Yesterday's fantasy budget, based on an unachievable 2011 growth forecast of 3.5%, was remarkable in many respects.
Aside from the fact that national debt has now shot up to £1 Trillion (see below), it proposed among other measures:
- Fines for tax advisers who are incompetent.
- A requirement for Finance Directors (FDs), of large companies, to personally certify that adequate controls are in place to prepare accurate tax computations. They will be personally fined £5K if they fail to do so.
- HMRC to publish a quarterly list of names and details of individuals and companies who have been penalised for deliberate defaults.
Why are these proposals so wrong?
1 Re financial advisers, the onus is on the client of the adviser to claim redress for incompetence not HMRC/HMG. This is an unnecessary, and unwelcome, extension of HMRC's powers to levy fines and regulate commercial relationships between third parties.
2 Re FD's certifications, this goes against the principles of company law whereby the board has collective responsibility; and is yet another excuse to raise revenue by levying fines.
3 Re the "name and shame" suggestion, as "morally satisfying" as that may appear, it may well breach human rights legislation and goes against the central tenets of HMRC; ie never to reveal an individual's/firms' tax affairs. It will also be open to abuse by HMRC, who will use it as a stick to threaten people who they "suspect" (but don't have proof) of misstating their tax declaration.
So much for KPMG's call for "simplification"!
Tax does have to be taxing.
HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"
Some interesting points, Ken, and not as easy to dismiss as the majority of your rants about tax law!
ReplyDeleteI have to admit that I too have some doubts about the name and shame thing. I'm not sure I agree that HMRC using it as a stick is necessarily abuse, though. The whole point of it is as a deterrent - as such it is just another form of penalty, so you could (and you probably do!) argue that cash penalties are a stick to get people to make disclosures. The budget note on the measure makes it clear that name and shame doesn't apply if someone makes a disclosure and it only applies to deliberate omissions of over £25k of tax. Frankly, you've got to be pretty deeply at it for that to apply (in practice it's going to quite hard for an accusation of "deliberate" to stick) and the good thing about disclosures is it means there's less cost to the rest of us law-abiding taxpayers for putting it right.
Having said all that, I, like you have concerns about the implications of this for the confidentiality principle!
As for the bit about holding individual directors responsible, it's interesting that you gave HMRC dog's abuse for having a separate chairman and chief executive (which is in line with prevailing corporate governance practice) plus whatever Hartnett's job is (which, admittedly, isn't). On the other hand, you seem to see PLCs' directors' right to hide behind the shield of collective responsibility as sacred! If indeed it is at odds with company law, so what, particularly if it provides clearer lines of responsibility for irregularities that cost the taxpayer? You could say that the whole of the business tax code is at odds with company law, given that it often goes against generally accepted accounting principles/IFRS, which the companies act specifies must be followed!
Re "it's interesting that you gave HMRC dog's abuse for having a separate chairman and chief executive"
ReplyDeleteNo I didn't, I gave them "dog's abuse" for having Hartnett in the mix as well; effectively calling the shots still, even tho there is a CEO.
It is the CEO who should be accountable, not the Chairman or Hartentt...yet all we ever hear from is Clasper and Hartnett.
"Personally certify" sounds good if it actually meant some real protection for shareholders. In reality it's all just more words for box tickers to tick.
ReplyDelete