PAC accuses Big 4 on tax

The Public Accounts Committee has once again criticised the Big Four, claiming that they play a ‘substantial role’ in advising clients on corporate structures and tax planning which ‘serve only to help them avoid UK taxes’ say Harris & Co accountants Northampton who specialise in accountancy services relating to tax.

The latest criticism contained in its report Tax Avoidance – Google, says that through its advice on tax planning, ‘the big accountancy firms are increasingly seen as being part of the problem of corporate tax avoidance, rather than the solution.’

PAC chair Margaret Hodge said: ‘This committee has vigorously condemned the activities of the big UK accountancy firms in helping their clients find loopholes in legislation and establish highly artificial tax structures. These firms must recognise that the public mood on tax avoidance has changed and that the time has come for them to advise their clients responsibly.’

John Dixon, managing partner for tax at Google"s auditors, Ernst & Young, refuted the PACs assertions, saying: ‘We do not offer advice on tax evasion, non-disclosure or artificial schemes and would always refuse to act for companies requesting advice in this area. What we do is offer legitimate tax planning to clients, which is disclosed to HMRC and other regulatory authorities.’

‘The tax system is not broken, but we absolutely do need to rebuild the confidence of the public that the tax system is operating as Parliament intended. Greater transparency is fundamental, as is the simplification of the UK tax code – which everyone agrees has become extremely complex,’ Dixon said.

His view was echoed by Kevin Nicholson, head of tax at PwC, who said: ‘We have long advocated greater transparency on the tax contribution of business and are helping more and more firms to provide more relevant information on their tax affairs.’

Bill Dodwell, Head of Tax Policy at Deloitte said: ‘Tax advisors play an important role in the effectiveness of the tax system and exercise judgment in advising our clients. As we and others acknowledged before the PAC, judgements change over time and we recognise today’s judgements are not the same as those reached a decade ago.’

As well as the move towards greater transparency in reporting, EY said it wanted to see more government initiatives designed to build confidence in the tax system. It cited incentives such as Patent Box and specific tax Roadmaps, as well as a commitment to a multilateral approach to internal tax policy reform.

The committee labelled Google’s tax arrangements in the UK as ‘highly contrived’ and accused the big accountancy firms of promoting artificial tax structures so that multinational companies can avoid UK taxes.

The accounts committee"s MPs branded the technology giant’s explanation that its sales to UK clients take place in Ireland as ‘deeply unconvincing’. It says that despite recording a $18bn (£11.5bn) turnover between 2006 and 2011, Google paid the equivalent of just $16m (£10m) in taxes to the UK government.

The PAC says it is ‘extraordinary’ that HMRC has not been more challenging of what it terms ‘multinationals’ manifestly artificial tax structures’. It called for a full investigation into Google’s tax arrangements, saying that ‘any common sense reading’ of HMRC’s own guidance and tests suggests it should vigorously contest the claim the company acted lawfully.

The committee wants HMRC to take a more active role in examining cases where a multinational’s company structure and the substance of its activities are inconsistent. In addition, it says HMRC and the Treasury should push for changes in international tax law to take account of the trading activities of internet firms.