Tax Break

Who said tax is boring?

Whole in one

"YOU are teaching ME the Old Testament?"

“YOU are teaching ME the Old Testament?”

“I said: ‘Remember Lot’s wife. Never look back.’ I don’t know whether Henry had read the Old Testament or not, but I had, and he got the point.”

Thus spake that most Nietzschean of US Presidents, Richard Milhous Nixon, to Sir David Frost  back in 1977, mocking his former Secretary of State’s qualms about invading Cambodia. Knowing, as we now do,  Mr Nixon’s eloquent way with words, we can make an educated guess that what he actually said was: ‘Remember Lot’s ******* wife’. However, Mr President, we too got the point.

No fire and brimstone raining down on this house

No fire and brimstone raining down on this house

But for Nixon’s conceit, he might have realized that, born into an Orthodox Jewish family, Henry {Kissinger} would have learned the story of  the Pillar of Salt in the Hebrew original  long before studying   “Fun with Dick and Jane” or its German equivalent (and Dick and Jane did not have nearly as much fun as they had in Sodom and Gomorrah).  Posterity does not record whether Kissinger retorted by congratulating his boss on his command of the early chapters of Genesis while asking whether the paranoid President had ever made it as far as the story of King Saul.

Had Nixon’s line come up at the impeachment of President Andrew Johnson a century earlier, it would have been reasonable to  assume that everyone hearing it would have immediately understood its context without the need for mentioning not to look back.  A third of a century on from the  interview and Generations X and Y would now most likely miss the point entirely until saved by that artificial memory facility, Wikipedia.

An increasingly secular world has substantially lost its Biblical “lingua franca” and, even allowing for a huge dollop of atheism, as we celebrate the 450th anniversary of the birth of  the Bard an increasingly prosaic secular world has lost its Shakespearian “lingua franca” too.

Who has time to read the Bible?

Who has time to read the Bible?

Which brings me to the single question that frames Generations X and Ys’  deeper thinking: “Who cares?” or, to be more precise, “Who gives a ****?’ (and that is as precise as I am going to be). Well, boys, girls and those of you Xs and Ys who have yet to decide what you are, apart from the ability to communicate in something more elegant than two syllable grunts, such universally shared texts allow  sometimes complex thought processes to be shared in a flash.

Reading the OECD’s relatively tame  “Public Discussion Draft: BEPS Action 1 : Address the Challenges of the Digital Economy” published a few weeks ago, it occurred to me how important this lingua franca thing is and how, until now, I may have been barking up the wrong tree in advocating a complete recalibration of the international tax system.

As readers know, the OECD in conjunction with the G20 (or G19 as Russia is currently standing outside the Headmaster’s office) is pursuing an ambitious goal of straightening out everything that is crooked on the international tax scene. One of the biggest challenges is dealing  with the Digital Economy because, in the succinct words of  the milkman philosopher Tevya in Fiddler on the Roof: ‘It’s a new world, Golda’. In my heart of hearts I continue to believe that there needs to be a fundamental change in the basis of taxation including abolition of company tax. However, the Draft, which impressively analyzes the components of the digital economy, while opening the door to substantial changes on such issues as the definition of a permanent establishment, reduces the issues for treatment to the well-worn existing norms of international taxation.  That, after all, may be no bad thing.

Nobel Laureate Daniel Kahneman in his book “Thinking, fast and slow’  talks about “expert intuition” – a Fire Chief who senses exactly when to leave a burning house before it collapses or a Chess Master who can instinctively advise the next three moves in somebody else’s game. It turns out that this comes from enormous practice and experience  and not some magical eureka moment- a combination of System 1 (automatic) and  System 2 (conscious) thinking. This allows for quick, highly complex, thoughts.

When an experienced tax advisor is asked to analyze a situation of, say permanent establishment status, he or she will often intuitively know the answer immediately and then spend the next 25 hours (at premium charge-out rates) proving it right. The terminology is then used as  a lingua franca between members of the tax advisory team who can concentrate on producing a holistic answer based on the initial “findings”.  If the system were to be fundamentally changed we would, at least in the short to medium term, lose that hard-wired expertise and be forced into fully conscious thought processing taking one step at a time.  Apart from the additional hours required to deal with new situations (Yippidoo!), there would be significantly increased risk of  not catching the full picture. Insurance claims would increase (along with the number of disclaimer lines on memos and opinions).

And if you think the above is a load of nonsense, an experiment I and my colleagues were once subjected to (spoiler alert: If you like making a fool of yourself in public, do not read on) involved watching a video of a white-clad team and a black-clad team passing basketballs. We were told to count the number of passes made by the white team.  Concentrating so hard on the number of passes, we all failed to notice the pantomime gorilla walk across the middle of the screen, stop, beat its chest, and carry on.  In tax advisors’ parlance that gorilla could have been VAT, disallowable interest or a host of other tax planning side dishes that today would serve themselves up as expert intuition.

I still believe that one day the system will need to fundamentally change, but – just as  St Augustine (with whom President Nixon was doubtless better acquainted than was Kissinger) beseeched his Creator: ” Give me chastity and continence, but not yet” – I would rather wait a while (preferably, until I  retire).

nietzsche-is-deadIn the meantime, while reading of the Bible may be at an all-time low, new-release Hollywood blockbusters like “Noah”, “Son of God” and “God’s Not Dead” may get the lingua franca going again. Mind you, judging by the wholesale reworking of the Noah story, I hate to think what they would do with Sodom and Gomorrah.

Single Post Navigation

One thought on “Whole in one

  1. “or a Chess Master who can instinctively advise the next three moves in somebody else’s game” ??-(I’m now down to beginners level,barely managing 2 moves).But in my more illustrious past I routinely exceeded John’s definition of grandmaster status. Or to put it more clearly – I believe that grandmasters think 8 moves and up.Nice blog anyway!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: