Big Four tax heads grilled by PAC on tax avoidance

The heads of the Big Four tax teams appeared before the influential Public Accounts Committee (PAC) today to be grilled on the use of tax avoidance.

Chaired by Labour MP Margaret Hodge, the PAC committee members, were highly critical of the Big Four's "inappropriately" close working relationship with government departments, their presence in virtually all the world's tax havens, their generic tax planning advice and the unfair "David and Goliath battle" between the firms and HMRC.

Appearing were KPMG's head of tax, Jane McCormick; Bill Dodwell, head of tax policy at Deloitte; PwC head of tax, Kevin Nicholson; and Ernst & Young's tax head, John Dixon.

Hodge, who revealed at the start of the hearing that she had once worked as a public sector consultant at PwC, criticised the secondment of Jonathan Bridges, international tax partner at KPMG, to the Treasury to work on the development of the Patent Box regime.

She said: 'You guys provide technical support, effectively writing policy and interpreting it,' and added that the involvement was "inappropriate".

Addressing Jane McCormick, KPMG's UK head of tax, Hodge said: 'You use that close relationship in an inappropriate way.'

She dubbed the firm "a poacher turned gamekeeper" and then "back again", a situation she described as "shocking". McCormick defended the role of the firm saying it merely provided technical support and advice to the government and where it advised clients on the benefits of the scheme, it was solely 'for the purpose in which it was intended'.

The firms' wider audit role also came under fire. Grimsby's Labour MP Austen Mitchell said: 'It's clear that the Big Four use their audits as a base to sell other services'. The gatherd tax heads were also criticised for their roles in devising schemes for companies such as Greene King, Prudential and Deutsche Bank, some of which had been thrown out at tribunal, while others were subject to appeals.

Hodge said it was therefore "questionable" whether the firms should be able to win lucrative publicly-funded government contracts - worth over £500m to the four.

However, in a few conciliatory moments, a few PAC members did appear to concede that wider international and national tax laws should be reviewed, which can only be addressed by the OECD and G20.

The hearing can be viewed on Parliament TV.

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