Richard Murphy thinks auditors should have triggered multiple catastrophic bank runs

Posted by Christie Malry on March 29, 2014 at 12:16 pm

Is there any other way to interpret this?

I am sorry – but if the auditors were worth their salt they’d have said no to the government

They did not

They are culpable

So, when the government told auditors that, in order to provide the necessary stability to a very nervous banking sector, it would provide funding of last resort, auditors should have told government tough tit. Even though the banks were now going concerns thanks to government's intervention to restore confidence to the sector, auditors should have undermined their efforts altogether. And, in doing so, triggered a series of catastrophic bank runs that would have crippled the entire UK economy.

Really, Ritchie? You sure about that?

Can accountants be trusted? A response to Ian Fraser

Posted by Christie Malry on March 28, 2014 at 12:41 pm

Yesterday, Economia magazine published the latest in its rather controversial series of debates. Entitled "Can accountants be trusted?" it put former ICAEW president, Mark Spofforth up against journalist and author, Ian Fraser.

I didn't find myself convinced by Fraser's case and, thanks largely to Twitter's 140 character limit and my own mercurial mood, we didn't get that close to resolving our differences on Twitter. So that's the purpose of this post: to set out what I see in flaws in Fraser's reasoning that lead him to incorrect conclusions about the accountancy profession.

It's worth pointing out that I'm not in the employ of the Big 4. As has been the case with this blog ever since I first started blogging in 2010, I care only about facts and what can logically be deduced from those facts. So my issue with Fraser's piece is that I see it as drawing inferences that cannot be inferred, not that I am personally unhappy with where he ends up. Nor should you read anything into my clashes with Fraser before. This is solely to do with this piece.

Because annotating each comment in HTML might become cumbersome, I've uploaded his entire text to Google Drive and added comments there. Please feel free to add your own comments to my comments (I think I've set the permissions right for you to be able to do this). Or you can simply comment below too.

In most cases, my issue is that Fraser makes claims which he doesn't support. If these claims turn out not to be true then everything that is deduced from them is in turn also not true. I also find that he has drawn examples from a selection of accountancy firms' behaviour and then claimed that these behaviours are representative of other accountancy firms and other work done by those firms, without demonstrating that it's appropriate to do that.

Whether accountants can be trusted is an important debate, and it needs rather more air than Economia's rather unfortunate to-and-fro, restricted to a single page of their magazine, can provide. So I hope we can get rather further than Economia managed.

No, you're not correct

Posted by Christie Malry on March 1, 2014 at 12:41 pm




He really needs to stop being such a twat about his critics. After all, the main motivation for Ritchie wanting "transparency" is so he can abuse them.


The £120bn tax gap and the Fair Tax Mark cannot co-exist

Posted by Christie Malry on February 27, 2014 at 9:58 am

Richard Murphy has been trying his hardest recently to explain the Fair Tax Mark methodology. At the heart of many criticisms of it is the observation that Fair Tax Mark is obsessed with the effective current tax rate. However, it permits companies with a low effective current tax rate to 'earn back' the points they need to secure a Fair Tax Mark by providing disclosures.

Murphy describes this - and in doing so rather tortures the corporate governance lexicon - as 'comply or explain'. What he means isn't "comply with the tax law". He means "comply with my personal, distorted view of how the tax system should work. For there may well be companies that, as a result of losses, capital investment, R&D or other government incentives have a low effective current tax rate for very good reasons. But to earn the Fair Tax Mark they need to also explain what they're doing. So it isn't "comply or explain". It's comply AND explain, because they're both complying with tax law and having to explain it to Murphy's satisfaction.

But this raises an interesting dilemma for Murphy's own tax campaigning. For years, he has promoted his own rival estimate to the tax gap. HMRC say it's £35bn or so. Murphy says it's £120bn. I've comprehensively debunked his estimate here and he has yet to engage with those criticisms so I think we can take it as read by now that he cannot respond to them. But, as Tim shows, his estimate presumes that every difference between the statutory tax rate and the effective tax rate is caused by tax avoidance and therefore belongs in the tax gap. So the £120bn estimate includes very naughty tax scheme dodges as well as vanilla deductions caused by investment in plant and machinery.

Murphy has made quite a name for himself, as well as quite a lot of money, by using the £120bn estimate to foment public anger against large corporations. UK Uncut, for instance, take his figure as gospel and base their campaigns on the apparent unfairness that large corporations can apparently legally not pay a penny of corporation tax ever while ordinary folk have their income tax and NI withheld at source. The £120bn tax gap could close the budget deficit. So every penny of it must be unfair.

This leaves Murphy with an uncomfortable conclusion. While he merrily awards the Fair Tax Mark to companies with low effective current tax rates but good disclosures, he is simultaneously seeking to argue that a low effective current tax rate, no matter how it is caused, is unfair. The two concepts simply cannot co-exist. And ultimately one - or, more likely both - will have to give.

Spot the difference: ICAEW edition

Posted by Christie Malry on February 25, 2014 at 10:10 pm


The Institute of Chartered Accountants in England and Wales has given unambiguous backing to the Fair Tax Mark.

‘Thanks’ is all I can say to that. Appreciated.

In December:

The ICAEW – arch defender of vested interests and the status quo against democratic accountability

There are occasions when I find my own professional institute – the Institute of Chartered Accountants in England and Wales - intensely annoying. I can even understand why another outstanding accountant of my acquaintance, Tim Bush, has now quit the Institute in disgust, but I persevere with membership in the hope that one data, maybe, the ICAEW will do the right thing. And then along comes something to dismay me.

It’s pure arrogance.

It shows the ICAEW has forgotten its public interest duty – which in no way can be aligned with these comments.

And it shows a profound misunderstanding of or disquiet for our political process, either of which is unappealing.

The ICAEW has a long way to go if it is to do anything to mend the enormously damaged reputation of accountants, and this is not the way to go about it.

And in January:

If the ICAEW wants to be credible it has to do much better than this. If not, it has to expect to be by-passed in the debate on what to do, and it will be. The choice is theirs to make: own up to the nature of the problem that exists and how it might be dealt with or simply look like an apologist for the abuse. At present it looks pretty clear which way they’re jumping. I hope they change their tune, and soon.

So it seems Ritchie wants us to ignore the ICAEW except for when they agree with him.

Quote of the day: Earnings tax edition

Posted by Christie Malry on February 24, 2014 at 7:42 am

Oh yes he did:

Second, if this is to be called an Earnings Tax the obvious question to ask us why then only earnings are taxed

Will "because it's called Earnings Tax" do?

Return of the Fair Tax Mark

Posted by Christie Malry on February 20, 2014 at 11:12 am

Like the proverbial bad penny, it’s back. The Fair Tax Mark mark 2 was relaunched on a reluctant world this morning, to much trumpeting.

So, the question is: has it improved?

Well, there are some definite improvements to be welcomed. Firstly, the inscrutable 15 point scale from the original FTM, under which you were awarded - against your will if necessary - a Green, Amber or Red Tax Mark, has been scrapped. Now you either get the Fair Tax Mark, and can wear it on your website, or you don’t. But companies that don’t get the Fair Tax Mark now won’t get pilloried for actively not getting it. This should encourage companies to think of the Fair Tax Mark as something to aspire towards rather than something to avoid completely.

And it’s good to see some real experts advising the FTM. I don’t always get along with David Quentin or Andrew Cobham. That’s not surprising, given that our politics are so diametrically opposed. But they know their stuff, and they’re exactly the sort of professionals a venture of this sort needs. Not the amateurish have-a-go zero antics of Richard Murphy (although he has been retained as its technical director - ugh - and “founder”).

However problems remain.

Fair Tax Mark is only as good as people’s trust in it. And the profoundly dishonest and grubby fingerprints of Richard Murphy still stain this project. So today’s announcement is presented as a “launch” of the Fair Tax Mark and last July’s Murphyshambles is now described as a “pilot study”. But this is a blatant lie. Last July was the launch, and it completely failed due to shoddy design, shoddy research, inadequate consultation and Richard’s trademark failure to engage with critics. Given that FTM expects businesses to be transparent about their taxes, it’s the very least it can do to be honest about its own difficult birth. There are further transparency problems over the organisation itself. What is its business structure? The old FTM was a company limited by guarantee, run out of Murphy’s mansion in Norfolk. Now the contact address is in Manchester. But what’s its funding? Who owns it? When can we see its accounts? The FTM is very coy on these issues, and that’s simply not good enough. As stands, it would score a big fat zero under its own criteria.

There are also the distasteful echoes of the worst abuses of indulgences. So companies pay FTM to be absolved by FTM. Yes, there’s a methodology, but it has some of the same wiggle room that allows FTM to reward its friends and smite its enemies. We don’t know how the three plucky FTM pioneers - Unity Trust Bank, Midcounties Coop and The Phone Coop - got their FTM. We just know that they paid an undisclosed sum of money to FTM and they got it. In this context, it’s particularly unfortunate that the Guardian’s recent roundtable on FTM was funded by the Midcounties Co-op. It rather stinks of “you scratch my back, and I’ll scratch yours”.

And it’s a pity that they’ve scoped multinationals out of the initial methodology. While there are good reasons for doing this, it allows the myth to remain that multinational companies are all vicious tax avoiders while small independent companies are pure as the driven snow. In practice, the situation is more complex. By focusing solely on corporation tax, which is almost all paid by the largest companies, it overlooks the other forms of taxes paid by companies and the other benefits they bring to society, most of which accrue to us, not their owners.

There are some niggles in the precise criteria too. The criteria reward companies that provide a reconciliation to current tax, even though FRS 102 (29.27(b)) requires a reconciliation to total (current plus deferred) tax. It’s true that not every company provides clear disclosures in their tax reconciliation, but it seems mean to require something that adds further clutter to local GAAP. The example notes, while welcome, look absurdly long for a small company.

Naturally, the proof of whether FTM will ultimately be successful will be in whether companies want it. And there are plenty of smaller companies who feel preyed upon by big multinationals who might think a couple of hundred quid is a price worth paying to be able to show a banner in their window. But it’s not clear that such parasitical behaviour will prove to be in these companies’ interest or even in the public interest.

Compare and contrast

Posted by Christie Malry on February 11, 2014 at 10:11 am

Ritchie two years ago:

Of course, Oxford could also have heard from me on the subject but so broad minded is the Oxford Centre for Business Taxation that they’ve banned me from their events for asking awkward questions about things like their funding (the FTSE 100) and governance and why they’re quite so keen to promote tax havens without disclosing their conflicts of interest when doing so. So they just have others promote my ideas instead.

Ritchie today:

If you came to my front door and when I opened it you yelled abuse at me do you honestly think I'd invite you in for a chat?

And do you honestly think that if you behaved like that I could trust you to not abuse my other guests?

Readers of this blog may recall that is precisely why Ritchie isn't welcome at Oxford Centre for Business Taxation events.

Quote of the day: bumpkin edition

Posted by Christie Malry on February 9, 2014 at 11:54 am

London is the problem of small scale thinking writ large

A city of 21 million people is "small scale thinking".

Is there any attempt at all to engage his brain before he spews out his blog posts?

Isn't this interesting?

Posted by Christie Malry on January 27, 2014 at 10:00 am

Ritchie posted this diagram this morning, before taking the blog post down. Presumably because it's naughty to post your HoL evidence; after all, it belongs to the committee, not you, and you need their permission to reuse it. (This is a small extract, with emphasis added)

He's saying that using a partnership saves you NIC compared to the corporate form.
And who do you know who operates through a partnership? Why, Mr Richard J Murphy, of course!
Why does he view his use of a partnership to be tax compliant, when other businesses that receive an apparent tax advantage from their business structure are criticised as tax avoiders?