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STEP chief executive backs Izza in quarrel over ‘aggressive’ tax avoidance

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Some tax avoidance schemes ‘undoubtedly’ fail the test of fairness, and reputable professionals should recognise the changing tax environment when they advise clients, the chief executive of the Society of Trust and Estate Practitioners (STEP) said yesterday.

David Harvey backed Michael Izza (pictured right), CEO of the Institute of Chartered Accountants in England and Wales (ICAEW), after Izza declared on his Moorgate Place blog last Friday that chartered accountants engaged in abusive schemes should consider whether they wanted to belong to ‘our profession’.

‘The public mood has changed’

Harvey’s intervention came as Philip Stephens, chief political commentator at the Financial Times, declared that aggressive tax avoidance was now ‘on a par with welfare scrounging’.

Stephens wrote in today’s FT: ‘Until quite recently, the offshore trusts and service companies routinely used as tax shelters were judged to be part of the furniture of the modern market economy. To confound the tax authorities and save the odd million was clever sport. The public mood has changed.’

He added: ‘Tax cheating by the wealthy is now recognised as imposing an added burden on everyone else.’

But comments posted on Izza’s blog this week have laid bare the wide range of views among tax advisers on the merits of a general anti-abuse rule (GAAR).

There was no ICAEW press release, and no-one at the institute was immediately available to comment on the controversy. But the ICAEW did note on Twitter this morning that Harvey had backed Izza’s ‘view on aggressive tax schemes’.

ICAEW chief denounces promoters of abusive tax avoidance schemes

Izza’s remarks were published days after Patrick Stevens, president of the Chartered Institute of Taxation, had suggested that an extension of mis-selling rules to tax schemes that have ‘no real prospect of working’ might result in the tax system being treated with more respect. They were posted under the title ‘Chartered accountants and tax evasion’, prompting one respondent to point out that the difference between evasion and avoidance was ‘not insignificant’. The title was changed later to ‘Aggressive tax avoidance – my view’.


Harvey said there had been a major move by tax authorities around the world during the last decade to improve tax transparency by ‘making it harder to use so-called “secrecy jurisdictions” to evade taxes’.

He added: ‘As transparency improves, the focus is now increasingly moving to the use of what are seen as abusive tax avoidance schemes that can often lead to wealthy taxpayers paying little or no tax. “Fairness” must be an overriding goal of any tax system and some avoidance schemes undoubtedly fail that test. It is therefore important that all reputable tax professionals fully recognise the changing environment in the advice they give to their clients.’

‘Unproven assertions’

Ken Frost, FCA and tax blogger, had been the first to respond on Izza’s blog: ‘Avoidance is a perfectly normal human thing to try to do, the politicians and media are not in a position to lecture the rest of us on “morality”.’

Simon McKie, a barrister, chartered accountant and chartered tax adviser, said it was ‘very unfortunate’ that Izza should ‘repeat in this uncritical fashion the unproven assertions of journalists’. The ‘DOTAS’ disclosure regime had resulted in ‘the withdrawal of most accountants and solicitors from supplying packaged avoidance schemes’, he suggested.

Graham Aaronson, the tax barrister whose study group reported to the Treasury, had concluded last November that ‘purposive interpretation [of tax legislation], specific anti-avoidance rules and DOTAS are not capable of dealing with some of the most egregious tax avoidance schemes’.

'I think in this case Michael [Izza], while undoubtedly contentious, and possibly ahead of where many of his members are, is probably right.'

Mike Truman, Editor, Taxation

One ‘non-ICA’ practitioner said it was ‘bizarre’ for Izza to ask fellow chartered accountants who had not broken the law to leave the institute ‘on the basis of what one person considers to be the moral obligation of all chartered accountants’.

Richard Murphy, chartered accountant and anti-avoidance campaigner, argued that Izza had not gone far enough. ‘He should be condemning all those who seek to get round the law – for that is what tax avoidance is,’ Murphy wrote on his Tax Research blog. ‘And he should be condemning the use of tax havens to undermine the settlement of obligations due within the spirit of the law in the UK, and all those ICAEW members who service those tax haven operations.’

‘Messy’ debate

David O’Keeffe, an independent tax adviser and former KPMG tax partner, urged the professional bodies to unite and lead the tax avoidance debate, which was becoming ‘messy’.

‘My own view is that you can't have a situation where anything goes just because it is "legal",' he said in response to Izza’s piece. ‘I have never been comfortable with the concept of manufactured schemes that seek to exploit loopholes in an artificial way. However, trying to bring "morality" into the argument will also get us nowhere, it is simply too subjective.’

Avoidance industry ‘fired up’

Mike Truman, Editor of Taxation – produced by LexisNexis, publisher of Tax Journal –  noted that the ‘avoidance industry’ had ‘fired up in the last decade’.

Truman wrote: ‘I think in this case Michael [Izza], while undoubtedly contentious, and possibly ahead of where many of his members are, is probably right. The problem with schemes like K2, Icebreaker, and the D'Arcy scheme some while back, is that they are not a case of making the most tax-efficient choice between two ways of carrying out a particular transaction, they are simply artificial structures designed to either create losses that can be offset, or to allow people the economic benefits of having their money while not being taxed on them.’

Taxation has launched a survey of attitudes towards avoidance and evasion. It has invited readers to complete a questionnaire, anonymously, to indicate what they would be prepared to do to avoid tax.  The findings will be submitted to the government’s consultation on a proposed GAAR.