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In what may be seen as a final act of desperation by a morally, legally and financially bankrupt UK government, the Treasury, having failed to “crack down” on what it sees as tax avoidance by banks (the UK courts don’t agree with HMRC) has now come out with a “Voluntary Code”.

Not only is this daft – “OK we accept you aren’t breaking any law by avoiding tax but do help us out by agreeing not to do so any more” – it totally undermines the UK’s reputation as a well regulated financial centre and somewhere for multi national companies to do business.

The Revenue and Customs division of the Treasury recently published a “consultation document” on a proposed code under which banks would be expected to have formal policy and governance procedures relating to taxation, with accountability falling directly on board members. The proposal is that each board would be required to have a member who would personally sign an undertaking that the company would not seek to promote services or products, which avoided tax. Given that I’d probably be that board member on some of the boards I currently sit on, I must declare a personal interest – not to mention my total disgust with the proposal!

This is ludicrous. HMRC is seeking to force banks – and probably in time all multi-nationals – to abandon the rule of law. This would mean that the UK would move away from having a transparent and competitive tax system based on the concept of clear, equitable case law to one of taxation by some unpublished and opaque practice with uncertain legal effect. This would make the UK a far less attractive place for multinational companies to do business and certainly lead to a loss on tax income.

It is crazy. What this would mean would be that banks (and in time other taxpayers) would be expected to follow a “spirit of the law” as defined by HMRC rather than being able to rely on the courts and Parliament – which body if it can’t draft sensible law should give up!

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Category: International Taxation

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