What to make of the departure of Sir David Varney from HM Revenue & Customs?

He has got a new job which many are describing as at least a sideways step - as an adviser to Gordon Brown on 'transformational government.' Now I don't know whether Whitehall people regard that as a terribly exciting new brief, but it sounds like a lot of hot air to me.

Getting closer to Gordon Brown might be an astute politicial move. Then again, it might be catastrophic if it all goes wrong for Gordon.

The question that keeps nagging is: why not just stay at HMRC? Not only does it present some of the most interesting moral challenges in government, you are also in charge of one of the nation's most powerful law enforcement agencies in Customs, and are responsible for one of, if not the most complex and difficult IT challenge in government.

Why go off and be an airy adviser to the Chancellor? I just can't fathom why you would do that.

There is a cynical explanation. Sir David was having real trouble with the job. His relationship with select committees was always tempestuous - he never got on with the MPs and seemed to lack the charm required to draw the sting.

Carousel fraud was marching ahead, primarily as a result of a misfiring strategy that he inherited, it has to be said. Tax credits had done him enormous damage, and he appeared to add little to the department, having lost control of the policy space to more junior colleagues.

Of all those things, I'd say his discomfort with MPs and his junior colleagues were most important - there are, after all, always negative stories about the tax collecting departments of the tax credits/carousel fraud kind.

As someone who was the pin-up for private sector talent in Whitehall, getting rid of him was a major headache for Gordon Brown. It would have been admitting defeat. So he has ended up with a non-job to make it look like he has been a success.

I don't think, as a matter of fact, that he has been a failure. The merger was carried off with no major hitches, an impressive achievement. He was always pretty much on top of his brief whatever the problems, and is clearly a highly intelligent individual.

But I can't help thinking there's more to his departure than meets the eye.

One thing that might be worth noting is that HMRC is now like no other department in Whitehall. Its minister, Dawn Primarolo, has outlived two permanent secretaries. Are there any other departments, I wonder, that can claim the same feat?

July 20, 2006 | Permalink | Comments (3)

Another year, another audit qualification. HMRC accounts were qualified by Sir John Bourn for the fourth year in a row this week.

The news comes as no surprise really, given the department is now an arm of UK social security. The DWP's own problems with getting its accounts signed off is testament to the enduring problem that such activities are beset by fraud.

What's disappointing perhaps is that such concerns entirely overshadow the department's main work, to collect tax.

There's some interesting stuff in the annual report, not least senior officials' pay packets.

Did you know that Sir David Varney was paid £175,000 in salary? And that his contract, rather than the rumoured three year term some mention, actually appears to be open-ended. Have a look at pages 21-22.

Dave Hartnett also extracts a pretty modest wage from HMRC, only £145,000, no change on last year it should be noted. They must be feeling the pinch.

Steve Lamey, the chief IT officer at the deparment, gets paid the most at £245,000. Probably sensible to pay a good whack given the problems the department has had, and the vast amount of IT it needs.

Speaking of which, the department confirms publicly the nature of its deal with EDS on page 16.

It gives a nominal amount for its audit work from the NAO - £1.9m.

And finally, there's also a good joke. On page 79 Sir David points out drily that 'no non-audit work was carried out by the auditors for HMRC.'

That would be 'Sir John Bourn Consulting inc' then. Or maybe he could have offered them tax advice?

July 13, 2006 | Permalink | Comments (0)

Three cheers for Lord Carter, then.

Except there's one aspect to this saga that dismays me slightly from a professional point of view.

We as journalists were urged throughout not to report the substance of the discussions on the proposed u-turn. The Sunday Telegraph, it was suggested, had almost derailed the whole process by announcing the likely turnaround last weekend.

U-turn headlines would mean political intransigence, we were told.

Whether or not that's true I don't know. But expecting journalists not to report what's going on is an utterly futile exercise. What it means is that those journalists who are most sympathetic to the point of view being expressed miss the story. That damages their credibility, and ultimately will damage those whose points of view they are helping to express.

Frankly, if politicans and Whitehall are really this nervous about newspaper headlines rather than doing the right thing, then there really is a very cowardly attitude prevailing in government.

And just for the record, so that politicans and officials are clear, the move to change filing dates without consultation was frankly silly, and the government deserves every embarrassing u-turn/cock-up headline in the book.

July 13, 2006 | Permalink | Comments (0)

Richard Murphy, the tax campaigner whose robust views on tax avoidance and evasion wind up many at the Big Four (they tend to whisper that he is somehow connected to terribly radical groups - in an attempt to play the man rather than the ball), has set up a blog.

In due course I will try and get a fuller blog roll thing here to link to people writing about tax like Richard. In the meantime, you'll just have to put up with a pathetic link through from here.

July 7, 2006 | Permalink | Comments (1)

I don't know quite how they did it, but the directors of MG Rover seem to have run into every complicated tax rule going.

First they had issues over Dextra. The Dextra decision disallowed the deduction of Employee Benefit Trust payments against profits. It also meant, in a less well noticed development, that payments from close companies hit with these charges would also pay an IHT bill.

The Phoenix four picked up not one, but both of these problems.

Now it emerges the intra-group loans could be challenged under thin cap transfer pricing rules, which prevent loans within groups being used to essentially limit tax bills, where such loans are not provided at arm's length.

It seems likely that the books, obviously made more interesting by virtue of the car company's collapse (which itself occasioned a controversial 'tax holiday'), will be a perfect case study for corporate tax lecturers for years to come.

July 7, 2006 | Permalink | Comments (0)

Here's a shameless plug for something else we do at Accountancy Age that you may not know about. I've been listening to the Insider Business Club this morning on tax avoidance.

Senior advisers (Chas Roy-Chowdhury of the ACCA, Mike Warburton of Grant Thornton and John Cullinane, president of the CIOT and also of Deloitte) were discussing the latest moves to crack down on abusive, and not so abusive avoidance, a hot topic, as nobody really needs reminding. If you go to the website you should be able to download it and listen again if you missed it this morning.

Some bright spark (well, OK, it was me) suggested that one way to beat the really abusive avoidance schemes, which we all know are deeply artificial (see the following case of a city headhunter who used complicated bond purchases to avoid paying income tax), was to make tax returns public.

That, I think, would shame people who used complicated schemes. If you were a rich city figure pondering an offshore set-up that the media would then pick up from your return, would you be so happy about signing on the dotted line and entering into a series of thirty nonsensical transactions designed solely to avoid tax?

People would obviously have a problem with that, but I can't really see any good reason why. If you're entering into a complicated offshore scheme to use a loophole in the law to avoid paying a tax I have to pay, I want to know about it. It's just not good enough to hide on these things.

Most of the people who use these schemes are extremely rich. Society has done them extraordinarily good turns, and they don't feel able to give something back by paying their tax bills. It may be legal, but it is deeply unethical. It's a question of good citizenship, really.

I have to say I also like Mike Warburton's definition of what an adviser should not recommend. It's not just a question of legality, he says, but also a question of whether you would be embarrassed explaining it to a high court judge. If it stinks, it stinks.

Both ideas rely on the notion that people would be embarrassed by their avoidance of tax. My only worry, and this is borne out by bitter experience of writing about tax schemes, is that some people have no sense of shame.

July 5, 2006 | Permalink | Comments (5)