It cannot have escaped most people in the UK that Google has just done a deal with HMRC, agreeing to pay a certain amount of money as a settlement for the tax that they are said to owe the UK Government. The Government immediately hailed this as a victory, but almost everyone else is very angry because it is too little, and because Google is a wicked multinational company that doesn't pay its fair share.
I'm beginning to think it's déjà vu all over again. And once again, as on all the other occasions when we hear about how a Google or a Starbucks or a Vodafone is dodging its taxes, I just pull a big woollen blanket over my ears and carry on with what I was doing.
Why don't I write about these issues? So many other commentators do. Well, that's the first reason. There are other people writing about these issues - some - but not all - are respected figures in the tax world. That is, they know what they are talking about.
But the second reason is the real reason why I don't write a lot about the Great Tax Avoidance Debate. It is a very simple reason: There's too much noise out there. So much noise that I'm not sure I know what the answers are anymore.
Do I believe in climate change?
Once upon a time, a 12 year old boy was assigned a project at school. He chose the all encompassing subject of "Space" because he was interested in it and there happened to be a big book on the subject written by a man called Patrick Moore.
And a most fascinating book it turned out to be. Probably the most important book I ever read, because that's the book that set me off towards a love of the sciences and a mathematics degree. I remember reading early on that there was another type of oxygen called ozone and there was an ozone layer surrounding the Earth, protecting us from the Sun's ultra-violet rays, but that the persistent use of aerosols was causing an hole in the ozone layer. I also found out that too much carbon dioxide was bad for the environment and if we weren't careful we'd all be roasted in our beds before long!
This was the first time that I discovered about environmental issues, and the threat of global warming. I believed there was a threat for the simple reason that I was an impressionable 12 year old, I'd read about it in a book, but most of all, because Patrick Moore was a very great man. If he'd said it, it had to be right.
There wasn't an enormous amount of debate about climate change in the 1980s when I was growing up. It was there, in the news, but nowhere near as much in the public eye as it is today. Finding books about renewable energy was like looking for a needle in a haystack - even as recently as ten years ago, there wasn't much out there.
Now it's different. It's out there in the mainstream media, it's on the TV, in the papers, on the internet. You just can't get away from it. Everything causes global warming, from volcanoes blowing up, earthquakes, tidal waves, to butterflies flapping their wings.
And of course, once a topic becomes mainstream, everyone starts having their own opinions. We have the global warming detractors - and some of them do have a point, because it can't be true that everything causes global warming. But although some of these people are scientists, their opinions don't count because their work's been commissioned by some big bad oil company. While those speaking on behalf of environmental pressure groups are right because they happen to be decent, kind, caring people (really?)
And finally we get the politicians, the journalists and celebrities all doing their bit. Some of them have even built their own environmentally friendly homes, and have electric cars, exhorting the rest of us to do the same (and how much does it all cost?)
We even have little kiddies telling us how important it all is. I have a bookmark which has a picture of a hip looking teenager called Sky, telling me "We all have to do our bit to save the planet!"
How does one go about sorting out the morass of information? How does one tell what's real and what's not? It just gets more and more difficult with each passing year.
There is a story that at the height of the stock market boom of the 1920s, just before the Great Crash, John D Rockefeller decided to sell out when his shoe shine boy started giving him stock tips. For when everyone happens to be an expert - when even your own shoe shine boy is giving you advice - it's time to pull out.
And so, Sky, a cardboard cutout teenager happens to be my shoe shine boy when it comes to climate change. I still believe in global warming - because I still remember those magical days of my childhood and what Patrick Moore said. And because Patrick Moore was a very great man. But no further do I go. I hardly read the news about climate change anymore. Too much noise.
And the same applies to the Great Tax Avoidance Debate.
The Great Tax Avoidance Debate - "Alas! I am an expert."
But it's different for tax isn't it? I'm supposed to be an expert - it's my field, I should know about these things. Well, I do know something. I know about the topics I write for Tax Notes. I know about the principle that one can only be taxed by statute and not by public opinion. And that probably explains why I don't feel qualified to contribute to the Great Debate:
"I'm a professional economist,' he explained. 'Director of Local Administrative Statistics.'
"So you were in charge of the Local Government Directorate until we took it over?'
He smiled at my question. 'Dear me, no.' He shook his head sadly, though apparently without bitterness. 'No, I'm just Under-Secretary rank. Sir Gordon Reid was the Permanent Secretary. I fear that I will rise no higher.'
I asked why not.
He smiled. 'Alas! I am an expert.' "
Extract from the Diaries of a Cabinet Minister, by the Right Hon James Hacker MP (edited by Jonathan Lyn and Anthony Jay)(Chapter 16, The Challenge)
Alas, I am an expert. When I started out all those years ago, I knew very little, but thought that one day, if I worked hard enough, I might just be able to understand some of it.
I remember reading about all those tax avoidance cases, being baffled, trying to find some overriding principle to make sense of it all. Couldn't find any! You read one case and think you've found it, and then another case comes along which says something completely different. And then the third case comes along, where another judge says "Actually, the first two cases aren't really inconsistent" and he then proceeds to tie himself up in knots ...
Years later and I know more tax than I did then. But I still can't make sense of those tax avoidance cases. There is one thing I do know - all those cases are decided on the premise that one starts with the words of the relevant taxing statute. Though how one goes about interpreting those words is another matter. But it's what the statute says that determines the outcome.
And this is why I am not qualified to write on such matters as Google and Starbucks and Vodafone. I have been discussing case law and legislation, as that is my understanding of where the tax law comes from. But events have moved on since I started out all those years ago. The legislation and case law seem to have less and less importance in today's world.
For now, tax avoidance has gone mainstream and almost everyone has an opinion on the subject. Not only do we have the established experts (real ones), we also have pseudo - experts (people who are experts because the press calls them experts), journalists, politicians, celebrities. Some of these people tell us how morally repugnant tax avoidance is, even going as far as to declare that they are planning to stop paying their own taxes until the evil tax avoiders are locked away in the slammer (using evasion to combat avoidance).
Too much noise. What place is there for the expert? There are so many real experts out there, who patiently point out that while we do have such a thing as tax avoidance, certain types of transactions are standard and totally above board. Such as deducting one's trading expenses. Or the fact that receiving a tax free loan from your own company isn't really tax free (loans to employees? Close company loans anyone?) But who's listening? Doesn't stop the press from confusing standard, run of the mill practices with full scale evil tax avoidance, which, according to some of the new pundits, also amounts to a criminal offence these days.
And what about the others? The pseudo-experts, the politicians, the journalists and celebrities? These people have founded new tax principles which an expert finds it hard to cope with. Now, the key words are "fairness", "morality", "ethical"- people should pay their fair share of tax and not just the amount legally due. "We are not accusing you of being illegal, we are accusing you of being immoral." But what is fair? What is moral? What guidance is there in the case law and the legislation?
Oh I see. I do apologise. In today's world, we don't have room for the expert. And we certainly don't have room for all that complex legislation. Cases? Who wants to read all those musty old cases? Really, you tax experts think you know it all don't you? Always using legalistic arguments ...
Have we reached the shoe-shine moment?
I am wondering when that moment will be, and what will it look like? Will it be a Government sponsored ad with a lot of little children singing how they all enjoy paying their tax, possibly to the tune of "Just a spoonful of sugar."?
No, personally I don't think I've quite reached that moment. In fact, if a little kid did come up to me and tell me how we all have to do our bit because we're all in it together, I'd probably tell him to stop being so impertinent and to concentrate on his reading, his 'riting and his 'rithmetic.
No, I shall carry on writing about tax matters. I shall avoid the noise of the Great Tax Avoidance Debate and stick to those topics where I (try to) explain the tax rules, using the legislation and case law, because that's where it all comes from. Though, even this may not be true in a few years time. For in the future, all our tax laws will be handed down from Google ...
(The above tweet courtesy of Max Schofield, an enterprising law student studying for the Bar, and conversant on tax matters, whose recent article on MITC VAT Fraud can be found in the British Tax Review).Back to Articles Back to Satwaki Chanda
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Maastricht University - 5th Global Tax Policy Conference: Tax Policy after BEPS, what can be expected? On 6 September 2019 at the Royal Museums of Arts and History in Brussels, Prof. Dr Hans van den Hurk, chairman of the Annual Global Tax Policy Conference of the Maastricht Centre for Taxation (Maastricht University) with his esteem speakers are addressing the above question.Read more