Should a tax haven abuser be allowed to own a bank?

The answer, from the Grauniad to the Daily Mail, is no. Peter Welch has been nobly reading the Mail so that we don’t have to, and reports on the spat currently taking place between Our Vince and Sir Richard Branson. To have a Liberal Democrat present the case for the opposition here is, as Peter says, something of a coup, but after all if there’s one thing Daily Mail readers hate more than benefit scroungers, it’s fat cats and tax havens.

It’s been clear for some time that what started out as a lone call for nationalisation from Vince Cable has increased steadily in tempo and volume to the point where it’s an acceptable mainstream position (imagine!) What is interesting to me is the range of people now asking the questions about Branson’s personal and corporate probity. The Mail, in common with many other major papers, has been doing some fairly sustained campaigning against the Virgin bid from the beginning, as a search on “Richard Branson” on the site reveals. But it’s the specialists too – Prem Sikka had this piece in CiF back in early December that totally passed me by, and more recently Richard Murphy, the tax research guru I read when I am feeling big and clever, echoes the concerns.

What exactly constitutes tax abuse is a question that exercises some of financial services’ most agile and morally adaptive minds. Eighteen months in that dark industry has left me with a distrust of complaints about “loopholes”, and the supposed moral degeneracy of those “exploiting” them. It is inappropriately emotive language, and I say this as one who regularly rants about people who have wot I reckon to be too much money for social comfort. Either a particular practice or treatment is against the law or it isn’t, and if the latter then we must agree to it, even if we mightn’t like the results (if we really don’t like the results, then the law itself is defective).

Balance is maintained by a communal understanding that there is a point at which avoidance (legal) becomes evasion (illegal), and that it’s in everyone’s interests not to push it by contravening too many of those unwritten tax laws which collectively say, in effect, “It shall be illegal for persons to be greedy bastards and wilfully twist the wording of inoffensive provisions for their own nefarious purposes”.

So when the condemnation of an individual’s tax arrangements are as universal as this, it’s time to be very afraid – because the law which says a tax haven abuser should not be allowed to own a bank is just such a one of those unwritten laws.

9 Comments

  1. To be fair, both Prem Sikka and Richard Murphy are notorious rent-a-quote self publicists and I usually find them convincing advocates of the opposite position to that which they take. Murphy is rather flattered IMO by your description of him including the words “research” let alone “guru”.

    Branson has always taken advantage of the fact that his business (most of it, most of the time) isn’t quoted and hence he can get away – reputationally – with a lot more than (say) a FTSE 100 Plc could. All completely legal but a large quoted business would find it expensive (under existing anti-avoidance rules) and impractical to restructure itself this way.

    There is also a reputational question: Virgin is a branding business par excellence, so you would think that reputational issues would preclude some of the (perfectly legal) planning they do. Vince is quite reasonably drawing attention to this.

    More generally, of course HMRC sits in a rather large glass house, having sold its property portfolio to a company based in a tax haven🙄

  2. I think it is equally right to say that a company based in a tax haven should not act as the landlord for Her Majesty’s Revenue and Customs. Alas, that cannot now be avoided as HMRC sold their buildings to them and then leased them back.😦

  3. Is it really in everyone’s interests not to push the unwritten rules too far? This is like the prisoner’s dilemma. I bet quite a few people are pushing them as far as possible while promoting a culture that we shouldn’t push them too far, in everybody’s interests.

  4. I always find Richard Murphy very useful, but then I don’t even understand transfer pricing so what would I know?😦 I certainly don’t think his politics are any more difficult to separate out from what he says than are those of Mike Warburton or any of the other top practice bods who get wheeled out. Howsobeit I have just been added to the CIOT press release list (thanks Simon!) so hopefully shall be quoting a wider range of specialists in future.

    Having said all that, use of the word “guru”, grr, that is the kind of lazy writing I usually try not to do, and I undertake to be slightly annoyed with myself for about twenty minutes.

    Joe, alas perhaps you are right. These things are always unquantifiable so the best one can do is go on one’s personal experience. I suppose from a liberal point of view, the tax accountancy profession self-regulates in the same way the market self-regulates: there *is* adjustment and there *are* people who push the rules, but the general tendency is that reputable firms and individuals who want to keep their reputations will be prepared to co-operate with a Revenue investigation at a moment’s notice, and anyone who doesn’t co-operate will quickly be exposed. The fact that this is all mostly theoretical does not prevent the majority from complying with the theory. So, while individuals (and certainly there are known rogue outfits that no reputable firm will deal with for fear of soiling by association) will push the rules too far, that does not mean they control or influence the culture.

  5. Transfer pricing? Bah, there’s nothing to it, just common sense really.

    CFCs, on the other hand … now we’re talking*😉

    Murphy is pretty lazy and knee-jerk IMO. There doesn’t seem to be much thought, let along research, in what he does. And I could probably write any of his blog postings after 6 pints down my local (who knows – perhaps I do?!).

    The best intelligent comment in my experience comes from John Whiting. He doesn’t come with an agenda like Mike Warburton and people would be surprised at how anti-establishment he can be. JW is invariably thoughtful and – despite having the highest profile of any tax professional (ok, I know that’s like basketball for pygmies!) – is incredibly self-effacing.

    But that’s more than enough tax …

    Keep up the great work on your blog – you were my choice for best newcomer and I hope you win it!

    D

    * in a sad, technical, far beyond bar-room kinda way

  6. Dominic

    What strange comments. My work is all research based. Try http://www.tuc.org.uk/economy/tuc-14238-f0.cfm. Now where’s the absence of research?

    Second, if I get in the press it’s because people call me, not vice versa. I almost never issue a press release.

    Third, Prem Sikka is one of the highest rated accountancy research professors in the UK.

    Fourth, are you sure of your facts, or might you be displaying something called a lack of objectivity?

    Richard

  7. Firstly, nice to find this website. I agree that we need more transparency, honesty and accountability and for that reason Virgin should not be allowed to own Rock.

    One is always looking for rational debate and Dominic offers none of that just personalised slurs on people he has probably never met or does not know. Has he ever read and more importantly understood Professor Sikka’s work. I was taught by Professor Sikka and it was the best education that I ever had and would wish my children to have. Professor Sikka is the only accounting academic ever to get his research recognised by UK practitioners. Some years ago he was voted ‘personality of the year’ by readers of Accountancy Age – tough lot of people. He is also the only UK accounting academic to win an award for his research in the US. His CV is on http://www.essex.ac.uk/afm/staff/PremsikkaCVJanuary08.pdf.

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