It is thought Mr Jenkins was in line to receive about £1m of a potential maximum entitlement of £2.75m.
Mr Jenkins took over as chief executive last August, just as Barclays was being rocked over mis-selling scandals and other issues.
He said in a statement: "To avoid further unnecessary public debate on this matter, I wish to make clear that I concluded early this week that I do not wish to be considered for a bonus award for 2012 and I have communicated that decision to the board.
"The year just past was clearly a very difficult one for Barclays and its stakeholders, with multiple issues of our own making besetting the bank.
"I think it only right that I bear an appropriate degree of accountability for those matters and I have concluded that it would be wrong for me to receive a bonus for 2012 given those circumstances."
Mr Jenkins' total potential pay package, including pension, basic salary, and incentives, was £8.6m.
Banks are currently reviewing the size of bonuses for senior staff, and there were reports this week that Royal Bank of Scotland will set aside £250m for payments. Last year, RBS's chief executive, Stephen Hester, waived his bonus.
Sign up, or resign
Barclays hit trouble last June, when it was fined £290m by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009.
The scandal sparked the resignations of three Barclays senior board members, including ex-chief executive Bob Diamond. He was replaced by Mr Jenkins, who was formerly head of retail and business banking.
Barclays has also set aside £2bn to compensate customers for the mis-selling of payment protection insurance.
On Friday, Barclays faced new claims that UK financial regulators were investigating the bank over money received from Qatar.
The Financial Times alleged that Barclays lent Qatar money to invest in the bank in 2008. Barclays was not immediately available for comment.
Last month, Mr Jenkins ordered all Barclays staff to sign up to a new ethical code of conduct or quit.
Thursday 31 January 2013
Women Boards
Business Secretary Vince Cable has called on the chairman and CEOs of the last seven FTSE 100 firms with all-male boards, urging them to increase the number of women in the boardroom.
The Business Secretary penned a letter asked the remaining companies Antofagasta, Croda, Glencore, Xstrata, Kazakhmys, Melrose and Vedanta, to explain what steps they have taken to up their female board representation and how they plan to make engender greater boardrooms diversity.
Cable said:
‘Over the last two and a half years we have seen real progress in the number of talented women reaching the boards of our top companies. During that time the number of all-male boards has fallen from 21 to the last seven remaining today, with the welcome news from mining giant Randgold being the latest step. My vision by 2015 is that Britain will not have a single FTSE 100 board without a significant female presence.’
‘Businesses should be making sure they have the right people around their top table. This is not about equality, this is about good governance and good business. The international evidence supports this: diverse boards are better boards benefiting from fresh perspectives, opinions and new ideas which ultimately serve the company's long term interests.’
‘I do recognise that for some businesses, like those in the mining and extractives industry in particular, there are unique challenges in diversifying their boards with the right experience. The frequent travel and project based work in remote areas of the world have all been cited as barriers to appointing more women in the past. However, successful modern companies learn to adapt and survive and doing nothing is not an option anymore. We've seen examples again today that this can be done and I am determined to see further action.’
Mining giant, Randgold Resources recently announced that Jeanine Mabunda Lioko has joined its board as a non-executive director.
In line with the efforts to increase boardroom diversity, last week Vince Cable announced that three of the five appointments to the Business Bank Advisory Group will be female.
In addition, he also announced that Dale Murray was the latest female non-executive appointment to the Department for Business, Innovation and Skills’ Departmental Board. Seven of the 21 attending the Departmental Board, and four of the nine attending the Executive Board, are female.
The number of all-male FTSE 100 boards has fallen from 21 in 2010.
In early January, Cynthia Carroll announced that she will step down from her role as Anglo American’s chief executive after six years at the helm.
Her exit left just two female bosses in the FTSE 100.
Carrol argued against the 'tokenism' of female CEO’s stressing the need for companies to 'develop' women so that they are 'capable of delivering and doing the job effectively'.
The latest Cranfield School of Management report (March 2012) into female executives showed an increase in the number of female-held directorships after a three-year plateau.
Released a year after the publication of the Davies report – which recommended at least 25% of board roles in FTSE 100 companies by 2015 should be held by women - the findings saw current figures at 15.6%.
Should that trend continue, the report predicts the minimum recommendations set by the Davies report, will be achieved with 26.7% of directors being female by 2015, and 36.9% five years further down the line.
E&Y off the hook
The Financial Reporting Council (FRC) has decided to drop the investigation against members of the ICAEW and Ernst & Young over the audit of Lehman Brothers International (Europe).
Following the conclusion of the investigation, the FRC’s executive counsel, Gareth Rees QC, has decided that no action should be taken against E&Y or any individuals in connection with their conduct in this matter.
This matter was referred to an expert to consider the case. Following this, executive counsel decided that there was no realistic prospect that a tribunal would make an adverse finding against E&Y in the UK or members within that firm. The FRC has confirmed that the investigation will now be closed and no further action taken.
The scope of the FRC investigation covered the ‘conduct of members and a member firm in relation to the preparation of reports to the Financial Services Authority (FSA) in respect of Lehman Brothers International (Europe)’s compliance with the FSA’s client asset rules for the year ended 30 November 2007’.
The focus of the investigation was the audit by E&Y of Lehman Brothers International (Europe) and its compliance with the CASS rules. E&Y audited client money opt out arrangements, client classification and the segregation of client money post MiFID.
In the course of the investigation, the investigation team obtained and reviewed E&Y’s audit files and hard copy documentation. The team also interviewed E&Y audit team staff.
The Accountancy and Actuarial Discipline Board (AADB) started the investigation on 9 September 2010 and decided, pursuant to paragraph 5(8) of the AADB Accountancy Scheme, that the matter should be investigated.
Further details are available from the FRC.
HMRC Windfall
With time running out for tax payers, HMRC is still on course for a £130m windfall in late-filing fines despite 150,000 completed returns so far having been received today alone.
According to HMRC, in just the hour between 11 and 12 this morning, more than 43,000 Self Assessments were received before the deadline of midnight tonight (31 January 2013) is reached.
An HMRC spokesperson said:
‘We have so far received more than 150,000 tax returns today, and we expect that to increase significantly. Last year there were over 445,000 completed on deadline day alone, but currently there are still close to 1.3m as-yet still outstanding.’
Should the 1.3m who have not filed their tax returns fail to do so before tonight’s cut-off point, HMRC would be owed £130m in late-filing fines – compared to the eventual £85m taken last year.
Christopher Clark, operations director, at Boox, said:
‘The £100 fine will hit tomorrow morning and hurt a lot of families struggling with the impacts of the economic downturn. Tax returns needn't be complex but can present a challenge to many people not familiar with these types of forms and procedures.’
Tony Bernstein, tax partner at HW Fisher & Company, said:
‘Filling in a self-assessment form can be a time-consuming process, but by working efficiently in the final hours before the deadline you can give yourself a fighting chance of getting it done in time. Finally, check everything carefully before pressing submit - and make sure you do so before midnight!’
Although the deadline for filing a paper return has already passed, tax returns for 2011/12 can be filed on the HMRC website before midnight tonight.
Further details are available from HMRC.
Tax avoidance scheme
On the last day to file your 2012 tax return, thought you might like this tax avoidance scheme!
Self assessment terrifies people
Over a fifth of owners of the UK’s smallest businesses feel anxious about completing their Self Assessment (SA) tax returns, according to research carried out by YouGov on behalf of online accounting provider FreeAgent.
In a poll of over 500 owners of companies with five or fewer members of staff, 21% said that they were anxious about completing their tax return, while 5% said they were terrified - with just 35% saying that they felt confident about the process.
The poll also shows that 56% of those surveyed admit that they will either pay a professional bookkeeper or accountant to complete their return for them (52%), or ask a friend or family member for help (4%).
Many often leave submission as late as January, with 46% estimating they’ll complete their returns within the month before the deadline, 16% within the final week.
Ed Molyneux, FreeAgent CEO, said that the survey results showed that SA remains a major cause for concern for many business owners, despite HMRC’s commitment to making the process as easy and hassle-free as possible.
He said: ‘The whole point of Self Assessment is that it should be as simple and stress-free as possible, and it clearly isn’t for many business owners. Self Assessment is supposed to be an easy process that anyone can do, yet more than half say they’ll get an accountant or friend to help them - which suggests that the government may need to consider making changes to ensure the process is easier.
‘As more small business owners turn to online accounting for managing their finances, I believe tax season will become a far less stressful and worrying time - which, in turn, will enable people to focus on running and growing their businesses.’
HMRC keeps us holding on!
As many as 17m people waiting more than five minutes on the phone for a tax query to be answered is 'acceptable', according to HMRC’s boss when grilled by a panel of MPs.
The startling assertion was made by chief executive Lin Homer during her appearance before the Public Accounts Committee (PAC), defending the tax department’s record in dealing with calls from members of the public and business community.
Referring to the figures released in a National Audit Office report, which revealed that 76% of the 80m calls for the period of 2011/12 were answered, Homer said: ‘If we can answer 90% of calls – like the last quarter - we think that people will wait up to five minutes. People believe that ... is reasonable.’
The HMRC boss also admitted that a four minute call waiting time did not include up to two minutes spent listening to pre-recorded messages but that from April, 80% of calls would be answered within five minutes.
PAC chair Margaret Hodge, who began the session by stating how ‘disappointing’ HMRC’s call centre results were and that ‘it was difficult to know where to start’, described the target of five minutes waiting time as ‘unambitious’ and ‘miles below the industry benchmark’.
Calculating that the remaining 20% of callers - who would have to wait longer than five minutes to speak to a person – would be 16 or 17m, Hodge said that ‘was a heck of a lot’ of callers.
In other exchanges, Homer also acknowledged that it wasn’t acceptable that callers had to fork out a combined £136m in call charges, declaring ‘we have got to do better’.
The PAC hearing is available to view from
Swiss pay HMRC half a billion
The UK-Swiss tax agreement which came into force on 1 January 2013 has delivered £342 million as the first tranche of revenue to the UK. This is the first instalment of a levy on the accounts of UK taxpayers in Switzerland to cover arrears of tax that should have been paid to the UK.
Current and future tax liabilities will be covered by a new withholding tax of 48 per cent on income.
Under the agreement, people with taxable assets in Switzerland have a choice of authorising their financial institution to disclose the details to HMRC or have the levy and withholding tax applied by the institution.
Exchequer Secretary David Gauke said:
'Our agreement with the Swiss Government will deliver around £5 billion of previously unpaid tax to the UK.
‘The first down payment of 500 million Swiss francs has now been received. This is money which was owed to the UK and has now been paid.
‘Offshore evasion costs the UK billions of pounds every year and we are determined to tackle it. One of the ways is through information exchange and this agreement makes it easier for HMRC to obtain information about UK taxpayers suspected of hiding money in Switzerland.’
HMRC has recently published guide to the agreement. As well as explaining the options available under the agreement, this factsheet provides details of the other ways in which individuals can ensure that their tax affairs are brought up to date. It includes contact details for those who now wish to make a direct disclosure to HMRC.
The guide is available from HMRC.
NIC rates
HMRC has published draft regulations and an order setting out the National Insurance contributions rates, thresholds and limits for the 2013-14 tax year. The draft regulations and order are subject to approval by both Houses of Parliament.
The relevant draft regulations are the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2013 and the Social Security (Contributions) (Re-rating) Order 2013.
Accompanying explanatory memorandums have also been published by HMRC. Further details are available from HMRC.
Tuesday 29 January 2013
Monday 28 January 2013
Tax warning to direct sellers
HMRC is warning anyone selling directly to customers and who haven’t paid all the tax they owe, have one month to come forward and pay up.
Under the time-limited opportunity, direct sellers - often called agents, consultants, representatives or distributors - must tell HMRC about the tax due and make arrangements to pay before 28 February 2013.
Direct selling involves selling directly to customers and taking commission on sales without the need for a shop. It can involve demonstrating a product in a customer’s home or selling at a party. Some agents sell door to door, and many use catalogues.
From today, HMRC will be writing to direct sellers to let them know about the Direct Selling campaign. After the 28 February deadline, HMRC will begin contacting direct sellers who did not come forward to take part in the opportunity, if HMRC believes they owe tax.
HMRC is inviting direct sellers to a live Twitter question and answer session, with tax experts who will answer questions about the campaign, on 7 February, between 1pm and 2pm. Follow @HMRCgovuk and tag questions #dsqa in advance or on the day.
Marian Wilson, head of HMRC Campaigns, said: “Anyone involved in direct selling who has not told HMRC about all of their income might not be paying the right amount of tax. The Direct Selling campaign is a chance to bring their tax affairs up to date, on the best terms. Anyone with questions should join our Twitter Q&A on 7 February, where our experts will be available to help.”
No win no fee
Creditors pursuing unpaid debts in court will be exempt from new rules on no-win, no-fee lawyers, thanks to legislation introduced by the government.
The exemption for insolvency practitioners (IP) means that payouts awarded in successful cases will not be restricted, as would have been the case before the legal amendment.
Liquidators, trustees in bankruptcy and administrators will all be exempt from a clampdown on the controversial no-win, no fee litigation funding and – significantly – with no time restrictions imposed.
The Association of Business Recovery Professionals, R3, welcomed the exemption that is similar to the one made for defamation cases.
Frances Coulson, R3 council member, said: “The exemption allows Insolvency Practitioners to pursue errant directors who have run off with company funds, or in serious cases, committed fraud. This costs the business community and the taxpayer hundreds of millions of pounds each year. Directors, who act improperly and strip value out of businesses, should not be allowed to benefit at the expense of legitimate business.”
Legislation was introduced to outlaw conditional fee arrangements (popularly known as no-win, no-fee deals), following recommendations made in a government-commissioned report.
Shortfall of accountants
The UK faces a shortfall of 10,200 qualified accountants by 2050, due to skills shortages, an ageing workforce and restrictive migration policy, according to Randstad Finance and Professional, the specialist recruiter.
The UK workforce as a whole will have a deficit of 3.1m by 2050, a figure which represents 9% of the required workforce. Using employment rates from the most recent European population analysis from Eurostat, the statistical office of the European Union, as a measure of demand, Randstad analysed the projected changes in UK population and working age rate for 2050 to establish the gap between employment demand and workforce supply.
The analysis showed that with a population of 74.5m, in 2050 the UK will require a workforce of 35.4m to meet demand. However, with a pool of just 45.1m people (60.5% of the population) forecast to the eligible to work in 2050, even if the employment rate matches pre-downturn levels of 71.6%, an ageing population will leave the UK with only 32.3m people in employment – 3.1m short of the 35.4m required to meet demand.
Despite the shortfall, the accountancy and finance sector is set to fare better than others. Qualified accountants represent 0.3% of the entire UK workforce, assuming this proportion remains constant, by 2050, the UK will have a deficit of 10,200 accountants. The education sector faces the biggest shortfall with the prospect of a deficit of 128,000 teachers by 2050.
Tara Ricks, managing director of Randstad Financial and Professional, said: “If the UK economy is to grow and overcome the difficulties of the last few years then it requires a strong workforce capable of meeting demand. Our projections are conservative but they still portray a worrying scenario for the country over the coming decades. With an ageing population, we need to ensure we are open for business and welcoming talent from around the world to bolster our workforce. Unfortunately, with a stagnant economy and crippling work related migration policy, the UK represents a much less attractive option for both domestic and overseas talent.”
Sunday 27 January 2013
Bosses
In his new book Office Politics psychologist Oliver James identies three types of bosses: cold ruthless psychopaths;Machiavellis;vain puffed up narcissists! Which are you???
Glass ceiling myth
Is the glass ceiling" a myth? A recent study by Wealth and Investment Management found that women who own their own business earn nearly 17% more than men in the same position.
Friday 25 January 2013
Are the GDP figures believable?
The British economy contracted by 0.3% in the final quarter of 2012, leading to fears that the economy could plunge into a triple dip recession.
The Office for National Statistics (ONS) said the fall was primarily down to a drop in mining and quarrying, following delays in maintenance at the UK's largest North Sea oil field.
The economy actually grew by 0.9% in the previous quarter, boosted by the “feel good” factor of the London 2012 Olympic Games.
Growth over the entire year was flat, meaning the economy is still some 3.3% smaller than it was at its pre-crisis peak.
The biggest factor for the drop was mining and quarrying output falling by 10.2% - its most dramatic decline since records began 16 years ago - driven by disruption to North Sea oil and gas fields.
If oil and gas extraction are excluded from the GDP calculations, the economy would only have shrunk by 0.1% in the fourth quarter, the ONS said.
The ONS said it was a "bumpy” and “sluggish” economy.
Manufacturing fell by 1.5% in the fourth quarter, the services sector was flat, but construction output rose by 0.3%.
A Treasury spokesman said: ‘It underlines what the Chancellor said at the Autumn Statement and the Governor of the Bank of England said this week: while the economy is healing, it is a difficult road.
‘While today's data confirms the scale of the challenge facing the British economy, this week has also seen the strongest yearly increase in jobs for over 20 years. A million new private sector jobs have been created and the deficit is down by a quarter.’
Chancellor George Osborne said the figures were "a reminder that last year was particularly difficult, that we face problems at home with the debts built up over many years, and problems abroad with the eurozone, where we export many of our products, deep in recession.’
‘Now we can either run away from those problems or we can confront them. And I'm determined to confront them so we can go on creating jobs for the people of this country,’ he added.
Shadow chancellor Ed Balls said: ‘This government's failing plan has now seen our economy stagnate for over two years and borrowing is now rising as a result.’
French dodge taxes
More than a fifth of French tax revenues could be lost to evasion, according to investigations carried out by an influential employee body based in the country.
The French Solidarity Public Finance union suggest that between €60bn (£50.8bn) and €80bn may be slipping through the coffers of President François Hollande’s tax department, which, if accurate, would mean lost revenues of €30bn more than France collects in income tax. This is in stark contrast to the UK where HMRC estimates that evasion accounts for £32bn of possible tax revenue.
Further still, the group claim that the shortfall is only increasing, citing equivalent figures for 2007 of €42-51bn – implying a rise of between 30 and 40%.
In its report, the union advocates the deployment of additional staff tasked with combating tax evasion by both individuals and corporations, although Vincent Drezent, general secretary of the union observes that the issue was primarily one concerning big businesses.
Drezent was also critical of the inaction of successive French governments, who consistently pledge to strengthen resources for tax officials, and yet are only recovering around €13bn every year.
Since Hollande moved into the Élysée Palace, his government has launched a major overhaul of the French tax system in the country, including a controversial ‘Google tax’ and a 75% tax rate for millionaires - that saw actor and French national treasure Gerard Depardieu take on Russian citizenship, in an effort to avoid the onerous tax.
The Socialist government has also had to suffer the embarrassment of its minister responsible for tax policy, Jérôme Cahuzac, facing an official inquiry into allegations of tax fraud
Cuts - what cuts again!!
The IMF’s chief economist has urged Chancellor George Osborne to consider easing off on some of his planned austerity measures, as UK economic growth remained sluggish.
Olivier Blanchard told Radio 4's Today programme on Thursday that the state of the British economy had clearly deteriorated a fact that had led the fund to revise down its forecasts for UK growth to 1pc this year.
He suggested that the forthcoming March Budget would be an opportune moment to ‘take stock’.
‘We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy,’ he said. We still believe that. You have a budget coming in March and we think this will be good time to take stock and see if some adjustments should now be made.’
‘We've never been passionate about austerity. From the beginning we have always emphasised that fiscal consolidation should be slow and steady,’ he said.
Blanchard added that “slower fiscal consolidation in some form may well be appropriate – the exact numbers I don’t know - that has to be worked out.”
But speaking in Davos this morning, Prime Minister David Cameron robustly defended the Government’s economic record:
‘How do we succeed when other nations are growing, changing, innovating so fast? A lot of the answers are clear. Deal with your debts. Cut business taxes. Tackle the bloat in welfare. And crucially: make sure your schools and universities are truly world class.’
‘In the UK we've been doing all these things. Less than three years in and we've cut the deficit by a quarter. Our corporation tax rate is the lowest in the G7.’
The IMF has downgraded its expectations for UK growth to just 1.9% in 2014, compared with the 2.2% previously predicted.
Tax return filing
Anyone who has been putting off filing their tax returns, now only has a week to get their house in order so as to avoid receiving a fine, warns HMRC.
Self Assessment tax returns for the year 2011/12 must be sent to HMRC by no later than the 31 January 2013 with £100 late-filing penalties being issued to those failing to do so – even if they don’t have any tax to pay, or it was paid on time.
Additional late-filing penalties after three, six and 12 months will also be handed out for anyone who persists in not sending the required information.
HMRC found that people often felt a real sense of relief, or peace of mind, once they sent in their return – like a weight being lifted from their shoulders.
A new ad campaign is encouraging people who still haven’t sent their return to “do it today, pay what you owe and take a load off your mind”, so they can experience “inner peace”.
Further information is available from HMRC.
Cameron attacks accountants
The UK accountancy profession has been left reeling by Prime Minister David Cameron’s outspoken attack on the industry.
Speaking at the World Economic Forum in Davos, the PM dubbed the profession as being part of a “travelling caravan of lawyers, accountants and financial gurus” engaged in tax avoidance.
Michael Izza, ICAEW’s chief executive, who is attending the event at the upmarket Alpine Swiss resort, said:
‘As a profession we spend a great deal of time working with policy makers to achieve this balance. Which was why I was disappointed to hear the Prime Minister again dismiss accountants, this time as an “army” of avoiders. ‘We don’t recognise that description. Our members do not support illegal tax evasion or the kind of aggressive tax avoidance that we believe to be unethical. In fact, an effective accountancy and finance profession can and does help solve many of the problems the Prime Minister wants to address.’
Izza stressed that accountants play “a key role in making the UK’s tax system work”.
‘Professional accountants everywhere are helping their clients pay the right amount of tax to the right governments at the right time.’
‘It’s true, as the PM says, that countries without this professional capacity struggle to collect the right amount of tax. Which is why ICAEW is working in places like Nigeria to help tackle the problems outlined in the speech this morning.’
Cameron was quick to defend “sensible tax planning” explaining that there “are some things governments want people to do to that reduce tax bills, such as investing in pensions, start-up businesses or charities”.
But he said avoidance was “an issue whose time has come”.
‘After years of abuse, people across the planet are calling for more action and most importantly, there is gathering political will to actually do something about it.’
‘In the UK we’ve already committed hundreds of millions into this effort – but acting alone has its limits.’
‘Clamp down in one country and the travelling caravan of lawyers, accountants and financial gurus just moves on elsewhere.’
‘So we need to act together at the G8.’
‘If there are difficult questions about whether existing standards are tough enough to tackle avoidance, we need to ask them.’
‘If there are options for more multi-lateral deals on automatic information exchange to catch tax evaders, we need to explore them.’
A furious Izza said the PM “would also do well to remember the accountancy profession employs a quarter of a million people in the UK alone, generating more graduate jobs than any other sector.”
In a final defiant riposte, Izza added:
‘My message is simple. Our profession is part of the solution: promoting trust and confidence in business at all levels. It is time the PM stopped castigating this vital economic sector and recognise just what we contribute to growth.’
Francesca Lagerberg, tax partner at Grant Thornton, said:
‘'Once again tax is on the agenda but the key here is international co-operation. To make sensible changes that satisfy the calls for transparency and 'fairness', it needs countries to work together to reach solutions. No single country will want to drive business away by acting unilaterally in law changes. It needs a global approach.’
Doug Sinclair, head of tax investigations at UK200 Group member firm Berg Kaprow Lewis, was equally affronted. He said:
‘Once again, David Cameron has sought to bring a moral dimension to the issue of tax avoidance. Last year it was individuals who were subject to David Cameron’s moral compass, now it is the turn of global companies who would have taken extensive accountancy and legal advice to ensure they stayed within the letter of the law regarding their UK tax obligations.’
Tuesday 22 January 2013
GAAR again
Two of the UK’s top tax lawyers told the House of Lords Sub-Committee on the 2013 Finance Bill that plans to introduce a General Anti-Abuse Rule (GAAR) this year will not be able to eradicate multinational tax planning and avoidance.
But it will help clamp down on “certain individuals who have taken tax planning to such levels that they are playing fast and loose with the rules to the point where it is unacceptable... and abusive”.
That’s the view of Graham Aaronson QC, tax barrister and leader of the GAAR (General Anti-Abuse Rule) study group 2011. He was appearing on Monday alongside Malcolm Gammie QC, tax barrister and member of the IFS Tax Law Review Committee. Both have been instrumental in driving government efforts to reduce tax avoidance.
The duo appeared before the peers on Monday in the first of two committee sessions looking into dealing with tax avoidance and how effective the new GAAR may be in addressing various types of tax avoidance recently highlighted in the media.
Aaronson told the committee:
‘Until we have the same tax system throughout the world, it’s inevitable that multi-nationals will locate their companies where it suits them best.’
‘While GAAR “cannot do anything about this”, he said it may be able to make “some extra checks and balances”.’
‘Multi-nationals will locate ownership of their assets in certain jurisdictions to get favourable advantages on a global basis. It makes taxing multinationals very challenging. Even if every tax system in the world was the same, the problem is that it’s so easy to move activities and profits to different jurisdictions.’
Some tax regimes try to attract investment, he said. He pointed to the example Puerto Rico, where half of all the world’s pharmaceuticals are now manufactured as a direct result of a favourable tax regime set up by the US to specifically drive inward investment from the global pharmaceutical industry to the country.
Meanwhile, Malcolm Gammie QC, told the committee:
‘It’s important to remember that GAAR is just one of the weapons that the Revenue deploys to deal with avoidance of one sort or another. It has been successful in stopping most artificial schemes under the Ramsay rules, for example, people who buy and sell guilt strips in less than 24 hours. With this GAAR, such a scheme will just not get off the ground.’
The second session is scheduled for 23 January at 15.35 It will focus more on tax practitioners and technical experts with Patrick Stevens, president of the Chartered Institute of Taxation (CIOT), Bill Dodwell, head of tax policy at Deloitte and vice chairman of the CIOT Technical Committee and Richard Murphy, head of Tax Research LLP and a vociferous critic of corporation tax avoidance.
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