Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers have provided the government with expert accountants to draw up tax laws. But the firms went on to advise multinationals and individuals on how to exploit loopholes around legislation they had helped to write, the public accounts committee found.
KPMG, staff advised on the development of "controlled foreign company" and "patent box" rules, and then issued marketing brochures highlighting the role they had played. The brochure "Patent box: what's in it for you" had, it said, suggested the legislation represented a business opportunity to reduce tax and that KPMG could help clients in the "preparation of defendable expense allocation".
Margaret Hodge, the PAC's chair, said the actions of the accountancy firms were tantamount to a scam and represented a "ridiculous conflict of interest" which must be stopped. "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said. “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.”
The accountancy giants employed almost 9,000 staff and earned £2bn a year from their tax work in the UK, and £25bn globally, the report claims. MPs found that Revenue and Customs had far fewer resources, particularly in the area of transfer pricing: complex transactions deployed by multinational companies in order to shift taxable profits to low tax jurisdictions. "In the area of transfer pricing alone, there are four times as many staff working for the four firms than for HMRC," the report says.
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