MPs attack Big Four firm over tax avoidance

ACCOUNTANCY  firm PricewaterhouseCoopers (PwC) has been accused of promoting tax avoidance “on an industrial scale” by MPs.

It is said to have helped hundreds of clients slash their corporation tax bills by setting up bases in Luxembourg.

The tax arrangements PwC is said to have promoted in Luxembourg “bear all the characteristics of a mass-marketed tax avoidance scheme,” according to the Public Accounts Committee (PAC) report.

Margaret Hodge, chairwoman of the PAC, said: “It is only right that companies pay their fair share of tax according to the profits they make from their economic activity in the countries in which they do business.

“This is the second time we have had cause to examine the role of large accountancy firms in advising multinational companies on complex strategies and contrived structures which are designed for no purpose other than to avoid tax.

“We believe that PricewaterhouseCoopers’s activities represent nothing short of the promotion of tax avoidance on an industrial scale.”

However, PwC refuted the committee’s conclusions and said it needed to work harder to explain the “positive role” it plays.

In a statement, it said: “We stand by the evidence we gave the Public Accounts Committee and disagree with its conclusions about the work we do.  But we recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.

“We agree the tax system is too complex, as governments compete for
investment and tax revenues.  We take our responsibility to build trust in the tax system seriously and will continue to support reform.”

Evidence was also taken from Shire Pharmaceuticals, which the report said has arranged its affairs so that interest payments on intra-company loans worth $10bn reduce significantly its overall tax liabilities.

“The effect is to shift profits from other countries, where tax rates are higher, to Luxembourg. Shire paid tax of only 0.0156% on its profits to the Luxembourg tax authority,” said the PAC.

“The “substance” of Shire’s business in Luxembourg, used to justify these arrangements, consists of two people out of the 5,600 staff the company employs globally. Neither PwC nor Shire could demonstrate that the company’s presence in Luxembourg was designed to do anything other than avoid tax.”

Other major firms were named in the Luxembourg tax rulings published by the International Consortium of Investigative Journalists last November, and the PAC said its  concerns “go wider” than the behaviour of PwC and Shire alone.

“The fact that PwC’s promotion of these schemes is permitted by its own code of conduct is clear evidence that Government needs to take a more active role in regulating the tax industry, as it evidently cannot be trusted to regulate itself,” the report said.

“In particular, HM Revenue & Customs needs to do more to challenge the nature of the advice being given by accountancy firms to their clients, ensure that tax liabilities reflect the substance of where companies conduct their business, and introduce a new code of conduct for all tax advisers.

“Unless HMRC takes urgent action, this irresponsible activity will go unchecked, causing harm to both the public finances and the reputations of the companies involved.”