Introduction, how is UK Tax Industry regulated? HMRC
What ways have HMRC been successful?
PwC scandal FOR Assertion
It is well known that tax advisory work within the UK is a legally unregulated profession, therefore in order to uphold high standards, the profession depends heavily upon self-regulation by the professional bodies. It is understood that the accounting profession is more prevalent than the legal profession within the market for large business tax advice in the UK. The efficacious tax advisory role of accountants in the UK may, to a certain extent, be explained by the sound working relationships that conventionally exist between the accountancy firms and HMRC, the UK tax authority. It can be argued that that strong relationships with the UK tax authority have corroborated the advising position of the UK accountancy profession.
The direct regulations of the tax advisory profession in the UK include a professional code of conduct that warrants professional conduct by incorporating aspects such as due care, integrity, confidentiality and objectivity, tax advisers who are affiliates of the CIOT (Chartered Institute of Taxation), ATT (Association of Taxation Technicians), or accountancy professional bodies are under obligation to follow this code. Consequently, affiliates who disregard the professional code may be scrutinised by the Taxation Disciplinary Board, which is an independent body established in 2001 by the CIOT and ATT. In addition, a percentage of tax advisers are bound by supplementary codes, for instance member firms of KPMG International practice a Global Code of Conduct which discloses the internal governance affairs of all KPMG firms. As a result of the investigations lead by the US Department of Justice into the US member firm of KPMG International with regard to the trade of tax shelters in the US between 1996 and 2002, KPMG UK (as of 2004) now apply the UK Principles of Tax Advice which summarises the governance operations of KPMG UK in relation to taxation. The unfavourable perception of the UK tax advisory profession has encouraged the implementation of professional codes by the UK tax advisory bodies that highlight a high level of societal accountability of the tax profession, going past perceptions that stick to the definition of the law.
Alongside direct regulations of the tax industry, indirect regulations of the tax advisory profession in the UK also exist. In spite of heated discussions in recent years, the UK Government has abstained from putting into effect legislation that would directly regulate the tax industry. However, UK policymakers have acknowledged tax avoidance schemes by introducing new legislation. Rules regarding the Disclosure of Tax Avoidance Schemes, or more commonly referred to as DOTAS, introduced new reporting obligations for both taxpayers as well as their advisors commencing from 2004. In addition, following detailed examination, the General Anti-Abuse Rule (GAAR) was implemented, in hopes of confronting abusive tax avoidance, the effects of which are yet to be seen as the legislation was only introduced in 2013.
Consequential to the investigations led by the Public Accounts Committee (PAC), a select committee of the British House of Commons, the success and usefulness of the tax industry being able to regulate itself has become an area of intense political dispute in the UK. The investigations were triggered by the leak of almost 28,000 documents, evidencing the involvement of over 1,000 business, demonstrated the promotion of Luxembourg-based tax-avoidance schemes by PwC. Margaret Hodge, Chairman of the PAC, deemed the actions of PwC to be the “promotion of tax avoidance on an industrial scale” and called for the UK Government to take the initiative to have a more active role regarding the regulation of the tax industry ‘as it evidently cannot be trusted to regulate itself’. Members of Parliament demanded that the Government present a code of conduct for all tax advisers and proposed that submission to this code would govern whether or not companies delivering this service can attain both government and public sector jobs (House of Commons Public Accounts Committee 2013). In addition to this, the Public Accounts Committee demanded that the professional bodies take on a greater lead and be more accountable for their actions with regard to tax avoidance. It is apparent that tax advisers play a very large part of the global issue of tax dodging, the effect being that it costs developing countries billions of pounds annually. The Public Accounts Committee’s 2013 report underlined the role that the Big 4 accounting firms play in tax avoidance as they generate billions of pounds a year as income from tax planning business in the UK alone, cash generated from worldwide clients is vastly greater. Tax Research UK director Richard Murphy claimed that accountancy firms are essentially the “back-bone” of the tax avoidance industry and that the act of tax avoidance would not be able to happen without accountancy firms as “they are the key suppliers of tax avoidance practices”. The PAC now have reason to believe that large accounting firms have been advising their clients of different and more complex forms of tax avoidance, such as developing intricate business operating models that are not limited to a certain group of countries, which impose on the lowest international rates of taxation. In contempt of the evidence submitted by PwC negating the allegations, the PAC concluded that the tax schemes displayed all the “characteristics of a mass-marketed tax avoidance scheme”.
However, there is still cause to debate whether PwC had genuinely done anything wrong other than legally reduce the tax liabilities of its clients. It is important to distinguish the difference between tax avoidance which involves planning affairs within the given framework of the tax legislation in an attempt to reduce tax liabilities, and tax evasion which involves refusing to pay tax liabilities by suppressing knowledge or information from HMRC, or by providing dishonest information.
Following the 10 year marker since HMRC was established from the merger of Inland Revenue and HM Customs and Excise, the ruling on the expanded division’s relative success or failure credibly lies somewhere in between. The merger to create HMRC was intended to improve customer service, coordinate strategies and construct efficiencies through economies of scale. We can conclude that the latter point has clearly been a success, however the former point disputably less so.
D. de Widt, E. Mulligan, L. Oats Regulating Tax Advisers, FairTax WP-Series No.6, 2016
Why I Chose to Be an Accountant: A Reflection
Accounting is an information and measurement system that we use for the purpose of identifying, recording, measuring, and communicating relevant and reliable information about an entity to those with an interest in the entity. Accounting is a very challenging and rewarding career with a wide variety of career paths that one can venture in. Accounting is more of a communicating language in the world of business and as a result, the demand for accountants are constantly increasing, making accounting an extremely marketable career path. An accountant, like a majority of other jobs, has the ability to work as an independent accountant or work in a corporate atmosphere. I decided to make a career into the field of accounting in the corporate market, working for a firm and then a private company. My goal is to achieve a position of a CFO or venturing into my own business.
When I first heard about accounting I thought it was a generic degree that had only one specific work area inside of a business. However, after speaking to accountants and learning more about the career I learned of several opportunities that are available to an accountant with a Bachelor’s degree. This can include auditing, bookkeeping, budget analyst, financial accounting, management accounting, tax, and much more. Inside each of these careers, accountants could also find a specific niche that they particularly like. For example, I spoke with a lady who works as a tax consultant but has never done a tax statement in her life because all she does is work with international markets for her company as it pertains to the budgeting for the tax aspect. Auditing is one of the most common areas that accountants have chosen to build their careers in. I believe in this era that we are in today, the work of an auditor is extremely important to ensure that the numbers reported by an entity are accurate and as a result, we, as citizens, are able to invest in companies accordingly. Also, having the ability to audit a company requires in-depth knowledge into the market, legal environment, and the entity.
Although I am interested in audit, I would like to start my career in tax. This is because taxation is an extremely important to a company and is extremely limited in regards to acceptance and turnover of employees. I believe to be a qualified tax accountant, an individual must have good knowledge of the necessary kind of government regulations and generally accepted accounting principles. As a tax accountant, I will be first be placed on a team in a tax department, where my duties can include reviewing files and company financial records, preparing ledgers, filling out tax forms, maintaining contact with tax agencies and holding meetings that are related to taxation and strategy (Admin, n.d.). My backup plan is to venture in becoming a forensic accountant with the FBI. I believe with my degree, as well as my military background in the U.S. Marines, I will be a qualified candidate. However, I don’t believe in pursuing that as my primary career goal because the government funding is fickle as well as the pay, compared to the corporate market. Although tax in many firms, have a low acceptance rate and many companies require you to have at least 2-3 years’ work experience in the field as well as at least a bachelor’s degree, I believe I will excel when given the opportunity. This is because not only do I have a passion for it but I also excel in the quantitative areas. As far as the work experience that is required, I will be trying to go through an internship to full-time offer with one of the local firms in Miami, which doesn’t require the work experience. With every accounting career field, you are required to work a lot of hours during “busy seasons”. At times I have heard of accountants working up to 7 days a week for 13-14 hours a day.
I believe every qualified accountant expects a salary that is higher than or on par with other undergraduates from a number of business schools. Unfortunately, these expectations are rarely met in the current society. Currently the broad career field of “Accountants and Auditors” has an average hourly wage is $36.19 with an average annual salary of $75,280 (Labor, 2016).Â However, as an entry-level tax accountant, I can realistically expect to earn between $47,568-$59,269 (salary.com, n.d.). Quite a number of students have joined the big accounting firms that pay higher salaries but it’s usually an average of around $50,000-$60,000. In other words, a lot of qualified accountants will be forced into sectors that don’t pay as well. I believe in order to make the most in the beginning of my career, I should try not to fall victim to this lower market of accounts by realizing the dilemma and work and figure out ways to avoid it. One way I hope to avoid this is by completing my Masters in Accounting as well as my CPA. I also believe by doing programs like VITA and internships, will make me a key candidate that will be viewed as having the ability to succeed in any turmoil the company might face. The type of internships I will be looking to acquire internships that will give me experience with software solutions such as Inuit QuickBooks, Sage 50 Accounting, ATX Total Tax Office, CCH ProSystem fx TAX, Delphi Technology, and Oracle E-Business Suite Financial ls (Development, n.d.). Hopefully the internship I will be offered a full-time position in which I believe can help progress my career in one of the corporate offices because of a majority of their corporate promotion structure. I believe this will help mold me into an accountant that will be incredibly marketable in the corporate market.
In conclusion, I would say that accounting is the very diverse career path that will forever be in demand. As our world moves more towards global transactions I also believe that we accountants will be in more demand. This is because accountants are a necessity to determine how successful a business entity is, that can be detrimental in determining if a business segment can survive in a new international market, costs needed to allocating, etc. For a successful career in accounting, I should always look for opportunities to mold myself as a capable accountant as well as adapt the new technology advances and learn how to adapt to the changing government regulations and generally accepted accounting principles.
Admin, W. (n.d.). What does a Tax Accountant Do? Retrieved March 27, 2016, from http://www.topaccountingdegrees.org/: http://www.topaccountingdegrees.org/faq/what-does-a-tax-accountant-do/
Development, N. C. (n.d.). Accountants. Retrieved March 22, 2017, from My Next Move: https://www.mynextmove.org/profile/summary/13-2011.01
Labor, U. S. (2016, March 30). www.bls.gov. Retrieved March 22, 2017, from Bureau of Labor Statistics: https://www.mynextmove.org/profile/ext/oesmaps/13-2011.01
salary.com. (n.d.). Tax Accountant | Salaries. Retrieved from salary.com: http://www1.salary.com/Tax-Accountant-I-Salaries.html