The state of our nation and economy

(Feeling the Pulse and the Pinch by Taxation)

However, while he was on his deathbed, he was determined to settle matters with the taxman. He enclosed a lemon in an envelope addressed to the taxman along with a cryptic message:

“Now, squeeze this.”

Nearer home, in Kano, there was the formidable Alhaji Baba Dan Bappa, who was very wealthy. He was my friend, and he had been a frontline politician in the first Republic. He had an English wife, Betty. He insisted that he was a devout Muslim. Regardless, he loved his champagne. He hated paying tax. As far as he was concerned, government money belonged to the government, and his money belonged to him. He would not steal from the government; hence, he would not let the government steal from him. Anyway, that was how he rationalised matters. Even when Major-General Tunde Idiagbon, the strongman of the Buhari/Idiagbon regime (1984 to 1985), assembled the leading businessmen in Kano and urged them to discharge their civil obligations by paying their taxes, Alhaji Dan Bappa remained stoutly defiant. He told Idiagbon in no uncertain terms that he was an old man, but he had no intention of paying any taxes. According to him, he had already paid his dues here on earth, and Idiagbon was free to do his worst.

Even Idiagbon was taken aback and hurried off to catch his flight back to Lagos instead of getting into a fight with Alhaji Dan Bappa.

Taxation is a specialised area of our profession as chartered accountants. However, we must be wary of the consequences of trying to outsmart the taxman. A case in point is what happened to the partners of KPMG in the United States of America.

In 2005-2008, KPMG U.S. avoided indictment for fraudulent tax shelters by paying $456 million in a deferred-prosecution agreement, while criminal charges against 13 employees, including Jeffrey Stein, were dismissed. The courts ruled the government violated Sixth Amendment rights by coercing KPMG into cutting off legal fees for employees.

Key Aspects of the Case:

The Agreement: KPMG paid $456 million, admitted wrongdoing, and accepted an independent monitor for three years.

Case Dismissal: Judge Lewis Kaplan dismissed charges against 13 former KPMG partners and employees, a decision upheld by the Second Circuit in 2008.

Government Coercion: The courts found the Department of Justice pressured KPMG to stop paying legal fees for employees, violating their right to counsel.

Aftermath: The case led to a shift in federal policy regarding corporate investigations and attorney-client privilege, specifically limiting the influence of the “Thompson Memorandum”.

Colin Morven Sharman, Baron Sharman OBE (born 19 February 1943), is the former British chairman of Aviva Group and former chairman of KPMG International.

He was educated at Bishop Wordsworth’s School in Salisbury and qualified as a chartered accountant in 1965. He joined Peat Marwick Mitchell the following year and rose through the years to become chairman of the renamed KPMG in 1997.

Sharman was appointed an Officer of the Order of the British Empire (OBE) in the 1980 Birthday Honours for services to the British community in the Netherlands.

He married his partner, Angela Timmons, and had two children, Sarah and Richard. Sarah had three children with her husband Peter Berridge, named Emily, Charlie and Oscar. Richard had two children with his wife, Holly Curtis, named William and Florence.

On 2 August 1999, he was created a life peer as Baron Sharman, of Redlynch in the County of Wiltshire [2], and entered the House of Lords as a Liberal Democrat peer. He retired from the House of Lords on 30 April 2015.

Lord Sharman was a member of the ABN AMRO Supervisory Board from 2003 until 2007. He was chairman of Aviva Group from January 2006 to June 2012, was a non-executive director at Reed Elsevier until April 2011, and was on the board of BG Group and Group 4 Securicor. Other previous board appointments include chairman of Aegis Group plc; deputy chairman of G4S plc; Young & Co’s Brewery plc; and AEA Technology plc. He attended the 2014 Moroccan British Business Conference, held in London, alongside Lord Mayor of London Fiona Woolf.

Tax Practice

KPMG

KPMG, one of the largest accounting firms in the world, was involved in a massive tax scandal in the United States. In 2005, the firm admitted to criminal wrongdoing and agreed to pay $456 million in fines, restitution, and penalties for designing, marketing, and implementing fraudulent tax shelters.

The scandal involved four tax shelters – FLIP, OPIS, BLIPS, and SOS – which generated at least $11 billion in phoney tax losses, costing the US government an estimated $2.5 billion in evaded taxes. Nine KPMG partners and executives, including the former deputy chairman, were indicted and faced criminal charges.

Some of the key individuals involved included:

– Jeffrey Stein, former Deputy Chairman of KPMG

– John Lanning, former vice chairman of KPMG

– Richard Smith, former vice chairman of KPMG

– Jeffrey Eischeid, former head of KPMG’s Innovative Strategies group.