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
    0

    Comment number 425.

    Please can we see the tax returns from current and previous MP's (and MEP's) so we can judge whether (or not) they're acting in our interests?

    Hmm..thought not. It would make the expenses scandel look like pen pinching from work. Time to simplify and get rid of these lying idiots at the same time.

  • rate this
    +4

    Comment number 424.

    19 out of the 20 Richest MP's and Members of the House of Lords (all multimillionaires) are Tories. Millionaire Cameron and Osborne don't even make this list.The Richest is Tory party bankroller Lord Ashcroft £1.2 Billion.

    Does anyone honestly think a government of the rich for the rich will ever do anything to threaten their own wealth or that of their Paymasters

  • rate this
    +18

    Comment number 423.

    The 3 estates in Britain.
    1) The rich - little or no tax.
    2) Politicians, bankers corporate friends - little or no tax.
    3) Workers (plebs) PAYE Taxed to hell.
    The French had this system in 1789.

  • rate this
    0

    Comment number 422.

    @404.Alan
    Exactly the same way!

    Income tax is - in effect - a tax on my personal "turnover"

    If I were treated the same way as companies are - I'd be taxed on what was left after my outgoings (call it a "profit" if you like)

    So why not treat us both the same way? The X/Y/Z figures might be different for companies but the single, simple, rule would still apply...

  • rate this
    +1

    Comment number 421.

    386.Dork Angel
    How would "everyone can claim the same expenses" work in practice?
    Example:
    E.g: if 'housing costs' were an allowable expense, how would that account for different mortgage, rent, CT or insurance premiums? If you rent you need only insure the contents not the building not to mention factors such as flood risk?
    Just the 1st one off the top of my head. nothing's ever 'simple'

  • rate this
    +2

    Comment number 420.

    So why didn't Hodges do anything about this while her lot were in power it seems she just comes up with these things every week because she loves the sound of her own voice & is still full of the arrogance & self importance she & labour have after 13 years in power.

  • rate this
    +4

    Comment number 419.

    410. Jaw dropping truth - No, that isn't the story. And I suspect you know damn well it isn't the story.

  • rate this
    +2

    Comment number 418.

    Why not just close the loopholes, with the same vigour as is being used against the 2% of the population who are now taking 15% of the cuts.

  • rate this
    -7

    Comment number 417.

    How much of your wage am I entitled to?

    If me stealing 100% of your wage is theft, at what % is not theft?

    If I can't steal from you, should I, and a large bunch of my friends, be able to elect a politician to rob you on our behalf?

    If taxes deter smoking, does the income tax deter wages?

  • rate this
    0

    Comment number 416.

    Ron 109 , would not be allowed as monopolys commision would put it out to tender, enter the Virgin , another step in ruling the world

  • rate this
    0

    Comment number 415.

    Again, throw the entire current tax system in the rubbish bin where it belongs.

    Introduce a FLAT TAX on EVERYTHING of 10% - income (starting from the annualised living wage amount), capital gains, goods and services, coporate earnings.

    No offshore or non-dom considerations at all.

    It would be near impossible to avoid or fiddle, and the harshest penalities if so - mandatory jail + massive fines

  • rate this
    0

    Comment number 414.

    2. MKMAT - they did but he accountant can make even more money by selling the loop holes.

    The tax system is not that complicated, its the allowances, just get rid of all allowances and most of the issues just go away.

    But.. the government only manage the little people the easy target.

    It's truly pathetic how we are micromanage yet real problems benefits, immigration, war, schools are ignored.

  • rate this
    +1

    Comment number 413.

    Would you ask a burglar to design your burglar alarm?

  • rate this
    0

    Comment number 412.

    Tax,Health,Law and Education are pretty fundamental to us ALL
    Whatever our politics,morals.intelligence,intellect,principles.
    If you can afford to pay top dollar/£ you will avoid more tax,live longer pain free,win legal fights you shouldn't have,children more likely to "reach their full potential"
    This is meant simply as a statement of the truth & the reality of life for us all in the real world

  • rate this
    +1

    Comment number 411.

    The message from MPs seems to be that parts of the tax code must be kept secret from tax advisers lest they use this knowledge to their client's advantage. This would only work if it is kept secret from all taxpayers, who would be expected to file a tax return without a full understanding of the rules!

  • rate this
    -15

    Comment number 410.

    Let me get this clear, the basics are this. The Socialist want all the workers to pay as much tax as possible. So they can sit on their backsides on £ 26 K p/a Benefits and pay nothing. To this end they Scream Its all unfair and they the £ 26 k p/a Idle Elites are the victims. Even though the hard working PAYE payer could only dream of such a Tax Free income ? is that the story broadly speaking

  • rate this
    -3

    Comment number 409.

    its not as if these companys avoiding tax are not employing people who pay tax and not just robbing people at gun point and sending the money abroad is it . the more lucrative it is to trade in this country the more firms will come and they will employ tax payers wont they ? .

  • rate this
    0

    Comment number 408.

    Just pay the accountancy firms to design a system without loopholes

  • rate this
    +3

    Comment number 407.

    399.JPublic
    Just as Thames Water loading up the company with so much that the government is having to underwite the new Thames Sewer just so Thames can pay its owners billions in profit and use tax relief to reduce its bill to peanuts. The whole system is flawed.Apple has around 70bil offshore, it won't take back to the US as it will pay tax on it.

  • rate this
    0

    Comment number 406.

    398.Sheff
    1 Minute ago
    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

    Very few American Corporations pay tax in America, that is why they are as bankrupt as we are.

 

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