Review of Lord Mayor's Debates
The 2008 global recession may have engendered an era of deep distrust of the approach of government and business to the issue of tax, but the profession has its role to play in righting the wrongs of the past and restoring public trust in the UK and international tax systems.
Those were the main takeaways from June‚ s Lord Mayor‚ s Tax Debate, hosted by the Lord Mayor of London, Charles Bowman, and supported by the Chartered Institute of Taxation and Worshipful Company of Tax Advisers.
The event was held as part of the Business of Trust programme, launched in 2017 by the Lord Mayor, who welcomed close to 200 guests to the event at Mansion House in the City of London.
In the first section of the debate Kevin Nicholson, head of tax at PwC, conceded that there had been a breakdown of trust in the UK tax system. He said that an ‚ overly complicated and antiquated‚ system had been a major factor in that decline.
He argued that a reshaped tax system, responsive to changing trends in the British economy, could help restore public trust. But the key to this, he argued, was the need to engage broadly with the British public to hold government, business and the tax profession to account for their actions.
Robert Palmer of Tax Justice UK agreed that the tax system was outdated and in need of reform but noted that Britons were proud to pay their taxes.
Despite this, the actions of a minority in the aftermath of the global recession had increased cynicism and scepticism of government and business, fostering a wider anti-establishment reaction across the globe.
Palmer welcomed the fact that many businesses had responded to this by opening up their tax and accounting practices to greater scrutiny. He the Fair Tax Mark as setting a new benchmark for ethical practices and also argued in favour of rebalancing the system towards the taxation of wealth over income.
The debate moved on towards consideration of international efforts to restore trust in the tax system. Grace Perez-Navarro of the Organisation for Economic Cooperation and Development (OECD), where she had been one of the architects of the Base Erosion and Profit Shifting (BEPS) project, said that the BEPS initiative came about as the result of the ‚ epicentre of outrage‚ that had developed in the UK and spread across the globe following the 2008 crash.
In her remarks, she argued that it was no longer appropriate for businesses to simply comply with the literal letter of the law, saying that it was now important for businesses to consider the ethical implications of their actions.
Chris O‚ Shea, chairman of the 100 Group Tax Committee, the body representing the heads of tax of FTSE 100 companies, said that BEPS should be applauded. But he also warned against the dangers of over-regulation, adding that efforts to regulate the global tax system were laudable but incoherent.
He too agreed that the debate around tax practices was a microcosm of a wider debate around the future of capitalism. However in doing so, he warned that individuals ‚ as well as businesses ‚ should look at their own actions when judging whether they too took advantage of opportunities to lighten their tax liabilities.
Glyn Fullelove, closing the evening on behalf of the Institute, said that everyone present should recognise that some of the practices of the past had been unacceptable. Companies, advisers and government had all made mistakes and all needed to take steps to ensure that those mistakes are never made again.
He said there was a very strong argument that the corporation tax system in the UK today was more robust than ever before and that we had probably gone as far as we could with legislation. He drew attention to the profession‚ s strengthening of its Professional Conduct in Relation to Taxation (PCRT) rules and said that fair tax initiatives needed to be embedded within business cultures.
On the international front, it was likely the BEPS project would prove to have curtailed opportunities for avoidance. However, as many jurisdictions now offered low corporate tax rates for intellectual property exploitation in particular, the proportion of tax taken from the corporate sector could still appear low, which brought us back to Kevin Nicholson‚ s concern that perhaps we needed to ask more fundamental questions.