MPs to quiz big four accountants on tax avoidance

LONDON (Reuters) - MPs plan to quiz representatives of the biggest accounting firms over their role in helping big companies minimise their tax bills, as politicians across Europe consider steps to clamp down on tax avoidance.

A spokesman for the Public Accounts Committee said it would hold a hearing on January 31, at which senior tax specialists from PricewaterhouseCoopers (PwC), Ernst and Young, KPMG, and Deloitte would testify.

Sources close to the committee said the tax advisors would likely receive a harsh grilling, akin to that meted out to executives from Google, Amazon and Starbucks in November, when the three were accused of engaging in “immoral” tax avoidance.

“It’s about trying to cut the problem off at source. Most of these tax avoidance strategies are cooked up by the big four,” one source close to the committee said.

A combatative hearing could be damaging for the firms, which have long enjoyed considerable influence in tax policy making in the UK.

The Conservative and Labour parties have received tax advice from the firms, representatives have participated in government consultative bodies on tax and former tax partners from KPMG and PricewaterhouseCoopers sit on the board of the UK tax authority.

The four firms declined to comment on the accusation that they had helped their clients avoid taxes - an entirely legal activity but one which has opened companies up to public criticism.

Last week, investment bank Goldman Sachs scrapped plans to delay paying bonuses to its bankers in Britain to exploit an income tax cut for top earners after a rash of negative media headlines, a plan the Bank of England Governor Mervyn King described as “depressing”.

Last year, Starbucks said it would voluntarily make tax payments of 20 million pounds over the next two years, even though it may not be liable for this much, after a Reuters investigation showed the company had paid no UK corporation tax in the previous three years.

All the companies involved said they strictly complied with tax law.

Bill Dodwell, Deloitte’s Head of Tax Policy, who will give evidence at the session this month, said in a statement that his firm was happy to help the committee.

“We hope that the experience and expertise Deloitte can offer will be useful to the Committee’s deliberations,” he said.

A spokeswoman for Ernst & Young said the firm welcomed the inquiry and the “opportunity to participate in it”.

Big budget deficits have forced governments to increase taxes on individuals and cut back on public services.

The realisation in recent years that the tax burden on big business has been falling, as companies find innovative ways to cut their tax bills, has prompted considerable public anger and increased pressure on governments to take action.

Some UK parliamentarians have suggested that companies which are deemed not to pay their fair share of taxes should be barred from bidding for government contracts, although tax experts said this could be legally difficult, or even impossible, to implement.

Reporting by Tom Bergin; Editing by Peter Graff