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
    +1

    Comment number 265.

    @85.Secretbanker

    Legislate retrospectively? Shouldn't the government get the laws right first time or legislate going forward? They have only themselves to blame if people are taking advantage of perfectly legal loopholes.

    I agree that loopholes should be closed but retrospection should never be used. Retrospective laws reduce confidence in the UK tax system.

  • rate this
    0

    Comment number 264.

    Better to ban complex tax laws, and return to a very simple one: everyone pays a fixed percentage of their income, with no allowances and no tax breaks of any nature. That way, there are no loopholes to be exploited by anyone, and we'd all probably end up paying less tax (because less bureaucracy at HMRC).

  • rate this
    +5

    Comment number 263.

    If there are problems the first thing to do is create a system to quickly and effectively deal with the problems.

    If loopholes are legal they will be used. If they are closed quickly as possible when identified they cease to exist.

    This is yet more time wasting by our 'political caste' (Every Party) that enables them to make more money from us, the honest taxpayer

    Transparently disgusting.

  • Comment number 262.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 261.

    Complex tax law and high rates of taxataion creates this situation.

    The government is a pest on the people to quote Mencius. They need to simplify and reduce tax and tax law.

    While this continues there will always people who will play the game but simplification reduces margin for the tax dodgers

  • rate this
    0

    Comment number 260.

    so simplify the tax system, these loopholes are nonsensical, make it so if you make a profit you pay tax. 0 exemptions. It neednt be less simple than that.

  • rate this
    +1

    Comment number 259.

    240 Chiptheduck
    I agree with you on this but it is not Tory policy to employ civil servants even if it would save money in the long run.

  • rate this
    +2

    Comment number 258.

    What? That’s like saying all problems will disappear if we place our hands over our ears and cover our heads with a blanket! Now I know for sure they've lost the plot!

  • rate this
    +1

    Comment number 257.

    If spending remains flat, it may become apparent that a shortage of Government tax revenue could actually be damaging the incomes of some of those who currently appear to be benefiting from avoidance?

  • rate this
    -1

    Comment number 256.

    Tax avoidance is rife and its perpetrators should be treated as public enemy No. 1.

    Just look into the PwC / Carlyle London property portfolio.

  • rate this
    +4

    Comment number 255.

    238.Vic Anderson
    apology accepted, you are of course correct the elite will always seek to maximise their own worth at the expense of everyone else! The difference with the Tories seems to have an inherent belief in their own entitlement and a hypocrisy in calling people immoral when many of their own are avoiding tax in very similar ways

  • rate this
    +1

    Comment number 254.

    241 Muff. Careful what you wish for. ISAs are a form of tax avoidance.

  • Comment number 253.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 252.

    The answer is very easy but very unpopular, as it inhibits the re distribution of wealth. Simplily have a flat rate of taxation 3 simply taxes, Everyone pays the same % of income tax, VAT and coproration tax, no expemption, simple. However people dont like the notion of all people are equal, when it comes to tax. Anyone one seen do do well or get on in life is chastised in this country

  • rate this
    +2

    Comment number 251.

    Some MPs may well have 'lost the plot', but Margaret Hodge is not one of them. She is shining a light into some very dark corners.
    Auditors should produce 'A true and fair view' of a Company's Accounts.
    'True' and 'Fair'?!
    Tell that to British public who bailed out Lloyds Bank after KPMG produced HBOS accounts! Or Deloitte and RBS!!
    Masks and stripey jerseys should be their work clothing...

  • rate this
    +14

    Comment number 250.

    Our tax system is so complicated only those who can afford to will use it and those ignorant of the system lose it.

    Do people know what can be claimed even on PAYE? many don't and most of those that do can't be bothered.

  • rate this
    +13

    Comment number 249.

    Didn't David Cameron's father make his money (passed on to our Prime Minister) by exploiting tax loopholes? Does Mrs Hodge's use of tax dodging cancel all criticism (as several poster imply) of this abuse, which, after all, is used by the top 5% for their own benefit, but is not used by the 95% of us ordinary people

  • rate this
    +2

    Comment number 248.

    Only one thing left to do now - Bring on the tumbrils! Vivez l'esprit de 1789!

  • rate this
    +5

    Comment number 247.

    @120 In a way you answered your own question. It is very hard to close tax loopholes when you are making laws that effect a wide range of circumstances. If it is not ok for Starbucks to get its beans from Switzerland and pay tax their. Then how does that work for Nissan who manufactures parts all over the world but assembles the cars here creating thousands of needed jobs. It is not that simple.

  • rate this
    +1

    Comment number 246.

    Doh! And also the external accoutants can highlight to the government where the tax loopholes are so they can be closed. Its a two way thing.

    This is actually about Civil service/public sector job creation, not about the nuts and bolts of this process.

 

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