PwC “promotes tax avoidance on an industrial scale” and misled MPs

Accountancy firm condemned by Public Accounts Committee

MPs have accused PwC, which works for hundreds of Britain’s biggest companies, of promoting “tax avoidance on an industrial scale”.

The accountant wrote more than 500 letters to tax authorities in Luxembourg – a popular tax haven – on behalf of more than 300 businesses.

A common method of avoiding tax in the UK is to reroute profits to Luxembourg, where tax is much lower, through a series of loans to subsidiaries of the business.

Margaret Hodge, chair of the Public Accounts Committee (PAC) said the ways PwC diverts its clients’ money “bear all the characteristics of a mass-marketed tax avoidance scheme”.

Tax avoidance is not illegal in the UK and, some might argue, PwC has a duty to reduce its clients’ tax liabilities in any legal way possible.

However, many people think tax avoidance is shameful. This has led to high-profile protests and boycotts of tax-avoiding companies such as Starbucks and Amazon in the last few years.

“We believe that PricewaterhouseCoopers’s activities represent nothing short of the promotion of tax avoidance on an industrial scale,” said Hodge.

The MPs also accused PwC of misleading the committee.

Hodge said: “We consider that the evidence that PwC provided to us in January 2013 was misleading, in particular its assertions that ‘we are not in the business of selling schemes’, and ‘we do not mass-market tax products, we do not produce tax products, we do not promote tax products’.”

In a statement, PwC said: “We stand by the evidence we gave the Public Accounts Committee and disagree with its conclusions about the work we do.

“But we recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.

“We agree the tax system is too complex, as governments compete for investment and tax revenues.

“We take our responsibility to build trust in the tax system seriously and will continue to support reform.”

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Readers' comments (9)

  • Shock horror! Accountants help save their clients tax within the law as specified by Parliament.

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  • Difference is tax avoidance (good) , tax evasion (bad).

    If avoidance is possible then the law makers are the ones to be blamed.

    Of course this is what happens when you try and overtax and not have a fair playing field - so much for the EU being a level playing field!

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  • Another liberal/left-leaning anti-captialst article. London DOES love business, but London Loves Business clearly doesn't. EVERYBODY minimises their tax up to the letter of the law. Every time you shop from duty free you do that, or use gift-aid.
    For an accountant to minimise their clients tax exposure is exactly what they SHOULD be doing.
    For MPs (who as a collective are the ones that DO commute fraud) to whinge about PwC minimising their clients tax position is comical and sheer testament to how out of touch MPs are to the real world.

    London Loves Business should be supporting business and the capitalism that drives businesses, or change it's name.

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  • Much tax avoidance is both legal and reasonable. If I invest in a film scheme or solar farm through EIS then I am avoiding tax but in a way that the government wants; they have given me a tax break to encourage a risky investment that they think will benefit the country.
    I think the problem is that there are a whole raft of very aggressive schemes which whilst marketed as tax avoidance are in reality tax evasion because there is no real commercial logic to them other than reducing your tax bill. Yes some (and it is only some) accountants are to blame but the higher tax rates are, the more there will be reliefs for things governments want done; and the more reliefs there are the more scope there is for dubious schemes. If you squeeze individuals too hard they will try to avoid tax. That is one of the reasons a 50% income tax rate is a bad idea.
    On a corporate level it seems that multi-nationals do abuse rules that are there for good reason. However I do think HMRC should take their fair share of the blame. It is hard to see why they haven't challenged the likes of Google on what is really evasion i.e. when you sell advertising to UK companies with UK staff for them to reach mainly UK consumers I don't see how you can reasonably claim that the business is being done in Ireland. I am sure it is more complex than that but I suspect that the essence of the business is as described.

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  • If the problem is, if taxable income earned by Starbucks, Google etc. is definable within the UK, then surely it's not beyond the wit of taxation lawmakers to outlaw 'off-shoring'. That is unless there is some cronyism at stake which encourages Euro tunnel sized loopholes through which shedloads of cash can be driven to Luxenbourg for taxation.

    Now whilst the tax gained from simplified, acceptable (to the man in the street) taxation regulations might not pay off the national debt or run the NHS, surely it would have the combined benefit of reducing HMRC investigative staff, public hearings, Facebook threads of bitching and hours of broadcast about the evil capitalist scum that, in the meantime, create employment for hundreds of thousands of taxable individuals, and perhaps knock a couple of percent off VAT.

    Seriously, it's not the companies to blame, nor the accountants, it's the grubby political system in this country that manipulates everything, so well connected politicians can raid the till with impunity.

    Full time politician? Part time nothing else! NO business interests, NO consultancy services, NO lobbying and NO contact whatsoever with Westminster following resignation (or sacking). Retrain and find a job like the rest of us.

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  • Anonymous

    Robyn, perhaps Gary is being unfair in calling you a 'liberal/left-leaning anti-captialst'. How about writing something on Margaret Hodge's family company, Stemcor. Just do a google search. Lots to write about.

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  • Agree with most of the above; it's up to governments to stop these loopholes. Until they do, companies are perfectly entitled to take advantage of them. But UK employees pay tax and NI and VAT is also paid on their sales. The simplest thing would be a turn-over tax on non-dom companies

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  • And who do you think advises Government on making tax laws?

    That's right - PWC. And of course, Deloitte, EY and KPMG.

    They design the laws and then mis-use them to help their wealthy clients avoid tax.

    So it's true that it is up to Governments to change the law. But they never do, because our Government no longer represents the people. It represent the interests of PWC's clients, same as PWC does.

    Add to the mix the "revolving door" of appointments between the Big Four accountancy firms and senior civil servants and ex-ministers, and it's very easy to see why our tax legislation is written to help the super-rich and big businesses avoid tax while the rest of us have to pay.

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  • How on earth can Ed balls (shadow chancellor) and Chuka Umunna (shadow business secretary) accept together more than £540,000 in so-called research assistance from PricewaterhouseCoopers (PwC), one of the 'big four global accountancy firms (as reported on BBC's Red Button today), when PwC have according to parliament's powerful public accounts committee, have been castigated for mass marketing tax avoidance schemes? But where it has to be said reading article from the international media and independent reports, that it appears to be the norm, as all leading politicians seem to be in the back pocket of global corporations these days, from the prime minister and shadow prime minister down. Indeed Ed Miliband is a hypocrite if what the BBC has stated also today is correct, as he has stated that if elected, he would clamp down on tax havens. You can't have it both ways Mr. Miliband with your senior colleagues receiving donations from the apparent architects of mass tax avoidance schemes and then accept money from them...or can you?

    If you did not know Mr. Miliband, I will educate you and where tax havens are a major part of tax avoidance schemes.

    But there again, the Establishment has always cuddled up to big business behind and the super-rich behind closed doors, no matter what political colour they were - 'Democracy died a death when 'Partyocracy' (a party-ruled 'democracy) and 'Corporatocracy' Corrupted the System and became the New way to Control People and run a Nation'
    http://worldinnovationfoundation.blogspot.co.uk/2014/04/democracy-died-death-when-partyocracy.html

    Politics has definitely to clean its act up for the people's long-term good,


    but can it is the very big question???.

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