The so-called Paradise Papers have put tax firmly back on the global media and political agenda. Over the last three days, we’ve seen a succession of stories highlighting how individuals and corporations have been able to take advantage of different tax jurisdictions around the world. Journalists and politicians alike are again calling for co-ordinated global action to stop this sort of behaviour which, they argue, undermines governments and public finances.
We live an increasingly complex world where trade and capital flows freely. It is clear that domestic and international rules on tax have got out of line with current ways of doing business. The G20 and the OECD have done an enormous amount in recent years to increase transparency and reconfigure domestic and international tax rules. But there is clearly more to be done, especially with the need of national governments to update their laws.
We have been very clear that we expect our members wherever they are based to uphold the highest ethical and professional standards when it comes to tax advice, in line with our ethical code. Our Professional Conduct in Relation to Tax (PCRT) sets this out in more detail. Other professions need to be challenged to abide by similar guidance.
But the furore over the Paradise Papers has highlighted another issue and it is one of trust. Some would argue that only complete transparency of corporate and trust ownership will provide the necessary sunlight for the secrecy that allows such behaviour. Others would suggest that if there are strong agreements in place between governments to share information between their respective tax authorities, then that is sufficient. I have no doubt that this debate will continue to rage over the coming weeks.
Whatever your view, there is one thing I think we all agree on - that individuals and companies who take advantage of any country’s public services have a responsibility to pay tax in those countries that fund those services.
I have always viewed being a Chartered Accountant as a privilege and a means of providing a service to society beyond that of simply generating an income for myself. I don't for one moment believe that I am alone in that view but to my immense disappointment I don't see it reflected in the ICAEW's positioning on tax avoidance and evasion. If the ICAEW isn't going to call its members to account, who will? And f it doesn't, what is the point of it?
Gareth's and Jackie's comments throw down the gauntlet to ICAEW and ask what we have been doing over the past five years or so to make the tax system work better and what steps we have taken to make sure ICAEW members are behaving, and advising, in an ethically sustainable way.At the time of the furore over the behaviour of Jimmy Carr in mid 2012, I blogged on this issue and also covered it in my column in economia. Both articles aroused enormous controversy amongst members of ICAEW many of whom felt we were taking sides in the debate about tax behaviours and potentially preventing them from giving advice to their clients as to how those clients could legitimately, within the law, save tax.In my view the position I took then has been seen to be the correct one and I and my colleagues have done a lot since then to make the tax world align better with the world of business and to make it more difficult for individuals to avoid their proper share of the tax bill. We have been active participants in the work of the OECD in its Base Erosion Profit Shifting Action Plan and submitted responses to the consultations and attended the public consultations which took place at the OECD HQ in Paris. The majority of the Action Plan reports were published in late 2015 but work on how to tax the digitalised economy is one of the main streams of OECD work which is continuing and we responded to the OECD Request for Input last month and that response is on our website. OECD will be publishing a further, interim, report on the taxation of the digitalised economy in time for the G20 meeting next April. We have also been involved in the work to produce greater transparency and exchange of information between governments through the OECD Forum on Transparency and Exchange of Information to which 146 countries have signed up and under which the first exchanges of financial account information under the Common Reporting Standard have just taken place. Equivalent exchanges under the US FATCA rules began a couple of years previously. But perhaps the most important answer to your challenge is the work that we have been doing in the recent update to our Professional Conduct in Relation to Taxation, the latest version of which came into effect on 1 March 2017. This now sets out standards for tax planning that we expect of our members and against which we will hold them to account if they do not meet those standard. In particular Standard Four states that: “Members must not create, encourage or promote tax planning arrangements or structures that i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.”We have also been working closely with HMRC to ensure that if they come across instances of behaviour by our members that does not match appropriate standards then they will refer those members to ICAEW and we will investigate if we agree that there is evidence of professional misconduct.