According to the Public Accounts Committee (PAC), tax arrangements promoted by PwC in Luxembourg bear all the characteristics of a "mass-marketed tax avoidance scheme" and consequences are to follow. But when and what? In the meantime, spiritual leader, Justin Welby, is suggesting we rapidly reconnect wealth creation with social justice.
Of course, the EU is on the case with Amazon, Apple, Starbucks and others and may well end up taking action against member states who provide tax havens for corporates. How long that will take is anybody's guess and as the years go by, some businesses remain well-served by large accountancy firms with complex strategies up their sleeves, designed for no purpose other than to avoid tax. The PAC reckons PwC's activities fall nothing short of the promotion of tax avoidance on an "industrial" scale.
Apparently, we need clarity about the boundary between acceptable tax planning and aggressive tax avoidance. If you are wondering what aggressive tax avoidance looks like, the Committee gave the example of Shire Pharmaceuticals, which shifts profits from other countries to its ‘business’ in Luxembourg, which consists of two members of staff out of 5,600 worldwide.
One solution is to regulate the tax industry and introduce a new code of conduct for all tax advisers - an idea that the Archbishop is likely to support given the "complexity of human motivation and greed" but Welby also suggest we re-engage with the concept of ‘gratuity’ which involves both philanthropy and a restraint in the maximisation of return. He argues that this can be good for people and business alike and I, for one, am in agreement.
Luckily all this has already been sorted out for us by St Basil the Great whom you may have missed if you are not well up on 4th Century theologians.
Back in the 300s, he warned that wealth needed to trickle down to the homes of the poor (I always wondered where Maggie got that idea from) but to continue, St Basil, explained: "Wealth is like water that issues forth from the fountain. The greater the frequency with which it is drawn, the purer it is, while it becomes foul if the fountain becomes unused."
That's interesting foul and stagnant water at the foot of the fountain, sounds awfully like ‘dark pools’ to me. And where is that phrase in the common parlance? It's a form of trading (often high speed) where the astonishingly wealthy, hedge funds and the like, invest...err...in the dark. Unsurprisingly, the phrase crops up from time to time in Armageddon type warnings from economists and regulators. Credit Suisse, Barclays, UBS, Merrill Lynch and Morgan Stanley are the key players, so we know we are in safe hands! No HSBC, but then Britain's biggest bank has been busy helping private clients dodge millions of pounds worth of taxes, via their Swiss operations.
Strikes me some people and companies should keep the fountain flowing by paying their taxes, so the annoying majority of us, who can certainly be classified as ‘poor’ by bankers' bonus standards, are in with a chance. Tax avoidance is a moral issue and I would rather not think about what lurks at the bottom of a dark stagnant pool, but I certainly know the smell.
However, I will end on a note of reason when it comes to the BBC's Panorama programme on HSBC's tax avoidance schemes based in Switzerland, which I thought was little more than a witch hunt.
It's reasonable to assume that HMRC is more interested in getting the money in than prosecuting tax evaders and locking them up. It frequently runs amnesties for those who have misunderstood the rules and those who have taken their money offshore specifically to evade tax. It may be a pragmatic approach, but the honest taxpayer wins, because revenues are raised, and whoever comes forward in an amnesty, will know they are on a watch list thereafter.
Another concern regarding the BBC is that post Panorama, news reports seemed to assume that the tax-avoiders and evaders linked to HSBC's activities in Switzerland were known criminals. Not all of them surely? If so, prosecution is the only way forward and the bank can face the hefty fines appropriate for a breach of money laundering rules.
Panorama didn't represent the best in financial journalism for me, rather drummed up left-wing propaganda. And bashing our biggest bank seemed to overlook the fact that the alleged tax avoidance by some of Britain's wealthiest took place in a country outside the EU. I would be only too happy to see Switzerland clean up its act - it could start by handing back all of the Jewish money stolen by the Nazis!
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