Following on from our recent New Year’s Philosophers’ Blog, I recently received a ‘Practicewire’ from the ICAEW [The Institute for Chartered Accountants]. They are the leading professional organisation concerned with helping businesses with preparing their financial accounts, plus advising on business practice, strategy and tax. I am proud to be a member.
Their email is lengthy with many links.
It starts with results of a survey of 500 businesses. Close to half said they had never heard of MTD (Making Tax Digital). Current proposals say it will be compulsory on a day to day basis very, very soon.
The huge number of fans of Harry Potter will shrug their shoulders and anticipate that Harry will just wave his magic wand and all business owners and managers will simply be transformed into having all systems in place and fully functioning in the calm waters and easy decision making which represents our current relations with our neighbours; Celtic, European and International. Obviously 70+ days is acres in time.
As a sincere devotee of the Rule of Law, I believe the Chancellor of the Exchequer should simply say, “We encourage every relevant business to sign up for MTD, but it will not be compulsory for the present; nor will there be penalties for inadvertent mistakes until we have ironed out the (inevitable) glitches”.
As a Mere Accountant may put it: SIMPLES
Government may never be loved, but at least they can be kind.
The American War of Independence, the French Revolution, the English Civil War, the Peasants Revolt. Each of these cataclysmic events in history were preceded by breakdowns in citizen’s trust in tax administration. The Boston Tea Party, tax protests and the Gabelle, Ship Money and the Poll Tax are not as well-known as their dramatic progeny, but a bomb may be ignited by a spark from a small fuse.
These events show tax administration, presentation and perception is vital in achieving successful governance. This is not just ‘historic’. It is a current lifetime experience for many European employees and business owners, so far as attitude to tax compliance is concerned. Remember, within living memory, the majority of Europe has suffered from military dictatorship. People adapt, it is not an evolutionary mutation, but obviously it affects their attitude towards paying taxes to Government. This is a commentary regarding tax compliance, not Brexit.
In my experience, in Europe citizens (say in Catalan, Spain) ruled over by in their view a fascist had no desire to ‘comply’ with tax rules. When questioned, they said ‘If you had been invaded by Hitler in 1940 would you readily have paid taxes to the 3rd Reich?’
Tax compliance, in my view, is a fragile flower. In the UK we are lucky in that compliance is (generally) better than in many other jurisdictions. It should not be taken for granted. The Tax Profession, Chartered Accountants, the legal profession and CTIOT should seek to work together with HMRC to create a successful and fair administration. As a result of seeing certain ‘schemes’, I confess I am as mad as HMRC, in that the underlying fundamentals were rarely disclosed. The professions collectively ought to recognise the effect this has on HMRC and the body politic generally. We need to buck up our ideas.
Similarly, as an ex-Inspector of taxes, I believe HMRC should endeavour to support and indeed ‘make friends with’, the vast majority of honest professionals who actually make the current system work. It is a collective responsibility to preserve with integrity and if we can head dishonesty off with plain professional integrity we will have ‘Done Our Bit’.