I didn’t manage to attend the World Economic Forum in Davos earlier this year. But according to the BBC, the British Shadow Chancellor of the Exchequer, John McDonnell was there, and he said that, the ‘Big Four’ accounting firms should work to maximise the amount of tax their clients pay.
It’s easy to dismiss this as out-of-touch craziness. But maybe there is an element of wisdom in his remarks.
Paying tax – whether corporate or personal – does have a link with philanthropy and ‘Corporate Social Responsibility’. I have advised various corporates whose objective has been to pay more tax, not less, because they wanted to be regarded as good corporate citizens.
Equally, there is nothing wrong about transparency. Showing off about the amount of tax you pay (whether corporately or personally) is a valid choice, as long as it’s not misleading. It brings to mind the lists of benefactors you see in some public buildings, such as in the “Painted Hall” in the Old Royal Naval College in Greenwich. (Click here for a picture.)
But it should be a matter of choice. It’s perfectly acceptable to pay the minimum amount of tax according to the law. That’s the whole point of having laws.
Of course, what no-one likes is nasty surprises. This applies whatever approach you have chosen as regards tax strategy and transparency. Some nasty surprises you don’t have control of: such changes in tax legislation (which are sometimes retrospective) or changes in case law (which are always retrospective). Other nasty surprises can be avoided. Having a clear understanding of the legal structure of your projects, and the likely tax implications, is a basic step which, in most cases, is easily achievable.
If you’re planning a project (or acting as introducer for prospective investors), and you’re not clear about the legal structure, you’re heading for a nasty surprise – because you don’t have a firm basis on which to take tax advice. If the project you’re working on is significant enough for this to matter, email us at firstname.lastname@example.org for a free consultation. If the project you’re working on is not significant enough for this to matter … we probably can’t help, and you’ve probably got bigger problems to fix.