My post about KPMG and its global head of tax Laughlin Hickey attracted a long response from Richard Murphy. Rather than leave it languishing in comments, I thought I'd reproduce it in full here:
'Good of Dennis to put this comment up. You’ll find in the link that in fact Loughlin Hickey was engaged in debate with Andrew Pendleton of Christian Aid and myself – on this occasion representing the Tax Justice Network. We have both published related reports on tax abuse in the last month – available from www.taxjustice.net.
Like Dennis I find Loughlin Hickey’s comments almost unbelievable. His firm led the market in abusive tax shelters and has had more offices in more tax havens than any other. And yet he has the nerve to stand up and want to lecture society on what should be the case in taxation. I am almost as shocked that the ICAEW tax faculty has asked him to give the Hardman memorial lecture on the themes he refers to in his Accountancy Age article on November 17. (continued in separate post)
So let’s be clear about what Loughlin Hickey wants:
1) He wants a technical definition of what’s right and wrong
2) He wants to do what is technically allowed
3) He wants to keep “soft stuff” like ethics out of this.
All of this is the argument of the technocrat. It is the inevitable response of such a person when presented with a challenge that they cannot understand. The challenge to technocrats almost always takes the same form. It is that something that is possible is ethically unacceptable. Scientists have to face this. Medics have to face this. People now face it on environmental and social issues within corporations. But Loughlin Hickey is saying he does not want to face this as a tax practitioner.
And yet it’s obvious he knows his position is untenable. That’s because he says in the next part of his article that “the law can be a clumsy and inefficient instrument to define and regulate behaviours in a sophisticated, rapidly changing and competitive world”. I couldn’t agree more. As I’ve said often (and fear I will again, many times over) all law is incomplete, inaccurate, a poor conveyor ofmeaning. That’s inevitable. Language has these faults inherent within it, which is precisely why a technical approach to tax cannot work in the end.
And Hickey seems to recognise this by going on to call for a “partnership ()with () behaviours regulated more by a code of conduct backed up by appropriate incentives and punishments for appropriate and inappropriate behaviour.”
Let’s for simplicity call that a code of conduct. And lets say the code of conduct says that companies will actively seek to comply with the law in all states in which they work, will seek to recognise profit where it can best be determined that it was really earned, will not seek to shift liability from one state to another, and will not engage in any transaction one purpose of which is the obtaining of a tax advantage. Then I think there’s a clear basis for working on the basis of what Hickey argues. And that, as far as I can see, is what the likes of Dave Hartnett want, and are determined to have, at least at a national level.
But somehow one doubts that is what Hickey means. Because he goes on to say that “by separating the development and operation of the law (rational) and the discussion and regulation of behaviours (emotional) we have a chance for real progress.”. Real progress towards what one wonders? Confusion of the sort inherent in his article one presumes, where (I suspect) he wishes for a world of minimal tax payment and wonderful CSR reports, for this is the divide accountancy has long seen between the technically possible and the ethically desirable.
But that technocratic response is no longer tenable, although you would not think so from John Whiting’s comment in today’s Accountancy Age where he said with regard to anti avoidance legislation “‘Where are we drawing the line? That’s what it’s all about. We are taxed by the plain letter of the law. The essential issue is to get the law right.’
Loughlin Hickey and John Whiting are in the same boat, and it’s sinking. The law is the current blunt instrument in this process. But ultimately if the law does not work to stop the abuse of it that undoubtedly exists then there’s a simple solution. Codes of Conduct will be imposed – and they’ll be much harsher than anything Hickey would agree to now. Perhaps he should explore his ethics and emotional side just a little bit more. It may well pay to do so.'