MPs criticise accounting firms on tax avoidance

By Tom Bergin

LONDON (Reuters) - MPs criticised the role of accounting firms in helping big companies avoid paying tax and said in a report on Friday that close corporate relationships with government raised concerns about undue influence on tax policy.

Corporate tax avoidance has risen to the top of the political agenda in Britain in the past year following reports which showed some major companies paid little or no tax in the country by shifting profits to tax havens.

While the four biggest accounting firms, KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers said they no longer advised on aggressive tax avoidance plans, the Public Accounts Committee said: "They are still devising complex schemes that look artificial".

It went on to say the accounting firms were still prepared to recommend tax arrangements which had as little as a 50 percent chance of being successful if challenged in court.

The report also questioned the way staff from the "Big Four" were seconded to the government to help draft tax rules.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," Committee chair Margaret Hodge said.

But the firms said they behaved ethically and that the complexity of tax law was largely to blame for any appearance to the contrary. They welcomed the committee's calls for the rules to be simplified.

"We perform an essential function in the UK economy by helping our clients navigate this complexity," Bill Dodwell, Head of Tax Policy at Deloitte said.

The committee called on companies to disclose more information about their tax affairs. The government has also called for more disclosure but has said it wants this to be done on a voluntary, rather than a mandatory, basis.

(Reporting by Tom Bergin; Editing by Elaine Hardcastle)

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New British tax law won't stop corporate avoidance - parliamentarians

By Tom Bergin

LONDON (Reuters) - Legislation on tax avoidance going through Britain's parliament will not address the kinds of corporate tax minimisation that are of the greatest concern to the public, a parliamentary committee said on Wednesday.

The "General Anti-Abuse Rule" (GAAR), part of a wider finance bill, would grant Her Majesty's Revenue & Customs additional powers to counter "abusive" tax avoidance

But a sub-committee in the Lords examining the bill said GAAR would not tackle the practices used by companies such as Amazon and Starbucks to reduce their tax bill.

A Reuters report on coffee chain Starbucks last year revealed the company had paid minimal tax over a 14-year period, prompting criticism from politicians, protests at stores and boycotts by customers.

Online retailer Amazon has been criticised for channelling its European profits via an untaxed Luxembourg entity.

Tax campaigners have criticised what they see as a watering down of the draft GAAR legislation, which was initially planned to tackle "aggressive" tax avoidance, something that later became "abusive" tax avoidance.

The actions of Starbucks and Amazon - which say they file all the appropriate taxes in every country in which they operate - would likely not be deemed abusive under the proposed legislation because they take advantage of arrangements allowed by international tax rules to shift profits.

The government says while it wants businesses to pay their fair share of taxes, it is also keen that Britain should have the most business-friendly tax system in the G20.

The sub-committee agreed that the narrow focus of the GAAR was the best approach to avoid uncertainty for business.

The sub-committee said in a statement that the GAAR should be independently reviewed after five years to "ensure that it is working properly and having the appropriate deterrent effect."

It also called for an acceleration of an international review, being led by the Organisation of Economic Co-operation and Development, of how multinational companies are taxed.

The sub-committee added that separate plans, also due to be included in the finance act, to introduce a tax on residential properties worth over 2 million pounds owned by corporations - a device often used by individuals to avoid stamp duty and capital gains taxes - was excessively complex and potentially unworkable.

(Reporting by Tom Bergin; Editing by Robin Pomeroy)

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