The role of accountancy firms in tax avoidance: Some evidence and issues

Abstract

As entrepreneurial businesses, accountancy firms have supplemented their traditional trade of selling accounting and auditing services by diversifying into a variety of other products and services. They have developed organisational struc tures and strategies to sell tax avoidance schemes to corporations and wealthy individuals. The sale of such services shifts tax burdens to less mobile capital and less well-off citizens. It also erodes the tax base and brings the firms into direct conflict with the state. This paper provides some evidence of the strategies and tactics used by accountancy firms to sell schemes that enable their clients to avoid corporate, sales and payroll taxes. Such strategies stimulate reflections upon the possible trajectories in the development of accountancy firms and social consequences of their trade.

Corporate governance: what about the workers?

“…Rather than creating suitable corporate governance processes, the UK state has sought to manage poverty a variety of social security benefits to improve the total income of the low income households. However, such a policy has severe limits as corporations and wealthy elites resent paying taxes and are increasingly opting out of their obligations through a variety of tax avoidance schemes and the tax burden is being shifted on to labour and consumption (Sikka and Hampton, 2005;Christensen and Murphy, 2004;Mitchell and Sikka, 2006). An effective reform of corporate governance to achieve equitable distribution remains the only viable long-term policy option.…”

Boundary work and tax regulation: A Bourdieusian view

“…Taxpayer clients, although motivated by financial gain (economic capital), thus engage with HMRC and their advisors in the game of tax avoidance. Such routines of practice naturalise the industry of tax planning and avoidance, and more controversially tax evasion (Sikka & Hampton, 2005), reinforcing and stabilising its existence.…”

“…If this were not the case, the tax system as we know it simply would not function" (HMRC, 2009). It should be noted that Sikka and Hampton (2005) are referring primarily to 'big' players in the tax game, and also primarily to the United States where cooperative regulation has not yet emerged and an adversarial approach to tax compliance predominates where there has been clear evidence of the failure of self-regulation among tax professionals (Ventry, 2008). Sikka and Hampton, also (deliberately) conflate tax avoidance and tax evasion to challenge the distinction, and thereby necessarily disregard the issue of potential legitimacy of the former and illegality of the latter (Barker, 2009;Ordower, 2010).…”

“…The role of the accounting profession in tax avoidance has led some commentators to suggest there exists a "rapacious tax avoidance industry … dominated by accountants, lawyers, and bankers … with ordinary citizens, equality, democracy and fairness as the visible casualties" (Sikka & Hampton, 2005, p. 326; see also Steubs & Wilkinson, 2010). This perhaps polemic view 13 is countered, although not completely negated, by HMRC's analysis that "[t]he overwhelming majority of tax agents advise their clients appropriately and calculate the right amount of tax ...…”

“…4 See, e.g., O'Neil & Samelson (2001), and Blanthorne & Kaplan (2008). 5 See, e.g., Sikka and Hampton (2005). encompassing not only behavioural requirements, as do all regulatory fields, but also the transfer of funds (taxes) from the regulatee to the regulator. Against this background, we interrogate the specific detail of the Arctic Systems dispute, constructing an alternative view of regulatory practice leading to concluding observations relevant to the tax regulation field.…”