Tax Wars: The Authorities Strike Back
Suicide is not a laughing matter. Last week marked fifty years since American poet, Sylvia Plath, took her own life, and the benefit-of-hindsight news stories on the subject were uniformly depressing. It is interesting, therefore, that one of the most successful comedy series in television history opened each week with a song about suicide. Thirty years ago this month Alan Alda climbed into a helicopter, circled over an improvised “Good-bye” message set in the Korean soil, and, together with M*A*S*H, flew into the sunset.
It transpires that, after seeing the 1970 film, it was “Suicide is painless” with such cheerful lines as: ” The game of life is hard to play, I’m gonna lose it anyway”, that inspired Larry Gelbart to script and produce a TV series. Played in a minor key, the melancholy tune exposed the funny, but almost tasteless lyrics, as pure irony – the song was anti-war. Screened when the Vietnam war was at its most painful to the American people (not to mention, the collaterally damaged residents of Cambodia and Laos), Gelbart fought with CBS over the infantile canned laughter that was shoe-horned into every pathetically unfunny US comedy series of the time – noting that there was no canned laughter in the real Korean War. He ultimately achieved a compromise whereby he was allowed to omit the puerile cackling from operating theatre scenes (MASH stood for Mobile Army Surgical Hospital). It is to Gelbart’s credit that he managed, like his subsequent triumph with Dustin Hoffman’s cross-dressing “Tootsie”, to avoid turning the whole thing into a sick (sic) joke.
We tax planners, of sedentary build and heavier step, are sometimes less nimble with our words and actions. Tax planning can sometimes be a sick joke, warranting a single finger salute down one’s own throat. Take Spain, for example (sometimes, I wish they would).
When the Spanish Government hiked the VAT rate to 21% last September as part of the austerity programme resulting from the Euro crisis, a theatre in a small town in Catalonia found a way round the increase. Staple foods were still only liable to 4% VAT, so the theatre owner received permission from the town council to set up a vegetable stall outside the box office, where theatregoers could purchase a carrot for €15 – €17 inclusive of 4% VAT (the difference arising, presumably, from variances in size of the carrot). Free with the carrot came a theatre ticket. It is understood that, prior to the commencement of performances, patrons were asked – in addition to turning off their mobile phones – not to munch their carrots (which, apart from the noise, presumably might be needed for re-admission if they popped out in the interval). Had I been the Spanish authorities, I would have garotted the lot of them and fed them to the bulls.
This kind of shtick gives tax planning a bad name. It is the equivalent of throwing a custard pie in the face of the government to the accompaniment of pathetic (canned) laughter or, to be more on topic, spitting out a liquidised carrot giving the “hilarious” impression of spontaneous vomiting. Yuck!
It appears, strangely, that there is nothing illegal in what the Catalonian Jesters did. On the other hand this kind of tax avoidance is definitely way beyond the parameters of what members of the Spanish Cortes had in mind when they conjured up the legislation.
There are currently moves around the globe to curb excessive tax avoidance, in the form of General Anti Avoidance Rules (universally known by the acronym GAAR, which onomatopoecially sounds pretty much like someone with a single finger stuck down his throat).
Britain’s new rules should enter into force in the next few months while India, to the relief of foreign investors still digesting the Vodafone case, has delayed implementation until 2016. Australia and New Zealand have had rules for donkey’s years while Canada came on board in the 1980s and China a couple of years ago. The US has something slightly different because the US always has something slightly different.
Although, in principle, the GAAR is a pretty slam dunk concept, it is in practice highly controversial. On the one hand governments need to be able to curb the most blatantly aggressive tax planning; on the other, investors and businessmen crave certainty while a GAAR instills fear (often justified) that virtually everything is up for grabs. Methods to try and achieve maximum fairness include having a regular tax authority committee, rather than individual tax officers, to decide on GAAR cases accompanied by very narrowly defined terms for applying the GAAR. Ultimately, the GAAR is, by definition, subjective and there cannot be any perfect answer. It depends from which angle you look at it, and both tax authorities and tax advisers often contort themselves into the strangest of poses to obtain the weirdest of views.
With all the drama of the tax wars (dear reader, allow me my fantasies) it is probably high time for a TV spin-off of another major film. How about the mega-successful, Les Miserables ? The tax profession would be very happy with the current cast – Hugh Jackman as the morally superior tax planner Jean Valjean making the world a better place and Russell Crowe as the stickler-for-the-letter-of-the-law tax enforcer Javert. The world’s tax authorities might, however, have a problem with this. They are more likely to go for the late Heath Ledger, with a bucket of make-up thrown over his head and an entire red lipstick smeared over his lips, as a psychotic Valjean and Christian Bale as the black-caped saviour of the universe. Had Larry Gelbart still been around to take on the project, he would have been challenged by “One day more”. Written in a major key, it includes the sickest of Javert’s lines “I will join these little schoolboys, they will wet themselves with blood”. On second thoughts, maybe he would have just turned up the canned laughter and comforted himself with the fact that all the characters were French.