Firms that help others avoid tax should be blacklisted

5 December 2012

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5 December 2012 | Anna Reynolds

Accountancy firms that help multinational corporations to avoid paying tax should be banned from tendering for government contracts, according to chairwoman of the Public Accounts Committee (PAC) Margaret Hodge.

Speaking on BBC Radio 4’s Today programme, the MP said her threat particularly applies to the ‘big four’ accountancy firms, PwC, Ernst & Young, KPMG and Deloitte, because it is believed companies would not be able to avoid paying taxes without their help.

Hodge said: “If we are to promote a culture of change we need to take action now. Using the power of the public purse to purchase contracts is an important power we have and the big four are getting more and more government business as this government chooses to outsource back office activity. They have a duty to lead by example. If they want access to this work they have to show they are responsible companies who don’t support anybody in trying to avoid tax.”

The PAC has been investigating global companies that have been paying little or no corporation tax and released a report on Monday.

The radio programme pointed to evidence from UK tax tribunals that shows the big four have devised and sold tax avoidance schemes to clients in the past 12 years. Also speaking on the show was Richard Murphy, chartered accountant and founder of the Tax Justice Network, who claimed: “International tax avoidance couldn’t happen without active involvement, consent and support of the big four firms of accountants.” He also said these four companies have 212 offices in 45 of the most prominent tax havens in the world, including Bermuda, the Cayman Islands and Lichtenstein.

However, Mark Littlewood, director general of the Institute of Economic Affairs, said it was wrong to blame these four firms, describing the UK tax system as “complicated” and having “grey areas”.

Mary Monfries, head of tax policy at PwC, who was also on the programme, said: “Any tax advice that we give has to be based on and supported by the law. The tax advice we give cannot be based on any misinterpretation or non-disclosure of what's going on. We have to base our advice on understanding the client's specific circumstances.”

Chris Morgan, head of tax policy at KPMG in the UK, said in a statement: “These cases refer to transactions that were undertaken several years ago and are on public record.  The tax environment has moved on significantly since that time and transactions of this type, which were common in the past, no longer work. The firm has an open and transparent relationship with tax authorities and encourages its clients to do the same.”

Ernst & Young said it is not commenting on the programme. SM is awaiting a response from Deloitte.

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