Contrived tax avoidance schemes that fail the ‘smell test’ bring the accountancy profession into disrepute, the President of the Institute of Chartered Accountants of Scotland has warned.
Sir David Tweedie said the recent ‘scandal’ over aggressive tax avoidance schemes had prompted him to compare ‘the idealism of our young chartered accountants’ with the schemes being invented and sold by some accountants. His comments echo those made in recent weeks by Michael Izza, Chief Executive of the Institute of Chartered Accountants in England and Wales. Leading figures in at least four professional bodies – ICAEW, CIOT, STEP and ICAS – have declared their support for the government’s efforts to tackle aggressive tax avoidance amid concerns that recent publicity has tarnished the reputation of tax professionals, including those who do not promote avoidance schemes.
‘I found it hard to reconcile these devices with the declaration made at the admission ceremony, which mentions serving the public interest, acting with integrity and doing nothing to damage the member’s reputation, that of the profession or of ICAS,’ Tweedie, a former Chairman of the International Accounting Standards Board, wrote in the monthly magazine The CA.
‘Let’s be clear: the vast majority of accountants do not have any dealings with these aggressive avoidance schemes. We are speaking about a small minority. But even a minority is too many.
‘I hated reading that “some experts said even the sweeping anti-avoidance measures floated by the Chancellor at the Budget would be circumvented by clever accountants and lawyers” and “it’s a game of cat and mouse. The Revenue closes one scheme and we find another way round it.”
‘The quotes remind me of a merchant banker telling me, when I was KPMG’s Technical Partner, that we would never beat his firm’s schemes to get assets and liabilities off his clients’ balance sheets.
'It is with great pleasure that we introduced FRS5 (an accounting standard that requires entities to report the substance of their transactions in financial statements) and, with the backing of tough auditors, drove out the worst of the abuses.
‘We may have to do something similar when dealing with taxation issues. It is obvious, but the Government needs taxation to provide the level of services for which we vote. We have to pay our fair share and at the right time.’
Principles
Tweedie said he personally found it ‘socially abhorrent’ that high earners could, by the use of artificial devices, avoid paying tax. ‘How do we deal with this issue? Do we need yet more complicated tax rules? Or, can we tackle it another way, by a series of principles outlining a code of practice, different behaviour and a tone at the top – one I suspect already exists in many firms – that refuses to get involved in contrived schemes which fail the “smell” test. Smart alec schemes bring this profession into disrepute. It is time that they stopped.’
Stephen Herring, Tax Partner at BDO, said there was a ‘broad consensus’ that ‘abusive tax planning products need to be stopped’. Writing in the ICAEW magazine Economia, he said people should be ‘very suspicious’ of investments appearing to eliminate their tax liabilities without investment risk, ‘as if by alchemy’. In the same item anti-avoidance campaigner Richard Murphy said it was time for the accountancy profession to ‘make clear tax avoidance is unethical – and reason for being excluded from our institutes’.
Annual Budget ‘should be scrapped’
ICAS has also called for the annual Budget to be scrapped. ‘A longer-term approach would encourage governments to set a clear strategy for the taxation system and avoid the political temptation of an eye-catching announcement every year,’ said Derek Allen, ICAS Director of Tax.
‘If there is only one Budget every few years, changes to the taxation system outside that process may also attract a better level of scrutiny from MPs. At present, it is not realistic to expect many MPs to look in detail at 600 plus pages of legislation.’
Contrived tax avoidance schemes that fail the ‘smell test’ bring the accountancy profession into disrepute, the President of the Institute of Chartered Accountants of Scotland has warned.
Sir David Tweedie said the recent ‘scandal’ over aggressive tax avoidance schemes had prompted him to compare ‘the idealism of our young chartered accountants’ with the schemes being invented and sold by some accountants. His comments echo those made in recent weeks by Michael Izza, Chief Executive of the Institute of Chartered Accountants in England and Wales. Leading figures in at least four professional bodies – ICAEW, CIOT, STEP and ICAS – have declared their support for the government’s efforts to tackle aggressive tax avoidance amid concerns that recent publicity has tarnished the reputation of tax professionals, including those who do not promote avoidance schemes.
‘I found it hard to reconcile these devices with the declaration made at the admission ceremony, which mentions serving the public interest, acting with integrity and doing nothing to damage the member’s reputation, that of the profession or of ICAS,’ Tweedie, a former Chairman of the International Accounting Standards Board, wrote in the monthly magazine The CA.
‘Let’s be clear: the vast majority of accountants do not have any dealings with these aggressive avoidance schemes. We are speaking about a small minority. But even a minority is too many.
‘I hated reading that “some experts said even the sweeping anti-avoidance measures floated by the Chancellor at the Budget would be circumvented by clever accountants and lawyers” and “it’s a game of cat and mouse. The Revenue closes one scheme and we find another way round it.”
‘The quotes remind me of a merchant banker telling me, when I was KPMG’s Technical Partner, that we would never beat his firm’s schemes to get assets and liabilities off his clients’ balance sheets.
'It is with great pleasure that we introduced FRS5 (an accounting standard that requires entities to report the substance of their transactions in financial statements) and, with the backing of tough auditors, drove out the worst of the abuses.
‘We may have to do something similar when dealing with taxation issues. It is obvious, but the Government needs taxation to provide the level of services for which we vote. We have to pay our fair share and at the right time.’
Principles
Tweedie said he personally found it ‘socially abhorrent’ that high earners could, by the use of artificial devices, avoid paying tax. ‘How do we deal with this issue? Do we need yet more complicated tax rules? Or, can we tackle it another way, by a series of principles outlining a code of practice, different behaviour and a tone at the top – one I suspect already exists in many firms – that refuses to get involved in contrived schemes which fail the “smell” test. Smart alec schemes bring this profession into disrepute. It is time that they stopped.’
Stephen Herring, Tax Partner at BDO, said there was a ‘broad consensus’ that ‘abusive tax planning products need to be stopped’. Writing in the ICAEW magazine Economia, he said people should be ‘very suspicious’ of investments appearing to eliminate their tax liabilities without investment risk, ‘as if by alchemy’. In the same item anti-avoidance campaigner Richard Murphy said it was time for the accountancy profession to ‘make clear tax avoidance is unethical – and reason for being excluded from our institutes’.
Annual Budget ‘should be scrapped’
ICAS has also called for the annual Budget to be scrapped. ‘A longer-term approach would encourage governments to set a clear strategy for the taxation system and avoid the political temptation of an eye-catching announcement every year,’ said Derek Allen, ICAS Director of Tax.
‘If there is only one Budget every few years, changes to the taxation system outside that process may also attract a better level of scrutiny from MPs. At present, it is not realistic to expect many MPs to look in detail at 600 plus pages of legislation.’
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