09 February 2015
PwC has been accused of promoting tax evasion of an industrial scale, by the Public Accounts Committee (PAC).
The select committee has stated in its report that contrary to the accounting giant’s denials, the tax arrangements PwC promotes, which are based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme.
In effect, this reduces the amount of corporation tax that some of these multinational companies pay in the countries they generate profits in.
Margaret Hodge, Chair of the PAC said ‘the evidence that PwC provided to us in January 2013 was misleading, in particular its assertions that “we are not in the business of selling schemes” and “we do not mass-market tax products, we do not produce tax products, we do not promote tax products”.’
Hodge added that the ‘promotion of these schemes [was] permitted by [PwC’s] own code of conduct … [which] 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 select committee stated that it believes there is no clarity about the boundary between acceptable tax planning and aggressive tax avoidance.
Recommendations have also been outlined by the PAC, which includes HMRC taking a more active role 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’, the PAC stated.
In a press statement, PwC said that it ‘disagrees with [the PAC’s] 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.’
Whistleblowing charity Public Concern at Work Chief Executive Cathy James commented: ‘The idea of 'guardians' to protect staff who speak out supported by an external body is an innovative and important step. We would caution however, that the success of this is entirely dependent on a workplace culture that is prepared to listen and proactive regulators. Time will tell whether this has sufficient teeth and progress should be monitored carefully.’