29 April 2013

The Commons Public Accounts Committee chair, on releasing a report on the role of large accountancy firms in tax avoidance, has suggested that it is ridiculous for the Treasury and HM Revenue and Customs to accept seconded of staff from the Big Four accounting firms – which make about $8 bn annually from tax work in Britain.

An inability of the HMRC to get the better of tax planning arrangements may well reflect the use of such staff.

“The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government. They second staff to the Treasury to advise on formulating tax legislation.”

“When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them. The poacher, turned gamekeeper for a time, returns to poaching.”  As an example, she spoke off how these firms have about 250 experts in transfer pricing who out manoeuvre the 65 HMRC staff working in that area, with a result that about half of the complex tax avoidance schemes they develop are unable to be undone through litigation.

The Public Accounts Committee, which has nine coalition members and only four opposition members, seems to support the powerfully independent stance taken by its chair.  In this tax report, the PAC’s 44th Report of this Session, principal concerns are with way substantial companies can utilise international tax arrangements so that they make a minimal contribution in Britain, and “with a never-ending game of cat and mouse” with the Big Four.