How To Confirm You're A Twit In Two Pages...

Richard Murphy is at it again. What a toothache of a man.

This time it's a "Code of Conduct" relating to tax matters that he somehow thinks taxpayers, tax professionals and taxing authorities are going to take seriously. Much of it is well beyond belief.

For those of you wanting the full comedic effect of Dickie's efforts, you can go here. For those more sensible, I present the best of the worst:

The Code

The Code is divided under six sections, each of which includes three statements of principle.

.....

2. Accounting

a. Transparent recording of the structure of all taxable entities is available on public record;

Evidently, this means that evey individual filing a tax return would have the "structure" used by said individual in his/her economic efforts recorded and made a matter of public record. As written, Murphy seems to be intent on requiring not only unincorporated businesses to divulge their "structures", but also all individuals filing tax returns. Either Murphy is suggesting an unprecidented (and voluntary) surrender of privacy, or he's too stupid to properly exclude individuals and certain entities. The fact that he doesn't bother to provide a proper definition of what a "structure" is constitutes a nice touch. Murphy provides no rationale or reason for this requirement, either. Another question: Who is charged with gathering and maintaining these records?

b. The accounts of all material entities are available on public record;

As written, this would require all privately held entities to make their financial statements a matter of public record. Why this would be considered "in the publc good" is beyond me. Other than that, this requirement would raise a huge number of issues in terms of financial reporting. At present, here in the U.S., private companies are spared the trouble and expense of SEC and (to an extent) GAAP compliance because their shares are not traded on an open market. But if their accounts are to be comparible, would private companies be required to incur the expense of complying with public company requirements? 

c. Taxable transactions are recorded where their economic benefit can be best determined to arise.

At present, where taxable transactions are recorded is a matter of law. Until that changes, you aren't going to see many CPAs (at least among those who don't care for prison food) jump on this particular bandwagon.

3. Planning

a. Tax planning seeks to comply with the spirit as well as the letter of the law;

Now just what the fuck is that supposed to mean? Is there a tax-related Delphic oracle out there that I don't know about? In the U.S. we have tax courts to decide what the "spirit" of the law is. This is the sort of silliness no competent CPA would bother with, and rightly so: The job of the CPA is compliance with the letter of the law. If his interpretation of the spirit of the law differs from the IRS' interpretation of the spirit of the law, and the IRS is enforcing its interpretation of the spirit as the letter, then you take it to tax court.

b. Tax planning seeks to reflect the economic substance of the transactions undertaken;

That would be fine except for one tiny problem: There is no overriding legal obligation for "tax planning" (whatever the fuck Murphy means by that) to reflect the economic substance of a transaction. The sole objective of tax planning is to structure an entity's business affairs so that the entity pays the least amount of tax required by law. What Murphy simply refuses to acknowledge (over and over) is that neither entities nor individuals have any legal obligation to pay one red cent more than is required by law.

c. No steps are put into a transaction solely or mainly to secure a tax advantage.

Hopeless drivel. As long as tax compliant tax avoidance (legal tax minimization) does not become tax evasion (illegal tax avoidance), tax planning to secure a tax advantage is a taxpayer's right.

4. Reporting

a. Tax planning will be consistently disclosed to all tax authorities affected by it;

And what the Hell will they do with it? Well, without codification of form and content of "tax planning" documentation, as well as a massive increase of various bureaucracies with highly trained tax professionals to review said documentation, the answer is... Nothing! Are these bureaucrats going to be empowered to reject such tax planning prospectively? Or what? It seems obvious that Dickie has never actually done any sort of sophisticated corporate tax planning. If he had, he'd know that any sort of meaningful review of corporate tax planning would require the reviewer to have an deep and intimate knowledge of the company as well as the relevent tax laws, and that just isn't remotely practical in the real world without putting tax planning review bureaucrats in the middle of the corporate tax planning process.

b. Data on a transaction will be consistently reported to all tax authorities affected by it;

This is even dumber. Which transactions? Which tax authorities? What form? What content? For what purpose? Even more bureaucrats? Can you imagine the staff requirements needed at the IRS to deal with even a fraction of the "transactions" routinely generated by, say, the Fortune 500 in any given year?

c. Taxation reporting will reflect the whole economic substance and not just the form of transactions.

More hopeless drivel, on the level of the whole "spirit of the law" thingy above. Again, no self-respecting tax professional will take this sort of thing seriously. Period.

If you go to the published version of Murphy's "Code of Conduct", you get over 60 pages of this sort of nonsense, complete with a selection of his monomanical ravings about evils of tax havens as well as his bizarre misunderstanding of the concepts of tax compliance, tax law and tax planning, and his even more bizarre inability to understand the considerable differences between tax avoidance, tax minimization and tax evasion. 

This morning, I took the trouble to email Dickie's "Code of Conduct" to several CPAs and tax attorneys whom I count as friendly. The result? Over half thought I had made it up and was pulling their legs. Several assumed I was overworked and needed some rest, and one Googled "Richard Murphy", spent 15 minutes looking over his site, and rendered a three word verdict of...

"What a twit."

Couldn't have said it better myself.

 

Comments

[richard mcenroe]

Sorry, still prefer my advice. More practical.

[David]

"What a twit."

Surely your friend substituted an "i" where an "a" was intended.

[Dennis The Peasant]

Surprisingly, no.

He's a gentleman.

[KMcC]

alas, Murphy has some pull with UK state-worshippers and Fabians and other deluded sorts. They think he's a guru, and want him to help formulate ways they can insert their hands ever deeper in our pockets (who knows - there might be a shilling beneath the hankie but above the crumbs). He is also, from what I've seen of the way he responds to discussion and criticism of his preposterous ideas, rather given to missing the point. There will always be Murphys in this world; our aim should be to ensure that they never ever have any power of any sort over other people.

[Dennis The Peasant]

I'm doing my small part, I hope.

[jcw]

Does anyone pay him to come up with this shit?

[richard mcenroe]

Obama Deeply Impressed by G19 Riots

[David]

quoth Dennis:

"He's a gentleman."

A worthy ideal but, in this society, an archaic one.

[richard mcenroe]

Remember the immortal words of Colour Sergeant Vaughan in "Zulu": "Be quiet now, will you, there's a good gentleman..."

[Phoenix Woman]

O/T, but I thought you might like this fond farewell to PJ Media:

http://christyhardinsmith.firedoglake.com/2009/04/01/buhbye/

[richard mcenroe]

Dennis, what's your opinion of the new accounting rules released for the banks today?