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Friday, 26 April 2013

MPs criticise accounting firms on tax avoidance

Corporate tax avoidance has risen to the top of the political agenda in Britain in the past year following reports which showed some major companies paid little or no tax in the country by shifting profits to tax havens.

While the four biggest accounting firms, KPMG , Deloitte , Ernst & Young and Price water house Coopers said they no longer advised on aggressive tax avoidance plans, the Public Accounts Committee said: "They are still devising complex schemes that look artificial".

It went on to say the accounting firms were still prepared to recommend tax arrangements which had as little as a 50 percent chance of being successful if challenged in court.

The report also questioned the way staff from the "Big Four" were seconded to the government to help draft tax rules.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," Committee chair Margaret Hodge said.

But the firms said they behaved ethically and that the complexity of tax law was largely to blame for any appearance to the contrary. They welcomed the committee's calls for the rules to be simplified.

"We perform an essential function in the UK economy by helping our clients navigate this complexity," Bill Dodwell, Head of Tax Policy at Deloitte said.

The committee called on companies to disclose more information about their tax affairs. The government has also called for more disclosure but has said it wants this to be done on a voluntary, rather than a mandatory, basis.

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Article Source : http://uk.reuters.com

UK avoids triple-dip recession with better-than-expected 0.3% GDP growth

George Osborne says growth is evidence the coalition's policies are helping to 'build an economy fit for the future'

George Osborne has welcomed news that Britain's economy expanded by a stronger-than-expected 0.3% in the first quarter of 2013, avoiding a triple-dip recession.

As the first estimate from the Office for National Statistics showed that a healthy performance from the services sector helped GDP growth to beat the 0.1% expected by City pundits, the chancellor said it was evidence that the coalition's policies were helping to "build an economy fit for the future".

"Today's figures are an encouraging sign the economy is healing," he said. "Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

The key services sector expanded by 0.6% on the quarter, according to the ONS, while industrial production also grew, by 0.2% – though much of that was accounted for by North Sea output. The struggling construction sector declined by 2.5%.

The business secretary, Vince Cable, said: "Today's figures are modestly encouraging and taken alongside other indicators, such as employment figures, suggest that things are going in the right direction."

Despite the unusually cold weather in March, the ONS denied that the weather had had any measurable impact on the figures. While retailers suffered in January and March, that was partly offset by increased demand for energy from householders turning up their heating against the freezing temperatures outside.

The spring bounce in the economy will have come as a relief at the Treasury, with officials from the International Monetary Fund due to arrive in the UK on 8 May to scrutinise the coalition's policies. A negative number, after the 0.3% contraction in the final quarter of 2012, would have marked an unprecedented triple-dip recession.

However, Labour will seize on the fact that, as the ONS said in its statement, GDP "has been broadly flat over the last 18 months". Output from the economy remains 2.6% below its pre-crisis peak in 2008.

Tony Dolphin, chief economist at the Institute for Public Policy Research, said the economy was "stuck in a rut".

"Normally, we would expect the economy to grow by around 12% over any five-year period. The fact that it has contracted by 2.6% instead means almost 15% of potential output has been lost, along with the employment opportunities and tax revenues that would have accompanied it," he added.

David Brown, of New View Economics, said: "The government have been very, very lucky. They have avoided a third dip into recession by the skin of their teeth. There is nothing to celebrate over as the UK economy is not out of the woods yet."

Sterling hit its highest level against the dollar in two months after the news, rising by more than a cent, to $1.5414, amid speculation that the Bank of England will be less likely to expand its recession-busting quantitative easing programme against the background of a healthier economy.

"From a policy point of view the signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May," said David Tinsley, at BNP Paribas. Three of the Bank's nine members voted for an expansion of QE at their April meeting.

Article source : http://www.guardian.co.uk

UK GDP: Osborne hails triple-dip escape as sign of 'healing economy'

But Labour and economists insist the figures don't add up to a recovery

George Osborne has hailed news that the UK escaped a triple-diprecession in the first quarter of 2013 as evidence that the coalition's policies are helping to "build an economy fit for the future".

After a challenging week, in which the International Monetary Fund urged him to ease up on his austerity policies, and Fitch became the second agency to strip the UK of its AAA credit rating, the chancellor welcomed the 0.3% growth in GDP announced by the Office for National Statistics (ONS).

"Today's figures are an encouraging sign the economy is healing," he said. "Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth but, by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

A second quarter of contraction, after the 0.3% decline in the final three months of 2012, would have met economists' standard definition of a recession, fuelling Labour's argument that the coalition's cutbacks have choked off recovery.

But despite the unexpectedly strong growth figure, the shadow chancellor Ed Balls pointed out that GDP remained at the same level as it had been six months earlier. The ONS said the economy had been "broadly flat" over the past 18 months.

George Osborne welcomed the 0.3% growth figure announced by the ONS: 'Britain is recovering and we are building an economy fit for the future.'

"If we're to have a strong and sustained recovery and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long term – as Labour and the IMF have warned," Balls said.

According to the detail of the ONS's figures, the upturn in GDP was driven by growth of 0.6% in the key services sector, which includes retail and transport and makes up more than three quarters of the economy.

Industrial production also expanded, by 0.2% – though much of that was accounted for by rising North Sea oil and gas production. Activity in the hard-hit construction sector declined by 2.5%.

The business secretary, Vince Cable, said: "Today's figures are modestly encouraging and, taken alongside other indicators such as employment figures, suggest that things are going in the right direction."

Sterling hit its highest level against the dollar in two months after the news, rising by a cent and a half to $1.5450, amid speculation that the Bank of England will be less likely to expand its emergency quantitative easing programme against the background of a healthier economy.

"From a policy point of view, the signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May," said David Tinsley at BNP Paribas. Three of the nine members of the Bank's monetary policy committee voted for an expansion of QE at its April meeting.

A return to modest growth may also help to strengthen Osborne's hand in the tough negotiations with ministers over individual departmental spending plans, to be announced in June's spending review.

"Today's figure should provide some cover for the chancellor to continue on the path of fiscal austerity; we do not expect any major changes in the deficit reduction plan, at least this side of the general election," said George Buckley of Deutsche Bank.

However, Tony Dolphin, chief economist at the Institute for Public Policy Research, said the big picture revealed by yesterday's figures was one of an economy that was "stuck in a rut". The ONS said GDP was 2.6% below its pre-crisis peak in 2008, making the recovery weaker than that from any recession since the 1930s.

"Normally, we would expect the economy to grow by around 12% over any five-year period," said Dolphin. "The fact that it has contracted by 2.6% instead means almost 15% of potential output has been lost, along with the employment opportunities and tax revenues that would have accompanied it."

David Brown of New View Economics said: "The government have been very, very lucky. They have avoided a third dip into recession by the skin of their teeth. There is nothing to celebrate over as the UK economy is not out of the woods yet."

IMF officials are due to arrive in London next month to scrutinise the government's tax-and-spending policies, as part of its annual health check of the economy, after chief economist Olivier Blanchard accused Osborne of "playing with fire".

Dhaval Joshi of BCA Research said the government's continued commitment to austerity was in contrast to the shift in approach from the eurozone countries, with Greece, Spain and Portugal being given extra time to reach their deficit-reduction targets. He argued that planned cuts would depress growth more dramatically in the UK between 2012 and 2015 than in crisis-hit Italy or Spain.

"Just like the UK, the monetary union's third- and fourth-largest economies have been in extended, austerity-caused economic stagnations. But for Italy and Spain, peak austerity is now over," he said.

"The UK government shows no sign of budging from its plan A, while euro area policymakers are signalling a shift away from aggressive fiscal consolidation."

Despite the snow and unusually cold weather in the first three months of the year, the ONS denied that the weather had had much impact on the figures. While retailers suffered in January and March, that was partly offset by increased demand for energy from householders turning up their heating.

Article source : http://www.guardian.co.uk

'Big four' accountants 'use knowledge of Treasury to help rich avoid tax'

Experts offering advice on legislation they helped to create is 'ridiculous conflict of interest', says select committee chair Margaret Hodge

The so-called "big four" accountancy firms are using knowledge gained from staff seconded to the Treasury to help wealthy clients avoid paying UK taxes, a report by the influential Commons public accounts committee says.

Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers have provided the government with expert accountants to draw up tax laws. But the firms went on to advise multinationals and individuals on how to exploit loopholes around legislation they had helped to write, the public accounts committee (PAC) found.

Margaret Hodge MP has called on the Teasury to stop accepting staff from the 'big four' accountancy firms when drawing up new laws.

Margaret Hodge, the PAC's chair, said the actions of the accountancy firms were tantamount to a scam and represented a "ridiculous conflict of interest" which must be stopped. "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said, calling for the Treasury to stop accepting their staff to draw up new tax laws.

The report comes after David Cameron on Thursday set out plans to use Britain's chairmanship of the G8 to tackle what he described as staggering worldwide levels of tax evasion and avoidance.

The PAC claims HM Revenue and Customs had to seek outside help because it was engaged in a "battle it cannot win" in seeking to stem the losses to the exchequer from tax avoidance.

The accountancy giants employed almost 9,000 staff and earned £2bn a year from their tax work in the UK, and £25bn globally, the report claims. MPs found that Revenue and Customs had far fewer resources, particularly in the area of transfer pricing: complex transactions deployed by multinational companies in order to shift taxable profits to low tax jurisdictions. "In the area of transfer pricing alone, there are four times as many staff working for the four firms than for HMRC," the report says.

The committee highlights the way the firms seconded staff to the Treasury to advise on issues in the drafting of legislation. "Through their work in advising government on changes to legislation they have a detailed knowledge of UK tax law, and the insight to identify loopholes in new legislation quickly," it said.

One example in the report is that of KPMG, whose staff advised on the development of "controlled foreign company" and "patent box" rules, and then issued marketing brochures highlighting the role they had played. The brochure "Patent box: what's in it for you" had, it said, suggested the legislation represented a business opportunity to reduce tax and that KPMG could help clients in the "preparation of defendable expense allocation".

The committee is "very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax", the report adds.

The report was welcomed by Prem Sikka, professor of accounting at University of Essex. "They [the big four] are the epicentre of a global tax avoidance industry and the loss of tax revenues is directly responsible for the current economic crisis. The Treasury should follow the US authorities and prosecute and fine the firms. The habitual offenders should be shut down," he said.

Officials from HMRC rejected criticisms that tax officers were not making progress in tackling avoidance. "The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them," a spokesman said.

KPMG said in a statement: "When requested to by government departments we do provide individuals on secondment. Their role is to provide tax technical input and commercial experience so that the authorities can make informed choices on tax policy. Our secondees do not write legislation or make policy decisions."

Bill Dodwell, head of tax policy at Deloitte, said: "We do not believe that there has ever been any conflict of interest but would want to help ensure that there is no perception of conflict." Kevin Nicholson, head of tax at PwC, said: "We provide technical insight to government but only when asked and are never involved in deciding tax policy which is a matter for the government."

In evidence to the committee, John Dixon, Ernst and Young's head of tax, said: "I think there are benefits in the work we do with government ... benefits to the country at large. If you look at the quality of the legislation that we now have ... it is a lot better than it was 10 years ago.

"Why is that? Because we are actively working with government, at our cost, to make sure that the legislative footprint we are working with is as clear and concise as it can possibly be."

An HMRC spokesman said: "HMRC gives careful consideration to the potential risks, as well as how to mitigate any potential conflicts of interest, before any such secondments are agreed. On balance, the carefully targeted use of secondees is beneficial for the development of tax policy and improving the effectiveness of the tax system."

Cameron, who hopes to use an EU summit in May as a stepping stone to a wider agreement at the G8, wrote to all EU leaders proposing:

• Rapid movement to a global system of information exchange to help tackle tax evasion including through the use of offshore trusts.

• Action plans by G8 countries to produce full transparency, breaking through walls of corporate secrecy and establishing central public company registries.

• Voluntary deals for multinational firms to make clear the tax they pay in every country they operate in.

• Implementation of the EU accounting directive so developing countries can access information on payments to governments made from the oil, gas and mining industries.

Article source : http://www.guardian.co.uk

Thursday, 7 March 2013

NatWest hit by system failure less than a year after last outage

Bank says that online and telephone banking, cash withdrawals and payments have been affected for majority of UK customers
Countless Natwest clients were remaining struggling to distance them self cash or perhaps help to make dealings about Thursday, less than a year after That difficulties remaining several struggling to transfer funds or even settle payments for several days.

The bank asserted on the internet and telephone financial, money distributions as well as payments have been afflicted. It stated it recognized that almost all UK consumers have been impacted. But no reason at all was handed for the problems.

NatWest furthermore established the situation about it's customer providers Facebook accounts: "We are aware of the difficulties our clients are possessing and apologise, we will provide more information the moment we've this.Inch
Nevertheless the apology was satisfied along with disapproval by hundreds of its clients, with a lot of upset that the financial institution acquired endured one more method disappointment.Joe Holmes, coming from Lancashire, tweeted: "@NatWest_Help it is possible to issue once again?!!! Abruptly cannot use my personal money card and every one of your own online solutions and programs are certainly not working.

"@NatWest_Help less than a 12 months following the previous fiasco -- this seriously isn't adequate."

Simon Brittain, another disappointed client, tweeted: "#natwest greeting card dropped within Indian native bistro, truly awkward #shambles #notagain.

"#natwest @natwest time to change? Two times in 2 years seems careless.

NatWest is actually owned by the Regal Lender regarding Scotland team. Final June"technical issues" led to setbacks to be able to amounts getting updated and also countless consumers having issues making use of their credit cards for three days.

RBS, NatWest as well as Ulster Bank needed to extend beginning hours inside their branches to aid clients who had previously been unable to pay bills, move money or whoever incomes was not paid.Later more than Seven hundred,500 customers have been impacted by a "human error" in which led to some company accounts becoming debited twice.

Bank of England faces knife-edge decision on bond buys

The Reuters study associated with economists the other day confirmed a 40 % chance of the financial institution choosing a lot more quantitative easing next week's two-day coverage meeting, and a 60 % possibility before the 12 months has gone out.

Because which study has been carried out, several economic experts have transformed their particular call and cash marketplaces declare that the actual possibility is actually better 50 %. The rise in QE expectations provides weighed about the single pound, driving that to some 2-1/2 12 months reduced up against the dollar.

"It's a really close contact,Inches said Ross Jogger, United kingdom economist at RBS.

"My view is that they holds fireplace this kind of thirty day period, however at least there are here that the Bank is very very happy to seem dovish.Inch
The united kingdom's main bank has recently acquired 375 billion lbs associated with gilts, roughly the same as 26 % regarding national earnings, much outstripping the federal government Reserve's QE work that makes up about 14 percent.
Inspite of the BoE's initiatives in order to stimulate the economy via producing money, Great britain is at threat regarding falling directly into it's third tough economy within 4 years and concern is increasing in what many identical would accomplish.
The particular Uk Compartments regarding Business, that reduced its progress estimations about Thurs, said financial coverage, and also targeted steps to support company expense, would be far better compared to driving financial plan further in to currently charted waters.

"More QE would only supply limited rewards for your economic system, while elevating longer-term risks of economic frame distortions, bubbles and higher inflation,Inches mentioned BCC economist David Kern.
PUSHING Over a Bit of Stringed?
The actual Lender's policymakers usually do not manage to share these issues, nevertheless. While they think interest rates, from 2.Five percent, go as little as they are able to, they think QE still has a few usage remaining.

Deputy governor Robert Tucker, that didn't prefer much more connection buying in Feb, mentioned the other day which "nobody around the panel considers that QE provides attained the end of the road which is not a helpful device anymore".
Minutes to be able to last month's meeting confirmed three with the bank's nine economic policy panel members had been currently confident of the need for more QE.
The truth that Governor Mervyn California king was one of them is critical. The past time he was inside the minority was final Summer and also the pursuing thirty day period he got his / her approach.
King is going to be replaced in Come july 1st by Financial institution associated with Canada Governor Indicate Carney, who is likely to have a practical way of getting Britain's economic system growing again.
The Monetary Occasions reported about Thursday in which Chancellor George Osborne might declare new forces with regard to Carney as well as the Bank regarding Great britain from his March 20 spending budget declaration, although the document didn't report options or perhaps specify what are the powers would be.
Any fund ministry speaker declined to discuss the particular Foot article.

Osborne said openly within 12 , that he might pleasant a discussion about the main lender's remit. Despite the fact that this individual extra the bar to alter will be higher, some financial experts see a chance of minimal adjustments to provide the financial institution added freedom more than just how long it enables inflation to be able to overshoot A couple of per cent target.
Those arguing in opposition to more stimulus previously point to The united kingdom's sticky the cost of living which is presently at 2.Seven per cent and not anticipated to go back to goal until early 2016.
The lb provides decreased 6 percent on the trade-weighted index because the introduction of the year, that means higher transfer charges is only going to worsen cost demands.
So far, the bank's policymakers seem to be confident with the actual currency's weak spot. Indeed, several financial experts suspect that the willingness to discuss unusual plan obama's stimulus can be a strategic make an effort to discuss the particular forex reduce and also obtain aggressive advantage.

Tucker brought up the thought a week ago from the financial institution charging financial institutions to park money on the key financial institution, a thing that can encourage these to lend more to be able to organizations in an attempt to enhance progress.