Ban 'insider' tax accountants from government - MPs

 

Margaret Hodge MP said there was evidence of accountancy firms devising new avoidance schemes

A report on tax avoidance by the Commons Public Accounts Committee has urged a ban on external accountants working inside government.

The recommendation aims to stop them telling clients about tax loopholes they find while working there.

The MPs said HM Revenue and Customs (HMRC) was in a "battle it cannot win" against the accountancy firms who have thousands of people giving advice.

HMRC said it was "aggressively fighting" tax avoidance and "winning".

In its latest report on tax avoidance, the committee turned its attention to accountancy firms after previously criticising multinational companies, including Starbucks, Amazon and Google, for the amount of corporation tax they paid.

The MPs said accountants were being seconded to work in the government to advise on changes to tax law but using the position to glean inside knowledge and tell businesses how to avoid tax. The MPs want the practice stopped.

'Conflict of interest'

They also called for a ban on firms being used by the public sector if they had been selling tax avoidance schemes.

Committee chairwoman Margaret Hodge said the practice represented a "ridiculous conflict of interest".

She said: "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government."

Start Quote

The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government”

End Quote Margaret Hodge MP Public Accounts Committee

The committee's report suggested that tax officials were outnumbered by well-resourced accountancy firms in key areas, such as businesses transferring their profits overseas in order to pay less tax.

It said the "big four" accountancy firms employed about 9,000 staff and earned £2bn a year from their tax work in the UK.

The report said: "We have seen what look like cases of poacher turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay.

"We are very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax."

The committee said HMRC was involved in a "never-ending game of cat and mouse" with the big accountancy firms over the issue, and added that UK tax law was "hopelessly complex and outdated".

Jim Harra, director-general of business tax at HMRC, told the BBC: "Clearly they [tax accountants seconded to the government] do go back out with some expertise and they do advise on how to use the legislation. We watch very carefully what advice accountants are giving to their clients.

"Provided that advice is how to use the legislation in accordance with the way Parliament intended it to be used, then we have no problems with that."

HMRC said that the government had announced last year it would invest a further £77m to expand the Revenue's anti-avoidance and evasion work.

An HMRC spokesman said: "The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.

"Since the end of 2012, we have won 11 tax tribunal cases against avoidance schemes, two of which were against large corporates.

"In the last three years alone, we have litigated more than 50 major avoidance cases, protecting billions of pounds of tax in the process."

'Strong professions vital'

Bill Dodwell, head of tax policy at Deloitte, said his firm was doing nothing wrong. He told the BBC: "We help companies pay the tax that is due."

The Institute of Chartered Accountants in England and Wales (ICAEW) said there was already international co-operation to tackle tax avoidance through the Organisation for Economic Co-operation and Development.

"The role of accountants is to help their clients pay the right amount of tax under the law," the ICAEW said.

"When it comes to strengthening tax systems, strong accountancy professions are just as vital as strong national rules and tax authorities. Accountants can help improve and strengthen tax rules."

Tax avoidance is the legal use of the tax framework to reduce the amount of tax payable whereas tax evasion is against the law.

Specialists in the field sometimes use the term "avoision" to refer to grey areas.

The BBC's File on 4 programme, Taxing Questions looked into this subject earlier in the year.

 

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  • rate this
    +3

    Comment number 205.

    close all tax loopholes and make it fair for everyone its as plain as that

  • rate this
    +1

    Comment number 204.

    We need to reverse the 'spying' Government should pay accountants or straight spies, in big companies to tell them of the tax practices, profit shifting etc., that they are being expected to do. Then we can close the loopholes, & keep a record of such practices to refer to when government contracts or other benefits to companies are considered. Giving preference to companies with decent tax habit.

  • rate this
    0

    Comment number 203.

    Thanks to this government I don't pay any income tax. Now if only I could avoid paying betting duty, air passenger duty, alcohol duty, IPT, custom duty , IHT, CGT, VED, climate change levy, tobacco duty, stamp duty, council tax, fuel duty, VAT and national insurance I would be a rich person.

    If you're not taxed at source the state will still get you when you spend it so why worry about avoidance?

  • rate this
    +3

    Comment number 202.

    Experts all of us when it comes to how taxes might best be collected. The system is corrupt. HMRC can wail all it likes, but it's not the right body to be battling the avoidance schemes. These schemes are legal. Pay the lawyers more than the avoidance scheme designers pay them, then we might be getting somewhere. Can't see that happening though.

  • rate this
    +2

    Comment number 201.

    - but then I guess there are many of the 'I always vote XXX' who will regardless of what the MP actually does.

    -----------
    Would you vote for the Party that has a Part Time Chancellor whose families £4 Million Trust fund is kept in the Cayman Islands?


    It might not be illegal (loop holes are handy Old Boy!) but it is hypocrisy of the first order

  • rate this
    +2

    Comment number 200.

    What an idiotic and foolish mad hatters tea party arrangement! The phrase "inviting the fox into the hen-house" springs to mind. The officials at HMRC are either naive in extremis or there's possibly a more sinister explanation for this. Whatever the case this crazy state of affairs must be terminated with immediate effect. Inviting the enemy to help formulate ones battle plans, extraordinary!

  • rate this
    +4

    Comment number 199.

    Sorry but the top rated HYSs cannot have it both ways. If you want simple then you have things like flat rates. But then stand by for the cry that the rich are not paying enough, and millionaires are not 'paying their fair share' and that small business is not being supported with rebates, exemptions and allowances to get them started.
    So which way do you want it folks?

  • rate this
    -1

    Comment number 198.

    I work for a large organisation who employ the services of the "big 4".
    More fool the HMRC ! When we get visitors to our organisation we show them what we want them to see. Surely a 'secondment' is an agreed working relationship - Get real Mrs Hodge - it takes two to tango !
    These companies are accountants, just like the accountant's office down the road giving decent qualified advice.

  • rate this
    +14

    Comment number 197.

    Where are the loopholes for PAYE ?

    Power, Greed & lack of basic Morals at the top are destroying our economy whilst choking the ability to spend or save at the bottom.

    The very people who have the ability to change the system are the abusers of the system !

  • rate this
    +2

    Comment number 196.

    Benefit Fraud costs this country around £1bn a year and government have a small army of people trying to stop it. Tax Avoidance and Evasion cost the country around £25bn (£13bn by individuals and £12bn by companies) a year and the government has 65 people at HMRC trying to stop it. A further £8bn a year is lost by “Tax Planning” by the very wealthy.

    It’s time to fix the tax system

  • rate this
    +36

    Comment number 195.

    one tax rate for all with a minimum starting point of £25000.... Any income received in WHATEVER FORM above that is taxable at that rate, any avoidance and tax is charged at 200%. Accountants are needed because the system is a maze of complication...get rid of allowances, close loopholes. Its not the inside jobs thats the problem, its the system itself

  • rate this
    +2

    Comment number 194.

    More obfuscation from the Tory boys and girls. Close the loopholes make people and companies pay the tax that is due and we could all probably pay less.

    People gain experience in related businesses and move around you can’t really stop that and at the end of the day tax law is not exactly secret is it?

  • rate this
    +3

    Comment number 193.

    With the tax system as it is, HMRC would always need to bring in accountants from time to time to advise / help out with changes demanded by politicians. Alternatively they employ an army of accountants to work on projects who would either have to be "found" work to do during slack periods or sit and twiddle their thumbs. In any case what prevents accountants leaving HMRC for private practice?

  • rate this
    +1

    Comment number 192.

    Make the tax system simpler with a flat rate tax for everyone with no loopholes. No more need for tax avoidance.

  • rate this
    +1

    Comment number 191.

    "It takes a thief to catch a thief" - so the saying goes.

    It will certainly boost our accountancy industry as we will need twice as many to outfox each other - a win win for them!

  • rate this
    +2

    Comment number 190.

    Can't we just ban useless, nose in trough MPs instead?

  • rate this
    0

    Comment number 189.

    Agree with many already posted that we need to simplify the tax rules/legislation. I am also in favour of reducing the tax to a low flat rate, for individuals and companies. We still need to move jobs from public to private, so what better incentive than a low flat rate of tax.

    While simplifying the tax rules remove some of the more exotic financial instruments as well.

  • rate this
    +3

    Comment number 188.

    What beggars belief is that MPs did not work out that external employees, seconded for a year or two to Govt., would not put their careers first by finding information that will help their employer. MPs unable to work out that these external employees while helping write tax policy may insert loopholes that would benefit their employers. This is the 'talent' that is running this country.

  • rate this
    +2

    Comment number 187.

    @153

    "we operate on the basis that if it's not banned, it's legal"

    Isn't that called basic freedom? If something isn't specified as illegal, then it's legal?

    "Perhaps all tax avoidance schemes... should be submitted to HMRC"

    Google DOTAS. Jeez, some people will rant about subjects they are totally ignorant of.

  • rate this
    +1

    Comment number 186.

    A million years ago I worked for a major London accountancy firm in a very junior role. One bit was to take inserts out of information files, and replace with the new ones. It was a huge (boring) job. When I asked why every month the tax rules were being re-published I got a big grin from the partner saying that's why companies came them instead of submitting their own tax information.

 

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