MPs press accountants on tax avoidance

LONDON Thu Jan 31, 2013 2:31pm GMT

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LONDON (Reuters) - MPs grilled senior tax officials from leading accounting firms on Thursday over their role in helping big companies avoid tax, and said they could be banned from government contracts because of their tax work.

Governments are under pressure from voters to reduce tax avoidance by rich companies and make them share more of the burden of lowering large budget deficits built up following the 2008 financial crisis.

Public anger at tax dodging has been heightened by a realisation that technological advances now allow many companies to organise themselves in such a way as to pay almost no tax.

Last week, Prime Minister David Cameron said in Davos that he planned to push the G8 for action against companies which "navigate their way around legitimate tax systems and even low tax rates with an army of clever accountants".

Parliament's Public Accounts Committee, which has held a number of high profile hearings on corporate tax avoidance over the past year, took evidence from the big four accounting firms - PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young.

In a confrontational hearing, MPs from all parties challenged the tax advisors' claims that their primary role was to help companies comply with the letter and spirit of tax law, rather than to minimise their tax bill.

"You all choose to focus on working in an area which reduces the available resources for us to build schools, hospitals, infrastructure," said Chairwoman Margaret Hodge, an MP with the opposition Labour party.

She said accounting firms which give advice that put taxpayers at a disadvantage should be barred from government contracts.

The government said in December it was looking at the possibility that companies involved in tax avoidance could be precluded from bidding for government contracts.

The Big Four firms told the committee they received annual revenue of almost 500 million pounds, collectively, from work for the UK government.

However, tax advisers and academics say a rule barring tax avoiders or their advisers would be difficult to put into force. As the activities are legal, any ban would be open to judicial challenge.

The accountants told the MPs it was the role of parliament to change the current tax system if they believed it was not working in the way legislators originally intended.

(Editing by Tom Pfeiffer)

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