Posted March 12, 2014
by Jerry Alatalo
“Hell is empty, and all the devils are here.”
– William Shakespeare
Considering one’s perceptions about tax evasion will increase readers’ sense of contrast when hearing what Finance and Accounting Professor Prem Sikka has to say. Professor Sikka, with over 45 years of lecturing, study and research on accounting, has the knowledge and shares it here in a powerful, focused, and direct way.
In effect, Mr. Sikka’s lecture is an advanced accounting explanation of how the worldwide tax evasion industry really operates. His description of the so-called Big Four accounting firms as the “pinstripe mafia” hits the proverbial “nail on the head”; he goes on to thoroughly explain a “very lucrative global industry” that is not as many perceive – an anomalous few island paradises having little consequence on the world’s economy and overall conditions – but an extremely consequential industry having locations in major first-world capitals including New York, London, Geneva, Frankfurt and Singapore.
Surrounded by complete secrecy.
The tax evasion industry is subverting democracy. Men and women run for political office, speaking about the need for better health care, education, security, and so on, people vote them into office, then the world’s largest transnational corporations, because of their tax evasion schemes, blow the promise of the elected politicians and citizen’s hopes for “real change this time” completely out of the water.
Professor Sikka points out that there are 2.5 million professionally qualified accountants in the world, of which 330 thousand reside in the United Kingdom; the UK is a nation of accountants. “Financial engineering” is not taught at universities anywhere, but is the first item on the agenda for newly hired, freshly pressed accounting graduates at the Big Four – Ernst and Young, KPMG, Deloitte, and Price Waterhouse Cooper. Financial engineering is the focus of new hires’ initial training workshops, and is all about creating, selling, and implementing off-the-shelf tax
avoidance evasion schemes for, and to, high net worth clients.
It is important to note that there is absolutely no difference between tax “avoidance” and tax “evasion”. Perhaps the accounting, legal, and banking firms that facilitate non-payment of taxes have the idea that using the term “avoidance” instead of “evasion” will prevent ordinary citizens’ associating today’s tax cheats with Al Capone, the infamous mob boss who was nearly impossible to put behind bars until his conviction on tax “evasion”.
The Big Four accounting firms
Price Waterhouse Cooper: $31.5 billion income/sales, 169,000 employees, operations in 150 nations, 766 offices
Deloitte: $31.3 billion income/sales, 170,000 employees, operations in 150 nations, 670 offices
Ernst and Young: $24.4 billion income/sales, 152,000 employees, operations in 140 nations, 700 offices
KPMG: $22.7 billion income/sales, 138,000 employees, operations in 150 nations, 770 offices
In addition to tax evasion the Big Four accounting firms – colluding with the largest legal and banking corporations – enable bribery, corruption, drug cartels, and money laundering.
The Big Four has come to control a vast amount of political power and resources. They have a principal role in suggesting and approving international accounting standards of organizations such as the International Accounting Standards Board, as well as other accounting rules groups. Big Four accounting firms send former employees to run national taxing authorities like the Internal Revenue Service in America.
Very little is known about the Big Four as the same tax evasion schemes they sell to customers come to be implemented in their own corporate accounting frameworks. How much do they earn through tax
avoidance evasion services? Nobody knows. How much do they earn from sales of tax avoidance evasion schemes? Nobody knows.
Professor Sikka holds the idea that taxes, from the vantage point of everyone paying their fair share, are not a “cost” like raw materials used in the manufacturing process, wages paid to employees, office supplies, etc. He points out that “bending the rules at any cost to increase profits is now seen as an entrepreneurial skill”. He shares some statements by one of the Big Four, “our profitability rests on the ability of our employees to serve clients well”. There is no mention at all about the public interest. The professor recounts a debate he had with a manager from Price Waterhouse Cooper where his debate opponent finally says, “..we create tremendous revenues for the state, and we have very many satisfied clients. Professor, what is your problem?”
The professor responded with, “..that is the language of drug pushers and pimps.”
The United Kingdom could be losing 30-150 billion, the European Union one trillion, and the U.S. Treasury 345-500 billion, maybe more. Developing countries’ revenue losses from tax evasion could be in the range of 500 billion per year – while total foreign aid is around 120 billion dollars.
Some tools to reduce tax havens and tax evasion have been proposed. Among those are legal agreements/treaties with the world’s over 70 tax haven jurisdictions to allow automatic sharing of tax crime related client/account information, in essence ending secrecy and bringing forth total transparency. Tax haven jurisdictions have thus far stalled and dragged their heels by asserting they will not sign any such agreement(s) until all of their competitor tax havens sign on.
Some have suggested sanctions against those tax haven jurisdictions who do not want to play ball.
Other proposals include laws which prevent any entity which has sold tax evasion schemes from entering into public contracts, establishing licensing requirements for tax advisers/consultants (and license revocation if found implementing or selling tax evasion schemes), elimination of limited liability partnerships because partners are damaging society, and disclosure of income made from sales of tax schemes with file availability (as opposed to years and years of litigation).
Individuals and corporations convicted of tax evasion have thus far “evaded” any penalties for the public’s (taxpayers) very real (and very large) litigations costs. Convicted tax cheats should become required to pay full restitution for taxpayers’ legal costs to the last penny, as well as more in punitive fines.
As Professor Sikka points out, tax cheats’ accounting firms have gone so far as to create “cost-benefit analyses” comparing the amounts of tax “savings” to potential fines from getting caught.
Another proposal is for banking regulatory agencies to conduct audits in tax evasion cases instead of the same accounting firms which have “engineered” the tax evasion schemes in the first place. Professor Sikka considers auditing by the Big Four in tax crime cases, instead of by an independent public regulatory body, as one of the biggest frauds of all time.
If you are interested and upset by a still operational, hugely undemocratic, extremely consequential financial industry focused entirely on tax evasion, Professor Sikka delivers all you need to know to begin taking action. Mr. Sikka has over 45 years experience, study, and research in the field of finance/accounting. If you are not interested – even though every year trillions of dollars in revenues are criminally taken from nations and their citizens the world over – please take a few moments to think about family, friends, acquaintances, journalists, local, state, or national representatives, etc. who may want awareness of the explosive information in this lecture.
(Thank you to Publish What You Pay Norway PWYP Norway @ YouTube)