TaxNetUK – now at http://www.taxresearch.org.uk/Blog/

June 28, 2006

Tax professionals should know better

Filed under: Tax avoidance — Richard Murphy @ 8:27 pm

Peter Penneycard, National Director of Tax at PKF, is quoted as saying “There is a huge gap between fraud and tax planning but the Government’s attitude is that they are merely different sides of the same coin.” on Shout 99.

Well, if he really said that (and I have little doubt that he did because it looks like press release language) then he should be ashamed of himself. The reason is simple: in my opinion he must know that’s not true, and to so massively overstate his case in that way can only undermine any case he wants to make.

Let’s be clear, on a scale of 1 to 5 my recent work for Sustainability suggested you could rate attempts to not pay take like this:

1. tax compliance – seeking to claim only those allowances and reliefs obviously provided for in law;
2. tax avoidance, making tax driven decisions between incentives clearly provided by the law but where tax distorts the decision making process;
3. aggressive tax avoidance – pushing the boundaries of the law into the grey area where certainty as to its intent is unknown, legality cannot be guaranteed and artificial, tax driven structures are adopted purely to secure a tax benefit;
4. tax evasion – what happens when the boundary of aggressive tax avoidance is crossed and it turns out the planning was not within the boundaries of the law;
5. tax fraud – knowingly suppressing information to secure a tax benefit e.g. not declaring income, misrepresenting the nature of a transaction and so on.

You can play with the wording as you like – but few would disagree with the scale. And however you look at it fraud is nowhere near planning, and nor have the Revenue at any time suggested anything remotely like that. Sure, they think aggressive tax planning is so close to evasion its sometimes hard to spot the difference (and they’re right – it often is) but I happen know some of the people at the top of HMRC, and quite a few more in the echelons below them, including many who tackle aggressive tax avoidance and these people are all too familiar with the difference between avoidance and evasion, and the games the profession, lawyers, bakers and others play to disguise that thin dividing line between the two. Which justifies my opinion that Penneycard is quite straightforwardly wrong.

I hope he has the sense to comment more appropriately in future, because he does no credit to his firm by speaking in this way.

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