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 405.

    Honest accountants have gone the way of honest bankers, politicians, lawyers etc. – they have become extinct.

  • rate this
    0

    Comment number 404.

    400.Gio
    Just now

    If the rules were - earn £X, allowances £Y, pay tax at Z% there'd be NO loopholes
    ------

    How would that work for a company?

  • rate this
    +2

    Comment number 403.

    re: Stephen of Woking - Slightly naive. So it doesn't confer any advantage and there is no conflict of interest for accountants who are paid millions by corporations to advise the gov't on tax policy. It is basically the equivalent of asking a burglar what switch off code should be used for your alarm system.

  • rate this
    +3

    Comment number 402.

    @383.Stunned_Silence

    "well, firstly there needs to be global action on this sort of thing. Countries that intentionally charge low taxes are doing major damage to the world economy."

    Umm Stunned-silence indeed. So the world should declare war on Switzerland?

    Just who on earth do you think you are telling other countries how to run their taxation??? Seriously?

  • rate this
    +4

    Comment number 401.

    The only reason tax avoidance exists is because of the complexity of the system. A simple system is almost impossible to cheat but sucessive Ministers have used the tax system to carry out Social Engineering or Economic tinkering.

    It's not the avoiders who are the issue but the legislators.

  • rate this
    +2

    Comment number 400.

    @388.paul

    If the rules were - earn £X, allowances £Y, pay tax at Z% there'd be NO loopholes

  • rate this
    +4

    Comment number 399.

    371Justin150
    UK may be a very profitable country for Starbucks as a group but that is not the same as being profitable for Starbucks UK

    And there lays the blatant lie.Why would Starbucks continue to trade in countries where they claim they make no profit??

    It is total BULL and nothing more than creative accountancy

    Tesco have pulled out of the US because they are not making a profit

  • rate this
    +1

    Comment number 398.

    It would be interesting to hear how Income and Corporation Tax is paid in the U.S. If there are much tighter rules across the pond, then why is it not implemented here? It's because MPs don't want to bite the hand that feeds them

  • rate this
    +4

    Comment number 397.

    Tax avoidance is as old as taxes themselves and there is no morals in taxation, if there were the government wouldn't tax taxes, as with vat on duties. Until the tax system is simplified the government should be more prudent in its use of that income and not throw our money around like confetti to all and sundry and then ask for more.The more complicated it is the more loopholes there are.

  • rate this
    +4

    Comment number 396.

    As useless as they may be, politicians are only the figureheads. It is the Civil Service that writes the Law and conducts the 'nuts and bolts' business of government. That is where the incompetence is manifest. But politicians are drilled not to criticise 'the office boy'.

  • rate this
    +2

    Comment number 395.

    371. Justin150
    4 MINUTES AGO
    Starbucks UK - not only legal but also following the intentions of the legislation
    --
    It may be legal, but most people recognise it's not right, if only because smaller UK competitors who do exactly the same thing (sell coffee and cakes) but do not have foreign subsidiaries are at a disadvantage. The tax system must aim to create a level playing field for all.

  • rate this
    0

    Comment number 394.

    The whole governmental and state bureaucracy favours big business.
    In this way it mimics the class system and ensures the status quo is biased in favour of a well connected minority.
    Weak and corrupt political institutions and second rate political leaders have gifted this minority massive personal wealth at the expense of the majority. Corruption is institutionalised in British society.

  • rate this
    0

    Comment number 393.

    Hallelulia, another gilded edifice under the cosh. Of course the accountants like the tax rules to be fiendishly complicated 'cos they can charge fat fees for navigating every twist and turn. Lets face it, accountants flourish handsomely in a habitat dense with the rules of rugby and cricket. But unfortunately, like the rest of the financial industry, they have built a house of cards.

  • rate this
    +8

    Comment number 392.

    Er, if the big 4 are helping draft the tax laws, why are we surprised the laws contain loopholes from which big 4 customers can benefit? I think if I were designing the tax laws I'd make sure they benefitted me and my family. Can I help? I can use Excel.

  • rate this
    -1

    Comment number 391.

    Our tax system is too complex, but in simplyfing it we will create winners and losers, and some of those losers wont be multi-millionaires but instead will be ordinary people. Who can forget the fiasco when we simplyfied the 10% tax bracket. For every loop hole we close there are highly paid ppl who will find the next one, banning the selling of this info is our best chance of tackling avoidance

  • rate this
    +2

    Comment number 390.

    195. John.

    Let me guess, you earn £24,999.99? Hahaha.

  • rate this
    -1

    Comment number 389.

    @376.Expat

    "Why do we recognise tax havens?"

    Pretty much every tax haven is the military protectorate of an EU country or the USA. They could be closed down overnight if the political will existed. Maybe the Commons Public Accounts Committee could turn its sights on itself and ask why HM Govt allows Jersey, IoM, the Caymans etc to continue bleeding us dry?

  • rate this
    +4

    Comment number 388.

    Does mrs hodge not realise that the only difference that not employing tax experts would make is that they would have to wait until the new rules are published before they start looking for the loopholes.

  • rate this
    +10

    Comment number 387.

    When I was an accountant in practice with all our wealthiest clients we promoted the latest schemes that took advantages of loopholes , there was a competition amongst accountants for the best schemes to attract and keep clients ... 15 years later and its still the same . Accountants and other professionals wield too much power and influence and the tax laws need overhauling .

  • rate this
    +1

    Comment number 386.

    Stop taxing companies but instead tax individuals. For individuals, tax is simple. Income - Expenses = Profit. Tax takes a percentage of profit. Income is everything you receive. wages, shares, interest, bonuses. Everyone pays equal tax on their profit regardless of source and everyone can claim the same expenses. The money companies make is taxed as soon as they give it to anyone.

 

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