Hodge accuses PwC of promoting 'industrial scale' tax avoidance

PwC denies Public Accounts Committee's claims over its role in Luxembourg tax schemes.

by Adam Gale
Last Updated: 17 Aug 2015

The Public Accounts Committee (PAC) has published a report accusing PwC of mass-marketing tax avoidance schemes in Luxembourg. This follows a hearing in December in which chairwoman Margaret Hodge savaged PwC boss Kevin Nicholson over the same issue.

Politicians with popular causes are like dogs with bones, never more so than in an election year. In her statement, Hodge went after every drip of marrow. After all, now that she's not running for London mayor, she needs something to do.

 'The tax arrangements PwC promotes, based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme,' Hodge said.

An International Consortium of Investigative Journalists (ICIJ) report in November appeared to show how PwC helped 343 companies reduce their bills by transferring profits to subsidiaries in low tax Luxembourg in the form of interest on intra-company loans.

PwC has persistently denied Hodge's claims that it produces and markets tax avoidance products. 'We stand by the evidence we gave the Public Accounts Committee and disagree with its conclusions about the work we do.'

The accountant's word is unlikely to mean much to Hodge. 'We consider that the evidence that PwC provided to us in January 2013 was misleading,' she said, echoing her comments in December.

While this mauling is embarassing for PwC, it will be quite aware that the PAC is a dog without teeth. It can force executives to sit before the committee and then shout at them, but on its own it can do little else.

Hodge called on HM Revenues & Customs to take 'urgent action' (as though HMRC has been somehow trailing its feet), and repeated the PAC's earlier proposal for new government regulation of the tax advice industry backed up by 'financial sanctions'.

It's true that such measures could be implemented should tax avoidance become hot political property, but Britain would struggle to act unilaterally. There's a reason countries like Luxembourg have favourable tax codes - it helps them get foreign investment.

If the UK's codes are more stringent than its competitors', foreign firms might think twice about locating here, which would be more painful than some lost billions in tax. The OECD is working on new international rules on this, but don't hold your breath.

Read MT's report on tackling tax avoidance.

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