A few years ago I went on a hiking holiday with a number of people I didn’t know, and ended up befriending a tax accountant. He was a very nice man, who had been going through a bit of a mid-life crisis, his children had grown up and left home, his wife was not very interested in him, and he had developed an interest in Buddhist philosophy. Anyhow, after a few days, he revealed to me that over the last five years he had started defrauding a firm he had been working for, to the tune of several million pounds a year. He was not taking the money for himself, but was abusing their trust in him, by not telling them about the latest tax avoidance schemes, meaning that they were systematically overpaying tax to the government.
I was reminded of this surprising suburban Robin Hood figure by the rash of stunning leaks on tax prompted by the whistle-blowers of the last couple of years, starting with the Luxleaks, then Swissleaks, and then the mother of all leaks, the Panama Papers. All have involved incredibly brave accountants or bankers risking a huge amount to get this information into the public domain. The two former employees of PricewaterhouseCoopers who leaked information on tax breaks for major corporates such as Apple, Ikea and Pepsi in the Luxleaks case are facing years in prison. The Swiss Leaks whistleblower has been sentenced to six years in prison in Switzerland in absentia. Finally the Panama Papers whistle blower has wisely remained anonymous, but I imagine is being hunted by a range of private security firms.
I can only guess at the panic in the boardrooms of the investment banks and particularly at the big four accounting firms – Deloittes, PwC, KPMG and Ernst & Young, who between them have almost complete oversight over the business of aggressive tax planning by the major corporations. But no amount of security software can fully protect any firm from increasing numbers of employees no longer feeling morally comfortable with what they are doing, as ultimately the secrecy of the system is dependent on those that run it being able to look in the bathroom mirror in the morning and feel OK about their lives.
And that is becoming harder for the corporate tax accountant to do. A study for the New Economics Foundation from a few years ago calculated that for every £1 of value that a tax planner contributes to the UK economy, they take out £37. Imagine if we were employing thousands of people in the City of London to travel around the country and actually physically destroy public buildings; schools, hospitals; or sack teachers and nurses.
Like investment banking and arms dealing before it, tax planning for corporations and the wealthy has now passed the dinner party moment. Where before it would have prompted jokes about how boring it was, or perhaps even a slap on the back for enabling hard-pressed entrepreneurs to escape the clutches of the dastardly taxman, it is now rapidly becoming seen as not a profession that is not one you would care to shout about. How many young graduates would want to help Starbucks or Google pay zero tax?
Also like investment banking, tax accountants engaged in the kind of aggressive tax avoidance for the super wealthy and multinational corporations are a relatively small proportion of the profession, and risk dragging the whole accountancy profession into the mud with their semi-illegal activity. This is deeply embarrassing for all the tens of thousands of accountants out there who are doing a good job enabling ordinary people, charities and small companies to manage their finances and pay their taxes.
The philosopher Michael Sandel, in his fantastic book, ‘What Money Can’t Buy: the Moral Limits of Markets’ points out that we have in recent years begun to move from a market economy to a market society, where not just our economy but our moral values are now increasingly only defined by a market logic. He believes this has undermined our morality and societies. I think the tax issue is a fine example of this. Using the market moral logic of the age, there is nothing wrong with aggressive tax competition between nations, nothing wrong with the network of financial secrecy and bevy of accountants, lawyers and enablers who keep the whole thing going. It is helping markets function more efficiently, which is ultimately good for all of us. On tax I believe we have reached a turning point, with the public rejecting this logic. Polling from across the political spectrum shows that people now believe both legal and illegal tax avoidance to be wrong.
I don’t think suddenly every tax accountant is going to quit, or that every graduate is going to resist the allure of the graduate training programme at one of the Big Four firms, especially when they are laden with debts from their studies. Certainly the arms and investment banking businesses are flourishing despite becoming morally questionable professions. They must just go to dinner parties with each other these days.
But I do know that the tax haven and tax dodging business is quite special in that it is completely reliant on secrecy, so we don’t need every accountant to have a Saul to Paul conversion. All we need is five or ten more whistle-blowers and the whole system will be on its knees. And in the interim, I would appeal to all the other tax planning accountants out there, who like me have a mortgage and children and would never be brave enough to risk everything. Why not follow my friend’s example instead, and just do your jobs not so well? Fail to tell you client about the latest ruse. Fail to save them that extra couple of percent. A work to (moral) rule? Every penny counts.