Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Friday, April 26, 2013

Deloitte, Ernst And Young, KPMG And PwC Using 'Insider Knowledge' From Treasury To Dodge Tax

Big accountancy firms are using "insider knowledge" gained from Treasury staff to help companies and wealthy individuals avoid paying UK taxes.

The Commons Public Accounts Committee warned over the way the big four firms - Deloitte, Ernst and Young, KPMG and PwC - were able to exploit loopholes in tax laws.

Committee chairman Margaret Hodge said the practice represented a "ridiculous conflict of interest" which should be banned.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said.

The committee warned that HM Revenue & Customs (HMRC) was engaged in a "battle it cannot win" in seeking to stem the losses to the Exchequer from tax avoidance.

It had far fewer resources than the big four firms which employed almost 9,000 staff and earned £2 billion a year from their tax work in the UK.

The committee particularly highlighted the way the firms seconded staff to the Treasury to advise on technical issues in the drafting of legislation only for the individuals concerned to return to advise clients on how to use those laws to avoid tax.

"Through their work in advising government on changes to legislation they have a detailed knowledge of UK tax law, and the insight to identify loopholes in new legislation quickly," it said.

It gave the example of KPMG whose staff advised on the development of "controlled foreign company" and "patent box" rules, and then issued marketing brochures highlighting the role they had played.

The brochure "Patent Box: what's in it for you" had, it said, suggested the legislation represented a business opportunity to reduce UK tax and that KPMG could help clients in the "preparation of defendable expense allocation".

The committee said it was "inappropriate" for individuals from firms to advise on tax law and then devise ways to avoid the tax.

"We have seen what look like cases of poacher, turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay," it said.

"We are ... very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax."

While the firms insisted they no longer sold the "very aggressive" avoidance schemes on offer 10 years ago, the committee said they had simply moved on to offering other forms of tax avoidance advice.

It said they still offered schemes with as little as a 50% chance of succeeding if challenged - suggesting a willingness to take advantage of HMRC's need to weigh the risks of becoming involved in protracted legal battles.

Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "Our hideously complex tax code makes it easier for well-paid accountants to run rings around a taxman who is reliant on the external help of the big four.

"The committee is right to say that radical action is needed to simplify the tax system. Strategic reforms are needed to get rid of redundant double taxes and end the need for countless complicated reliefs. Then taxpayers could have confidence that everyone was paying their fair share."

The Treasury strongly rejected the committee's findings.

"The analysis and conclusions in the PAC report bear almost no resemblance to reality of what government is doing or what is happening," a spokesman said.

"In particular, as a matter of principle, the suggestion that government shouldn't work with business and indeed anyone affected by its policies is totally absurd."

Original Article
Source: huffingtonpost.co.uk
Author: PA/The Huffington Post UK

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