Member Article

PwC encouraged tax avoidance ‘on an industrial scale’ says MPs

MPs have accused accountancy firm PricewaterhouseCoopers (PwC) of encouraging tax avoidance “on an industrial scale”, based on an evidence session held in December, at which PwC gave evidence.

According to the BBC, it is said to have helped hundreds of clients cut their corporation tax bills by setting up bases in Luxembourg.

The tax avoidance schemes, which are technically legal, involve companies diverting profits to tax havens like Luxembourg via a series of loans between different parts of the business.

The profits are eventually taxed in that country, but often at tiny rates, Shire Pharmaceuticals for example, reportedly paid just 0.0156% of its profits to the local tax authority, they said.

The main rate of corporation tax in the UK is 21%.

PwC said it disagreed with the Public Accounts Committee report but added that the tax system was “too complex”.

Margaret Hodge, chairwoman of the Public Accounts Committee (PAC) said: “We believe that PricewaterhouseCoopers’s activities represent nothing short of the promotion of tax avoidance on an industrial scale.

“We consider that the evidence that PwC provided to us in January 2013 was misleading.”

“We consider that 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’,” said Ms Hodge.

In its defence, PwC 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.”

The government is in the process of introducing the Diverted Profit Tax, announced by the chancellor, George Osborne in the Autumn Statement.

The tax aims to counter the use of “aggressive tax planning techniques” to divert profits from the UK to low tax jurisdictions.

Profits made after 1 April 2015, and diverted to other countries, will be taxed at 25%.

This was posted in Bdaily's Members' News section by Clare Burnett .