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king_pellinorI listened to yesterday’s Public Accounts Committee meeting with the Big 4 accountants yesterday.
It was billed as a chance for the PAC to collect evidence about tax avoidance. In fact it was just a soapbox for Margaret Hodge to browbeat a load of straw men. She made herself look absolutely ridiculous, in my eyes: she seems to think she’s a headmistress telling off some naughty schoolchildren. Austin Mitchell wasn’t much better, though he was fairly inarticulate most of the time so it was hard to tell.
Hodge clearly has an idea of what happens in business, and although she was supposed to be collecting evidence she set out far more “facts” than the witnesses did. Her refrain was “I don’t agree”, whenever someone made a valid point that ran counter to her prejudice. I cannot see that she will have changed her mind in any way, but then I don’t think she intended to: all she was after was to try to get the Big 4 people to admit something she could attack them for.
Running through my notes in order (I may ascribe to Hodge views expressed by Mitchell or the rest of the PAC, but she agreed with anything that questioned the Big 4):
Straw man: she starts off by telling people how their business runs. No-one apparently gets the Big 4 to fill in forms, as a high street accountant would be cheaper, so obviously everything all their tax people do is tax avoidance. She’s amazed that they don’t say “for every £1 you pay us, we’ll save you £X in tax”, as that’s what she’d do. Tax work *must* be more profitable than anything else that can be done.
She seems to have no conception of the idea that 20,000 pages of tax law make life a bit complicated, so sometimes you need experts just to take you along the path and a general practitioner can’t necessarily deal with everything. Nor of the fact that many clients don’t like paying for legal obligations: the Government has made their lives complicated, so they resent paying for the help they’re forced to get.
She can’t cope with the fact that tax is a consequence of a transaction. To her, what happens is that an advisor says “Do A and you’ll save tax”, the courts say “no you won’t”, and so the tax gets paid because A should never have been done in the first place. Doing A is illegal.
To me, what happens is that the advisor says “If you do A, then you’ll probably pay X in tax; but we might be wrong and you might pay Y”. Then the courts say it’s Y, so you pay up. You still did A, it’s just that you were wrong about the tax bill. Doing A is perfectly legal.
Amazon: she’s gobsmacked that all the warehouses don’t constitute a permanent establishment of Amazon in the UK, so no direct tax arises on their operation. The Big 4 are wrong to treat the warehouses like that. Oh, except that this stuff is expressly set out in double tax treaties negotiated and signed by the Government, normally in a standard form agreed by the OECD.
Does she *really* mean that the Big 4 should say “we disagree with the OED and the Government, so we’re going to ignore the legislation when deciding how things should be taxed”? Really? Thought not.
She’s also amazed that this means that no VAT will be payable on all these sales in the UK. Shocking! Only, er, VAT is paid. Amazon Luxembourg can be registered for UK VAT even if it’s not got a permanent establishment for direct tax purposes. Because, well, they’re different taxes and the UK and the EU wrote different rules for them. And no, this is not the Big 4 and Amazon exploiting a “loophole”, as she puts it, this is explicit law. In fact it’s very simple, basic law.
The PAC had a bit of a digression about whether not paying VAT that is due to HMG would be fraud. Yes, it clearly would, say the Big 4. And Amazon pays UK VAT on sales in the UK. So the question’s completely irrelevant. But I think the PAC just wanted to have the word “fraud” in the transcript as often as possible.
Starbucks: Hodge thinks absolutely all the value of a cup of coffee arises when you sell it: no-one in the entire company does anything at all valuable, except the baristas. I have no idea why anyone works for that company in any other role, then, because clearly they don’t get paid for all this useless work roasting coffee beans, buying cakes, marketing the place, running the loyalty scheme, delivering the cups. Idiot. What she means is that any work done that has any connection with the UK at all should be taxed solely in the UK. She’s worse than California.
Patent Box: A KPMG partner helped the Government out with the design of the Patent Box regime, which is expressly designed to lower the tax bills of companies doing Good Things.
He has then gone back to KPMG to tell all his clients how to use the Patent Box to avoid Tax! Bastard! When the Government said it wanted to give tax relief, it clearly didn’t mean that people should pay less tax by claiming it - that’s tax avoidance!
It’s *exactly* like that person in the coffee shop the other day. I said “If you give me a cup of coffee and a cake, I’ll give you £5”. They gave me a cup of coffee and a cake, and then do you know what they did? They took a £5 note right out of my hand and put it in their till! In broad daylight!! I couldn’t believe the barefaced thievery!!!
KPMG of course said that claiming relief that Government has expressly said should be available is “fulfilling the purpose of the legislation”, but of course Hodge pointed out that it is clearly impossible that the Government could ever intend anyone to pay less tax, under any circumstances.
Legislation generally: Hodge really doesn’t like the way that the Big 4 write all these laws, and Parliament is powerless to stop them. She seems to misunderstand her role as an MP. Perhaps she should do something she can cope with, like serving coffee?
Axiom: the Big 4 are writing all these laws, maugre Parliament’s head, to make life as complicated as possible to they can earn more fees. The Big 4 say they’d like life to be simple so they could spend less time worrying about whether they’ve checked all the exceptions to the exclusions to the exemptions under the transitional rules, and more time doing something that their clients will pay them to do. Hodge disagrees - she knows more about heir business than they do.
HMRC: Two points here. Austin Mitchell rambled on about a small high street accountant constituent of his, that HMRC had been mean to in some unspecified way. This clearly shows how evil the Big 4 are. I think this was to do with the complexity of legislation, but I’m not sure.
The other point Mitchell wants to make is that HMRC is made up of a small number of stupid people, whereas the Big 4 have lots of clever ones. So whenever they clash, the Big will invariably win. This is clearly the Big 4’s fault, and nothing whatsoever to do with HMRC cutting jobs and paying low salaries.
I’d add that it is also well known that it is inherently easier for an accountant to determine the precise tax position of a company than it is for HMRC to check their workings and raise queries. After all, it’s much quicker to write a book than to read it.
Morton’s Fork: Hodge pointed out that the Government has set up the Office of Tax Simplification to strip out all this complexity that the Big 4 have insisted on, and that it’s such a shame that the Big 4 aren’t helping the project in any way.
She was only briefly silenced when it was pointed out that John Whiting, who founded it, was a PwC partner. She went on to challenge Bill Dodwell of Deloittes (I think it was he) to contribute some resources to the project, only to be told that he had one secondee in there already and was discussing sending a second. So she turned to EY, asking if they’d do some pro bono work, to be told that they’d be happy to as long as they weren’t then criticised for putting a man on the inside for immoral ends (see Patent Box).
I think that pretty much sums up Hodge’s approach to this: she’s already decided what’s going on, she doesn’t know or care about the facts, and she’ll attack people whatever they do.
Captive insurance companies: According to the Big 4, these are set up in Jersey because the insurance regulatory environment is favourable. Hodge laughed derisively at this and call them “naïve”: they are clearly done to avoid tax. It was pointed out that all the profit is taxed in the UK, so there is no tax avoidance; Hodge ignores this. They’re in Jersey, therefore they exist for tax avoidance, QED. One wonders why she so proudly mentioned (twice) that she’s been to the Caymans - this seems to be as much proof that she’s a tax avoider as she’s adduced about the sort of company that engages the Big 4.
Final remarks: The Big 4 exist solely to cut the amount of tax people pay. Any protests that actually it takes a bit of effort to find out what the tax liability is, never mind what it might be if you did something else, are completely dismissed. Hodge would get that done by someone cheap, anyway, presumably because it takes no effort or expertise at all. Auditors should on no account give tax advice, and as there’s no such thing as tax compliance that presumably means they should have no tax people in the firm at all.
Last word: only naughty children smoke behind the bike sheds. You’re very clever when you put your mind to things, and if only you’d pull your socks up and do something productive, it’d be much better for everyone. Now off you go, and be thankful I’m not putting you in detention this time.
Patronising fool.
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HMRC cutting jobs and paying low salaries.
Date: 2013-02-01 03:40 pm (UTC)Apparently it is Whitehall? But the HMRC website did not tell me this, I had to look in Wikipedia, which I think one of these enquiries has already established is also run by suspiciously-clever people who are Up To No Good.
Re: HMRC cutting jobs and paying low salaries.
Date: 2013-02-01 04:56 pm (UTC)Re: HMRC cutting jobs and paying low salaries.
Date: 2013-02-02 08:38 am (UTC)no subject
Date: 2013-02-02 12:32 pm (UTC)Quite often, Inspectors ask us to email a copy of a letter over to them so they can deal with it this month, rather than waiting for Pootle to send it over.
no subject
Date: 2013-02-01 05:03 pm (UTC)I can agree with this. Auditors in Big 4 firms know sod all* about tax. They should always get the Tax Department to do it.
* Where "sod all" is a small amount compared to tax specialists, but still several orders of magnitude more than politicians like the homeopathy enthusiast MP for Barking (was there ever a politician with a more appropriate constituency?) and retards like Richard Murphy.
no subject
Date: 2013-02-01 05:13 pm (UTC)Or for that matter all those French footballers fleeing French football to escape France's punitive tax regime (Newcastle United alone signed FIVE footballers from French teams in the transfer window that has just closed). Of course in Murphyworld, that didn't happen because everyone knows that rich people don't move country to avoid paying ludicrously high tax rates.
Richard Murphy. Profession: Retard. And to make the bizarre discussion on tax that we now have in this country even more surreal, he's going to serve on the General Anti-Avoidance Rule committee! Isn't that rather like appointing the chairman of the Flat Earth Society to the council of the Royal Geographic Society?
* Although I strongly suspect that somewhere in his contract is something about image rights and merchandise sales outside of France.