Margaret Hodge got vey angry with PWC yesterday over its Luxembourg tax practice. She accused the firm of lying because it had previously told her committee that it did not mass market tax avoidance schemes. Not surprisingly she concluded that well over 500 fairly similar schemes looked like mass marketing to her.
PWC's defence was to say if had not lied, of course. What else could it say, whatever the truth? But what it added was much more damning. Its senior UK tax partner said:
At the heart of the Luxembourg economy now is an economy that is based around businesses going there to finance [and] to hold investments. The tax structure, the system that they have created, facilitates that happening, along with all the other infrastructure. I'm not here to change the Lux tax regime. If you want to change the Lux tax regime, the politicians could change the Lux tax regime.
This would have made me very angry. Kevin Nicholson, who said this, knows that it is beyond Westminster's power to change law in Luxembourg. He knows his firm has exploited that fact. And he knows his firm has been a primary architect of many tax haven practices, advising government's on how to create these. It is not a neutral agent on these issues. And he knows his firm chose to sell these structures when it need not have done so. That option did exist. His firm's disingenuity on these matters is unbecoming, at best. It blights the accounting profession. And it rightly taints it all as being far less trustworthy than it should be.
Shame on PWC and all others involved in such activity, I say. I deeply resent the assumption that many will make that this is what accountants do because that's not true.
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Missing a word here?
“She accused the firm of lying because it had previously told her committee that it did [not] mass market tax avoidance schemes.”
Thanks
Corrected
And what were we saying on another of your blogs yesterday about some professions maintaining that their actions aren’t “political”, Richard. Here we have an example of a set of actions and practices that have both direct and indirect public policy implications and outcomes (e.g. denying governments taxes and thus the ability to provide services), but those that devise and carry out such practices and actions are completely free from the political dimensions of such actions. No doubt they would claim they are also ethically and morally “free” or neutral too. And this from a company that we know constantly lobbies government over a whole range of issues and policies, and further distorts the policy process by seconding personnel to work for politicians in both government and opposition, with the potential for bias and insider influence that comes with such practices. At some point in the future when a history of the destruction of representative democracy in the West is written PWC and its ilk will feature large in that analysis (assuming that by then anyone still has the freedom to write such a work, which on current evidence I seriously doubt).
You can be depressing sometimes! 🙂
Apologies. I originally included something about the number of “secondees” (and I use that term advisedly as I’d actually say their role is something more than that) working with Labour shadow ministers and in government which was even more depressing, but I deleted it – for now, anyway 🙂
Once upon a time there was a purchase tax – let’s do away with external corporation tax and scoop profits on UK sales buy a ‘purchase’ or ‘sales tax’?
“Kevin Nicholson, who said this, knows that it is beyond Westminster’s power to change law in Luxembourg.”
I think what he may have meant was to change the UK-Lux relationship. If politicians felt so strongly about it, they could revoke the DTA and even go about creating blacklists.
Instead we just see the same old statements that BEPS will deal with it, i.e. pass the buck to the OECD
Luxembourg is in the EU
Our relationships with it are largely governed by that fact
Big accountancy firms are having the same role in taxes as the rating agencies had on the financial crisis of 2008, and sadly officials (HMRC, IRS, etc.) are naive, stupid or in the worst case accomplices of the consecuences of the firm’s advice. It’s no excuse for a government to say that they need expert advice in any subject, they have to reduce the gap between what the expert knows and the knowledge the official holds.
Good analogy