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Tax prat of the year

05 February 2013 / Mike Truman
Issue: 4389 / Categories: Comment & Analysis , Admin

The Public Accounts Committee is in danger of being made a laughing stock by its chair


  • PAC not listening to evidence
  • Chair attacked practice of seconding staff to Treasury who then return to work in the same area.
  • Refusal to accept that the tax profession in general wants simplification.
  • What would happen if next Budget’s consultation documents were met with silence?

If you are going to dish it out, you ought to be prepared to take it, which is why I make no apologies for the title or tone of this article.

The personal crusade of Margaret Hodge (pictured) against the tax profession as a whole (whether in the leadership of HMRC or in private practice), because it will not fall into line with her idiosyncratic and ill-informed views about tax avoidance, risks marginalising the Public Accounts Committee (PAC) and has already made it a joke to those who understand the subject.

The low point of this vendetta came on 31 January, of all days, when the heads of tax of the Big 4 were called before the committee to give evidence.

As the drama unfolded live on Parliament TV, so the volume of complaint grew on Twitter from those tax professionals who were watching

The professional bodies and firms put out comments later that showed all the hallmarks of having been edited and re-edited through gritted teeth until they were sufficiently dispassionate and professional.

I may not be the only one who notes the distinction made between “various committees” and the PAC in the statement by the ACCA’s Chas Roy-Chowdhury:

“When the ACCA has been called to give evidence to various committees in parliament, there appears a genuine desire by members to try to understand and learn from us as to what the issues are. What the recent PAC hearings have shown is that there is a role for the profession here to educate, communicate and prove its worth to the external world.”

Never mind the facts

There seems to be a frequent tendency in parliamentary committees to forget that they are neither in a criminal court nor at prime minister’s questions, and to adopt a point-scoring and aggressive tone which generates heat without ever casting light.

Unique to the PAC, however, is a seeming refusal to accept that their witnesses might actually have something useful to say.

With Margaret Hodge at the helm, the PAC does not seem to see its role as listening to the evidence that its witnesses give and then probing and testing it, which is what I always understood its function to be.

Rather, the members appear to go into the hearing with a view that whatever has been alleged by Private Eye and/or The Guardian is, ipso facto, correct, and to then pour scorn on its witnesses and hold them up to ridicule when they refuse to accept that 2+2=5. 

This could be seen in the earlier hearings in 2011 and 2012 about the alleged “deals” done by HMRC, including those with Goldman Sachs and Vodafone.

However much it was explained to the PAC that HMRC had a statutory duty to observe taxpayer confidentiality, still Hodge would lambast them for not giving full details, and struck back with an implicit (and totally unwarranted) attack on the integrity of HMRC’s top lawyer, Anthony Inglese, putting him under oath during questioning.

When eventually a solution was found that enabled Sir Andrew Park to see all the files and report to the National Audit Office, the clean bill of health he gave the settlements was simply ignored as if it had been dropped into a 1984 Minitrue memory hole.

Last Thursday, Hodge again referred disparagingly to the “deal” done with Goldman Sachs: Goldman Sachs is a tax avoider, Goldman Sachs has always been a tax avoider, and no one has ever believed differently.

Scores on the doors

And so we come to the hearing attended by the Big 4 heads of tax. From left to right, as we looked at them, were Bill Dodwell (Deloitte), John Dixon (E&Y), Jane McCormick (KPMG) and Kevin Nicholson (PwC).

Or, as we discovered in one of the lighter moments of the hearing 6, 7, 6 and (if I heard Nicholson’s mumble correctly) 7; those being the number of figures in their respective annual partnership incomes.

As a former consultant with PwC (not in the accountancy practice), who explained that she understood how professional firms charged their time, you might have thought that Hodge would add up the implicit combined charge-out rate and ensure that the witnesses spent most of the time talking.

Not a bit of it. No sooner would one of them start to answer a question than Hodge would jump in with a dig or a slur.

Told repeatedly that tax was not significantly more (or less) profitable than the rest of the accountancy business, she replied “Well, I can’t believe that”, a conclusion for which she gave no evidence at all.

Told that the only way to deal with online companies basing themselves in low-tax jurisdictions was OECD reform, she impatiently dismissed it as an attempt to buy time.

Seconds out

All of which would be bad enough, but the part of the session which really incensed me was when she attacked the work done on technical committees and working groups by tax professionals from private practice, and in particular the work done by staff who are seconded from their firms to HMRC and HM Treasury (HMT).

Triumphantly brandishing an advertising brochure from KPMG on the patent box, she jabbed her finger at a section explaining that Jonathan Bridges, a KPMG associate partner, had been seconded to the HMT team working on tax and innovation policy, including the patent box.

Quivering with righteous indignation she said it was “completely inappropriate and wrong” that “the guy who helped write the legislation then goes back to you to help use the law for a purpose for which it was never intended”.

First, what on earth did she expect him to do after his secondment? Go back into KPMG and work on something completely different? Take a vow of silence and enter an enclosed order of monks, never to sully his mind with tax matters again?

In vain, Jane McCormick tried to explain that it is precisely the point of the patent box that you pay less tax on patent income – that, according to Hodge was not its purpose at all, it was to “encourage innovation”, though seemingly in her world without incurring any cost to the Exchequer.

And she had another example, a KPMG manager Robert Edwards, who had been seconded to the team dealing with controlled foreign companies and had then also committed the unpardonable sin of advising clients on the same subject once his secondment had finished.

Let’s get this straight. It is quite routine for HMT to ask the professional firms whether they would be prepared to second staff for a period to provide technical and practical expertise when significant tax reforms are being prepared.

The firms will send the CVs of candidates that they think are suitable, and frequently the process of appointment is just like a normal competitive job interview.

The staff seconded will be paid by their firm, but HMT will either pay nothing, or significantly less than a commercial rate. The terms of the appointments are governed by robust confidentiality agreements.

The seconded staff join teams in HMT, which are tasked with implementing the minister’s policy. The job of the team is to put forward options and explain the implications of the decisions the minister has to make.

It is fundamentally wrong for Margaret Hodge to say the seconded staff were “drafting the legislation”, because there is a separate Office of Parliamentary Counsel with that responsibility.

HMT has a lot of bright staff, but they are not tax experts, and they are not experienced in business. While HMRC can provide some of the technical expertise necessary, and often does, HMT wants the commercial insight and business experience which a view from outside can bring.

There are, of course, advantages to the firm and to the individual staff from the secondment. The firm gets, through the knowledge of the seconded member of staff on their return, a deeper understanding of the purpose behind the legislation, and can therefore advise clients if what they want to do is within that spirit – since, if it is not, it is much more likely to be challenged.

But what they definitely are not doing is discovering loopholes (still less deliberately drafting them into the legislation) so that they can advise their clients how to get round the rules when they are back with their firms.

Edwards called such allegations “upsetting”, and told me that the tenor of the comments in the debate seemed to be questioning his integrity and professionalism. He believed that, with the rest of the Treasury team, his advice had led to robust and effective law being drafted.

Does not compute

The idea that across the profession there is a desire for simpler and more effective tax legislation simply did not compute with the committee.

Asked who would benefit from the length of last year’s Finance Act, Nicholson correctly answered “No one”, but his suggestions for removing redundant or ineffective legislation by including sunset clauses was ignored by the committee, as it did not fit their view of reality.

Instead, they implied that simplification would mean Dodwell losing one of his “many jobs”, such as chairing the CIOT Technical Committee, or sitting on the GAAR interim advisory panel.

It did not seem to occur to the MPs that, unlike chairing the PAC, these positions are unpaid; ever the gentleman, Dodwell did not feel the need to enlighten them.

Clearly expecting the answer “no”, one of the other committee members asked whether any of the Big 4 would second staff to the Office of Tax Simplification (OTS). 

Yes, we already have, said Dodwell, and have just been asked to second someone else. He emphasised that the firm would get nothing in return, since the project was about abolishing legislation, not writing new laws.

Unfortunately this was the wrong answer, so Nicholson was asked whether he, too, would be prepared to second someone of suitable seniority to the OTS.

Yes, he said, “as long as I wasn’t then criticised for having someone on the inside helping to change the legislation”…

Nothing to do with us

After the hearing, HMT seemed keen to dissociate themselves from the views expressed by the committee; as well they might, considering that consultation with tax professionals outside government is an integral part of the new policy for developing tax law, and the secondments are made to help them understand the technicalities of the proposals they are implementing. Their official response was that:

“Tax policy is always a matter for HMT ministers, but there is a role for external interested parties in informing policy development. The government is committed to better tax policy making and recognises the importance when developing policy of engaging fully with those that will have to operate the rules and with all other interested parties.”

The Exchequer Secretary to the Treasury, David Gauke, made a similar comment when discussing the issue on the Radio 4 programme File on Four.

Taxation has yet to receive a comment from HMRC. Peter Fanning, for the CIOT, stressed that tax professionals give about 30,000 hours a year voluntarily to that Institute alone, many of them spent trying to improve tax legislation.

What the PAC completely fails to grasp is that, by and large, tax professionals are passionate about their subject.

Of course they will advise their clients on legal ways to arrange their affairs so that less tax is paid, but the number of advisers who want to indulge in aggressive tax planning has diminished and continues to diminish as the courts complete their swing back from the heady days of the Barclays Mercantile case.

Most tax professionals recognise that the current tax system is broken, and simply want to help to fix it.

They have given HMT and HMRC suggestions and advice about how to do so, not because they want to be “poachers, turned gamekeepers, turned poachers again” but because poorly targeted and uncertain tax legislation is not good for either government or business.

More fundamentally, it simply offends our professional sensibilities to be working with rubbish tools.

But if our input is not required, then I am sure tax advisers have better things that they could be doing with their time.

Perhaps, when the next round of consultation documents comes out with the budget in just under six weeks’ time, it should be met with stony silence from the institutes and the large firms. Then we’ll see how well HMT do when tax is run on Hodgesonian principles.

As was mentioned in the PAC, David Gauke was tax personality of the year at the 2011 Taxation Awards. (For reasons inexplicable to me, that got a laugh from the committee.) The citation on the night highlighted the policy of cooperation and engagement with the profession as one of the reasons for his success.

On precisely equal but opposite grounds, I have no hesitation in awarding Margaret Hodge the title of Tax Prat of the Year, for her attempts to destroy that cooperation and engagement.


Issue: 4389 / Categories: Comment & Analysis , Admin
15 Comments Hide
REBECCACAVE, 02/06/2013 08:45:00

And the runner-up was ...

, 02/06/2013 10:28:00

You've managed to get all the outrage and disgust I was feeling listening to this pathetic excuse for a politician into a coherent well informed piece of print. Great job Mike.

Personally think Tax Prat is far too generous.

Andrew Rainford

, 02/06/2013 10:49:00

Nadine will surely be disapointed not to win "Tax Prat of the Year". Her blistering attack in the Panorama programme on the Barclay Brothers (it was OUTRAGEOUS that these billionaires paid no UK tax) overlooked the teeny-tiny point that they don't live here.

BRIANOGILVIE, 02/06/2013 17:23:00

Thanks Mike for an article which succinctly expresses what so many of us who work in tax have been thinking for a long time now.How much of other people's time and taxpayer's money has been spent in allowing Hodge and her cohorts on the PAC to indulge themselves in preening and bullying ? I dread to think !

Bill Dodwell has raised the suggestion that questioning should be undertaken not by the technically incompetent PAC members but by an appropriately experienced and briefed barrister 'Leveson style'. I expect that this would produce quicker,cheaper and more useful results

Brian Ogilvie FCCA CTA

, 02/07/2013 06:32:00

Good to see the tax cheats creeping out of the woodwork! You can rant all you like but the game is up. The eyes of the public have been opened to the fraudulent 'tax avoidance' industry. You know it, Mike, hence the descent into personal insult. How can you claim the moral high ground when your reaction to Hodge has consistently been insults and name-calling?

, 02/07/2013 13:29:00

Well what did the profession expect?
For years we have politely gone along with all sorts of intiatives in order to maintain a "working relationship" with HMRC.
As a result, we have allowed the do-what-we-think-you-should-do brigade win over the law-is-the-law brigade.
If we keep going back for more insults of course "They" will treat us as dogsbodies.
It is time the appointed leaders of our profession woke up to reality and brought a stop to this nonsense.
Simply tell HMG we aint going to the party to be insulted, we play the law is the law. Nor are we paying professional Danegeld.
MPs have for years jointly and severally avoided proper supervision and constructive development of tax law. I guess becasue if they got it right no-one would notice, if they got it wrong no-one would let them forget.
For me the penny dropped 08/ 09/2008 when David Hartnett told a gathering of ACCAs
Please do not send HMRC letters, use our telephone sytem.
Maybe practitioners who act for MPs and their associates should make the supreme sacrifice by telling these clients no more "Tax Avoidance" for you, until you sort this mess out. The proverbial would hit the fan.

, 02/07/2013 21:33:00

Mike, although I can understand your anger, but I don't agree with you on this one.

There are many honourable hardworking tax professionals with decent and good intentions, but you know what they say about the road to Hell...

I think it would be prudent if the Tax profession as whole took a deep breath and stood back to look at the bigger economic picture and to try and put itself in the shoes of the man or woman on the Clapham Omnibus.

For a start try typing "Vantis Tax" into Google and look at the results.

Now set this in the context of Libor rigging and the other bank scandals.

The MPs expense scandal.

etc etc

I won't go on as I have probably laboured the point, but perhaps the vista is perhaps not a rosy as the tax profession as a whole would like.

, 02/07/2013 22:19:00

Mike, is Lord Lucas a "tax prat" too?

online editor, 02/08/2013 09:12:00

Here's the uncorrected transcript of oral evidence from the session, 30-plus interruptions of witnesses' replies and all.

online editor, 02/08/2013 11:37:00

Robert Leach FCCA ACA writes...
Congratulations on your excellent article. Although I did a double take on seeing the headline, I do believe the well-written article justifies it.
I was so disgusted at the treatment Margaret Hodge gave to Dave Hartnett just over a year ago that I wrote to them both to say so. Hartnett sent me a polite reply; Hodge ignored me.
HMRC must be accountable, but making wild accusations, shouting people down and being plain rude does not achieve that.

, 02/08/2013 20:25:00

I think your front page is offensive and a disservice to the profession. I would expect better from a publication that holds itself out as the leading authority on tax law, practice and administration. It undermines the credibility of the publication and its editorial board.

kencurran, 02/14/2013 20:41:00

When I read the front cover of the 7 February issue I did not expect to see the personal abuse of an individual by a professional magazine to which I have subscribed for many years.
There is nothing laudable about such aggression. It is demeans the profession and perhaps from Mike Truman's perspective may been considered self- destructive at the very least.

Please be aware that if I ever see such a tabloid aproach again I will cease to subscribe.I forgive this error of editorial judgement. We all make mistakes.

Mike... take a deep breath and perhaps realise that it is only tax. That Ms Hodge is a politician not a qulaified tax professional and as such doesn't really have any understanding of tax. It is only through education that minds can be changed. Certainly such violence of language will not achieve anything positive.

online editor, 02/26/2013 12:27:00

Gill Molloy of Champion group writes...

Mike, your article was brilliant! It’s a marvellous thing when a brave soul stands up to the establishment and tells them, “You’re wrong”.

It was your own personal Tiananmen Square moment. You articulated for me all of the frustration that I as a tax partner feel every time the subject of “tax avoidance” is mentioned, whether through the daily expulsion of lazy, mis-informed journalism or the PAC commentary that choses to vilify our profession rather than take responsibility for the taxation system.

Thank you for giving me a rare glimmer of hope and a damn good read.

Ed Gilchrist, 12/28/2013 13:45:00

I have watched parliamentary TV quite a bit this last few months and, in particular, I have been interested in the PAC meetings. Sadly, the proceedings are always wrecked by the chair, Margaret Hodge.
Regardless of what party she represents, Ms Hodge is rude and immensely disrespectful to the 'witnesses' and seems to enjoy the sound of her own voice far too much. I would even go on to say that she thinks her sarcastic and demeaning attitude is, in some way, 'humourous' and 'clever'. She reminds me of the teacher that puts down the school kid who mumbles or stutters - except that these people in front of her, no matter what heinous accounting mess they are responsible for, are highly successful business people in their respective fields.
Her self glorifying antics wreck the proceedings time and time again. She interrupts,  she jibes, she grins and looks side to side to seek praise from her colleagues for what she mistakenly thinks are witty and cutting remarks. If I were any of those on the committee, I would be seriously embarrased by her childish, unprofessional and bullying behaviour.  If the PAC is to really do the best possible job at holding people and organisations to account, it needs a new chair who commands respect from business poeple as well as the public. 
And, for the record, I despise the way public money is being wasted on some projects. I also distrust many senior public servants including some cabinet ministers, but this chairperson is in danger of making the PAC, at best, a target of ridicule and hence another waste of public funds.

David Gibb, 02/20/2015 00:21:00

Thank you Mike for your article. I rejoiced to read it! I did not know about it until I just came across it.
Over the last few years I have watched Margaret Hodge preside over the PAC and its interrogation of witnesses with increasing anger and frustration. It all feels very much as if she is not interested in the facts or getting at them, but rather trying to grab the headlines for her own publicity.
Back in March 2013 I was recovering from an operation and watched Ms Hodge as she chairedthe PAC's questionning of officials in charge of the Charity Commission. I was astonished at her rude interruptions and bullyboy tactics towards the courteous and cooperative officials. How they managed to remain calm and civil I do not know! I wrote immediately to Ms Hodge to complain and to appeal to her to ask probing questions based on evidence, not to use the moment in front of the cameras to belittle those who come before the PAC. I got a bland reply from 'Jess Mullins' who works in her office, saying 'I am sorry that you felt Mrs Hodge’s manner was rude, this is merely the way Mrs Hodge responds to witnesses she feels are being deliberately evasive. I shall pass on your concerns to her."
Then on Feb 11th this year (2015) I watched Ms Hodge presiding over the interrogaton of Lin Homer from HMRC and again cringed at the way she spoke to her and other HMRC officials. As a former Government and Political Studies teacher I felt compelled to write again to Ms Hodge and tell her how embarrassed I would have been for any of my students to have watched the session. I bemoaned the fact that instead of forensic questioning that depended on evidence, she used rudeness, suggestion and an unnecessarily confrontational manner. I explaines that in an age when people are increasingly turned off by the way politics is conducted I was so disappointed that she went for the ‘easy’ tactic and chose to belittle the public officials with scorn, talking over people, not allowing them to answer the questions and discourtesy. I said that it is much harder, it doesn’t grab the headlines or the TV soundbites but, would have been more honest and (in the end) far more honourable to have proceeded by careful examination and detailed questioning. Scoring points off witnesses rather than getting to the truth may have got the headline but at what cost? Politics and democracy will have suffered as a result. 
I was depressed, but not surprised to get the following reply from 'Jess Mullins' this time: 'Thank you very much for your email, the contents of which have been noted.'
My heart was warmed to read your article and to come across the many comments at the bottom supporting you. I was beginning to think I was the only one who cannot stand the way Margaret Hodge treats people who come before the PAC. I am hoping that she will not get the chairmanship again after the General Election.

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