Tuesday, March 23, 2021

Tribute To Nina Olson

 The IRS says don’t file an amended tax return if the new Covid bill changed your refund CNBC


Another Blow to Tax Evasion and Money Laundering: UK Targets Art Market After US Goes After Anonymous Shell Companies

The US and UK are making life a bit harder for tax cheats


Nina E. Olson | Harvard Kennedy School


Symposium, Tribute to National Taxpayer Advocate Nina Olson, 18 Pitt. Tax Rev. 1-189 (2020):


Larissa Neumann (Fenwick & West, Mountain View, CA; Lecturer, UC-Berkeley), A Virtuous Cycle: Investing in Diversity and Inclusion, 99 Tax Notes State 995 (Mar. 8, 2021):

Tax Notes StateThe call for more equal representation of women in positions of power in the tax law profession has never been louder than it is today. Companies, professional organizations, law schools, and society at large are initiating a concerted push for greater gender diversity within law firms. According to the American Bar Association’s “ABA Profile of the Profession 2020 Report,” the percentage of female lawyers has increased very slowly in the last 10 years; it stood at 31 percent in 2010 and is now at 37 percent. Male attorneys still greatly outnumber female attorneys, especially in management and equity partner positions. Although women generally have made up half of graduating law school classes for the last 20 years, there continues to be a disparity in the legal profession.



The UK  government has published its audit reform proposals this morning in a new White Paper. In this they say:

[T]he audit regulator has in recent years found up to a third of audits carried out by the seven largest audit firms to be in need of improvement or significant improvement.

The entire focus of this review should have, in that case, been on the inability of these firms to do the task that they claim to undertake on behalf of society, and which lets them earn exceptional profits.

There have also, of course, been many concerns expressed over the conflicts of interests within Big 4 firms. Their whole structure is set up top be opaque, as I have shown in my research with Saila Stausholm. As we suggested the only possible explanation for that is their own desire to avoid regulation. What such structures also permit is the cross-selling of c0nsulting services to audit clients, creating significant conflicts of interest. I know they say that this is no longer happens but what is undoubtedly still true is that they remain the backbone of offshore, as the same research showed.

The government is aware of this. What they say is this:

It is not healthy for audit quality that the UK audit market is so concentrated, with 97% of FTSE 350 audits undertaken by just four audit firms. This concentration is not helped by the fact that those firms also compete to provide a wide range of other business services to the largest companies.

But then they say:

The core of the Government’s proposal is a managed shared audit requirement for UK-registered FTSE 350 companies. This form of shared audit would see an audit firm appointed to lead the group audit, for which it bears the overall liability. When tendering the statutory audits of entities within the group, companies would be required to appoint a Challenger audit firm to conduct a meaningful proportion of the statutory audits. The requirement would apply across the FTSE 350, giving the audit firms the opportunity to gain exposure to the statutory audit engagements and audit committees of the largest and most complex companies, and giving those companies greater choice of auditor.

In other words, they leave the status quo intact. But what they do is evolve responsibility for the drudgery that they do not really want to do anyway to a smaller firm, and when everything fails you can imagine what the defence from the Big 4 will be: the claim will always be that it was the 'challenger' firm that got is work wrong, and not them. The excuse is quite literally lined up to use, off the peg.

It should be added that the government also says this:

[T]he Government also proposes a reserve power for the Secretary of State to allow the regulator to introduce a market share cap. This would be operated following a joint review by BEIS and the regulator, if mandatory shared audits do not bring about the desired change to the FTSE 350 audit market within a reasonable period of time.

That however is utterly meaningless. If there are no firms able to take on the role of the Big 4 then imposing a cap on them does not increase audit quality, but likely reduces it.

Finally, it should be noted that the government does suggest that there should be some reorganisation within audit firms. They say:

The Government proposes to require:

• the strengthening of governance within audit practices through the creation of independent Audit Boards within firms;

• Audit Boards to have oversight of audit partner remuneration and ensure it is linked to audit quality;

• the publication of a separate profit and loss account for the audit practice, accounting for cross subsidies between the audit practice and the rest of the firm through arm’s-length transfer pricing; and

• regulatory oversight of the remuneration of audit partners, with a view to supporting policies and practices that reward high-quality audits.

Let me be candid: no one is going to be quaking as a result of those suggestions. A little light reorganisation and the publication of a little extra data is a tiny price to pay for keeping the status quo intact, where Big 4 partners regularly earn well in excess of £500,000 a year.

The simple fact is that if these reforms were meant to deliver fundamental change it is very apparent already that they do not. Maybe the dependence of the government on these firms for Covid advice might have had something to do with that. We will never know.



The dark side

Where threats lie

Mike Burgess, Director-General of ASIO, has delivered the agency’s Annual Threat Assessment.  It’s partly an explanation of how ASIO works, demolishing a few myths and stereotypes about spying. It’s also an explanation of how those intent on doing harm have dealt with Covid-19 – which has provided an opportunity “to portray governments as oppressors, and globalisation, multiculturalism and democracy as flawed and failing”. Travel restrictions have made it harder for foreign spies and ideological extremists to move people around, but just like businesses challenged by such restrictions they have adapted through use of technology. “The online environment is a force multiplier for extremism; fertile ground for sharing ideology and spreading propaganda.”

He refers to the highly visible displays by Nazis and other far-right groups, but warns that “today’s ideological extremist is more likely to be motivated by a social or economic grievance than national socialism. More often than not, they are young, well-educated, articulate, and middle class—and not easily identified”.

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