CTA Address 2019: How the touchpaper was lit on tax avoidance, and the challenges for companies today

The tax debate in the UK has changed from ‘boring and poorly understood... to impassioned and poorly understood’, according to Houlder, a long-serving journalist at the Financial Times, who delivered this year’s CTA Address.

Ms Houlder, a former tax correspondent who now writes for the paper’s Lex column, said that among the reasons why tax gets the public more excited today are the legacy of the financial crisis and concerns as to whether people are paying their ‘fair share’, a febrile political climate, ‘armies of keyboard warriors’ on social media and the increasing importance of investigative journalism that draws on new tools, such as the internet.

She found the seeds of discontent at aggressive tax planning when beginning as a tax reporter at the FT in 2004, around the time the Tax Justice Network launched [2003]. But it took a long time to germinate, a process not helped by the complexity of corporate taxation. It was not hard for journalists to get things wrong and it can be very expensive when they do, just as the Guardian found out when sued for libel by Tesco in 2008.

Ms Houlder said the touch paper was lit, in part, by UK Uncut which organised sit-ins in stores like Vodafone, HSBC and Alliance Boots. The feeling that you could not trust the Government to collect the money it is due was traced back to a Private Eye story that Goldman Sachs had cut a ‘sweetheart deal’ with HMRC. Public Accounts Committee Chair Margaret Hodge weighed in and what followed was a big political story.

More exposes followed.

News editors’ drive for tax stories has led to some fascinating and important investigations, said Ms Houlder. Tracking down stories from meagre clues in companies’ accounts is hard. It can be difficult for journalists to navigate this unfamiliar tax terrain, with mutual suspicion between tax firms and reporters not helping.

Ms Houlder advised companies that providing a lot of information to the public and journalists is a good strategy. Increasingly companies are publishing some very clear and full accounts of their strategy and why they pay the tax they do. Wider efforts to improve the quality of debate helps too. Rightly or wrongly, it is sometimes hard to defuse controversy. Companies need to think broadly about how tax planning might be perceived, she said.  

Concluding, Ms Houlder observed that while much of the interest in ‘tax dodging’ has died down, the embers will stay warm for a long time: “It would not take much to make them to catch light again”.

Reaction and debate

The Address was followed by responses from a panel. Panellists were Heather Self of Blick Rothenberg, Jim Marshall of Pearson and Rhiannon Kinghall Were of Macfarlanes. The Chair was the CIOT’s new President Glyn Fullelove.

Ms Kinghall Were observed that BEPS (the OECD-led project to tackle Base Erosion and Profit Shifting) was seen a panacea among the tax community but she suspects the ‘damage’ has been done’ in terms of public perception of MNCs and tax avoidance. Ms Self reflected that her then employer HMRC was proud of the settlement with Vodafone at the time, quite in contrast to the public’s perception, having brought in £1 billion as a result of a large investigation. Jim Marshall said the drivers of Pearson’s decision to say more on tax reporting including a large amount of misinformation flying around as a result of the ‘LuxLeaks’ expose. The firm’s publication of a user friendly tax strategy document had resulted in no public or media interest  - in effect transparency had made the ‘story’ go away.

Audience members then joined in with questions and other contributions. The audience was made up of CIOT and ATT members, other tax and accounting professionals, civil servants and others involved in the tax policy debate, and representatives of other professional bodies, as well as journalists.

During the Q&A, Ms Self argued that HMRC have a good record on tax avoidance, which she believes is only being promoted at the ‘grubby end’ of the profession now.

What if companies voluntarily paid more tax, an audience member asked. Ms Houlder said the public would be very suspicious of a company that claimed to do so, citing the public reaction to Starbucks’ announcement of extra tax payments.

Mr Fullelove claimed that tax strategy is the subject of debate in boardrooms today but Mr Marshall disagreed saying it has always been at the heart of boardrooms.

Has the media’s coverage of tax made for a better tax system, asked Office of Tax Simplification Tax Director Bill Dodwell. Mr Marshall did not think it had, saying the expanding tax code ‘makes things more complex – although I am not saying that is wrong’. Ms Houlder said exposes have helped rein in unacceptable practices but not in a systematic way, and the system remains a mess. Mr Fullelove observed that the media’s coverage is focused on corporate tax, which is not the bulk of the UK’s tax take.

Another questioner observed that anti avoidance law increasingly looks to the motive of the taxpayer and asked whether this presents difficulties. Yes, said Ms Self. She was disappointed that the advent of the GAAR (General Anti-Abuse Rule) had not reduced the number of TAARs (targeted anti-avoidance rules).

The CTA Address was held at One Great George Street, Westminster, London on 21 May 2019.

Vanessa Houlder's speech can be found in the document below: 

Download Download Vanessa Houlder CTA Address 21 May 2019.pdf (82.68 KB)

By Hamant Verma.