Only arrogant politicians keep the tax debate alive

Kieran Corcoran questions Westminster's attack on professional services firms

The public "grilling" of major corporations continues apace. Most recently in the iron sight of self-appointed moral guardian Margaret Hodge were the Big Four professional services firms, who advise clients (including the government) extensively on tax.

No love was lost between Hodge and representatives of Deloitte, Ernst & Young, KPMG and PwC, incidentally her former employer, as she tried to make them feel bad and look bad for doing their jobs. Their tax planning strategies, she concluded, "stink" despite being legal applications of HMRC's rules.

But in her haste to hit the headlines, Saint Hodge is forgetting something. Unlike public servants such as herself, businesses are obliged to be competitive and strike the best deals possible, including in relation to tax, for their shareholders. Doing so is a legal obligation, unlike paying a "moral" amount of tax, however much that may be. Immorality, the chief crime (although it's not a crime, is it?) of which the Big Four stand accused, means precious little to them compared to the prospect of losing a valuable client due to giving uncompetitive tax advice, or not receiving the best performance from employees due to their new-found social consciences.

And when the Public Accounts Committee hits out at companies for using foreign vehicles, we are faced with a fresh wave of arrogance tinged with misunderstanding. Parliament may rule the country, but it does not rule the world. In a globalised world, government needs business more than the other way round. Companies like Apple have bigger reserves than the White House and the expertise and dedication of the international private sector roundly outclasses government resources, so bullying big business is little more than posturing. As France's bloodthirsty incoming tax regime has proven, if the going gets really tough, these businesses and their people aren't afraid to move.

Professional services firms are also excellent employers. They can afford to take on thousands of talented graduates because their advice is second-to-none, the world over. And as tables like the Times Top 100 Graduate Employers endlessly attest, they provide some of the best working lives in the country. Along with their clients, they contribute huge amounts of tax to government coffers, with corporationtax on the FTSE 100 alone accounting for 14 per cent of total tax receipts.

So if the government wants more revenue from tax, it should pull its collective finger out and reform the tax system itself, not expect businesses to hand over extra money out of guilt or shame. That politicians such as Hodge expect anything less than total professionalism and dedication from our thriving professional services industry is the real scandal.

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