Offshore

Guest Opinion: Ethics And Compliance In Tax Planning

Anthony Markham and Dalila Ver Elst, Maitland , 7 August 2013

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The practice of legal tax planning has come under attack, as seen in the corporate and private client world. Maitland, the law firm, examines the issues of the ethics involved.

The tax planning industry is under attack and advisors on tax mitigation need to be aware of the crucial importance of the ethics in the process, argues Maitland, the law firm. Partner Anthony Markham and Dalila Ver Elst, senior compliance officer, examine the issues.

The practice of legal tax planning has come under attack, with the tax affairs of multinationals such as Google, Amazon,and Starbucks coming under intense scrutiny and criticism.  At a personal tax planning level, with the progress of FATCA and other similar automatic information exchange agreements, the subject of tax avoidance and offshore tax planning is high up the agenda at summits such as the Group of Eight.

Whilst discussion so far has tended to focus on public policy and the actions of specific companies and jurisdictions, there is a question as to what this means for the tax planning industry itself. In other sectors, crises have historically prompted the development of new standards, new ethics – so does today’s tax planning industry need an ethical revolution?

There can be no doubt that we are entering a new era.  As tax avoidance has steadily risen up the public policy and media agenda in recent months, much ink has been spilt on the debate over the line between legitimate tax planning and "immoral" avoidance, or whether the only line that matters is the line of law.

The ideological gulf between the two camps is wide, and the academic debate will likely continue for some time. However the tax planning industry has a more urgent, practical need to seek out common ground in the debate, to see where the tax planning industry can learn immediate lessons from events. This article explores a few issues and seeks to provide some practical guidance.

The world has become a global village. Interconnected transactions, global supply chains, and intellectual property developed all over the world mean that traditional boundaries have become fluid. Thus for example, a corporate giant like Google is able to establish a structure which employs thousands of people in Britain; makes billions of sterling in revenue in Britain, but permits Google to pay a fraction of 1 per cent of that revenue in tax to the UK because its transactions are formally executed in Ireland where it has a more tenuous connection.

Where a country introduces punitive taxation on high incomes, as France has done, people choose to renounce their citizenship and move elsewhere, the most notable example being actor Gerard Depardieu. 

Some would argue that this is wrong and irresponsible, that Google is shirking its corporate responsibility; that there is a moral imperative for corporates and individuals to pay a fair contribution to society. Privacy, a morally defensible personable right, does the tax planners’ profession no credit when privacy is abused.  The defensible concept of moral and ethical tax planning is blurred by association with immoral, unethical and illegal tax evasion.

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