When I started life as a tax advisor (only 3 years ago) I never really questioned the morality of my job. I help people structure their tax affairs efficiently and ensure that they can protect their wealth whilst providing for future generations.
However, since the recession took hold in 2009, there has been a huge shift in public opinion. The general public are disgruntled by the likes of Jimmy Carr and Starbucks and understandably so when times are so difficult for the vast majority.
This makes the job that I do even more interesting. On a daily basis there are news articles announcing the latest ‘tax avoider’ and my friends are even becoming interested (sort of) when I discuss tax at the pub!
However, on the eve of the 2012 Autumn Statement where tax avoidance is likely to dominate the headlines, this shift in public opinion is verging on a profound change in the role of a tax advisor. Nobody is accusing Jimmy Carr or Starbucks of breaking the law and they are simply structuring their affairs so they pay the least tax possible whilst keeping within the remit of the law. Instead they are being accused of, in my view, an equally heinous crime of acting immorally!
By reference, one of the most famous quotes in tax planning comes form Lord Clyde in a decision he gave in 1929:
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores.”
The current state of play goes against this basic principle which has been followed for so long. The argument that sticking within the law is no longer enough concerns me greatly, as who defines morality and ethics? As far as I am aware there is no law, act or statute defining the morally correct ethical taxpayer. It is a long established principle that individuals and companies are well within their rights to structure their affairs efficiently. However, we have reached a stage where doing this is classed as immoral and unethical!
The most simple tax efficient structuring such as making use of pensions, ISAs and transfers between spouses, all perfectly legal, are now being called into question. Are these transactions immoral or simply doing as Lord Clyde told us to all those years ago?
I understand people’s frustrations that some companies may pay more tax than others. However, we also need to consider that these companies contribute a lot more to our economy than corporation tax. They all employ a substantial amount of people, pay their business rates, fuel duty, national insurance etc. and have helped shape our economy into what it is today.
Also, and more importantly, these companies are, from the current facts available, not breaking the law. Surely, the general public should be lobbying the government to change the law in order to curb this perceived immorality, instead of attacking law-abiding individuals and companies. The Government’s proposal is to introduce a General Anti Abuse Rule (GAAR). This will seek to tackle abusive tax arrangements and will aim to set the borderline between what is acceptable and what is not. However to resolve the issue of multinationals’ corporation tax, it is likely that the OECD model of a tax system based proportionately on revenue will need to be adopted.
However my concern remains about what defines a moral ethical taxpayer? Does it need a definition? Who can even contemplate making such a definition? And are the lines between what is legal and what is moral diverging?
I anticipate that the next few years will be instrumental in the future of tax planning. With the current public opinion, the introduction of the GAAR and a shift of focus from legality to morality, the tax planning arena will be shifted into uncharted territories where it appears we will all have to learn what is ‘right’ and what is ‘wrong’ all over again.