Big Four at the PAC: Replay

Parliament TV provided riveting viewing on Thursday morning as the heads of tax at the UK's Big Four firms testified before the Public Accounts Committee (PAC).

KPMG head of tax Jane McCormick, head of tax policy at Deloitte, Bill Dodwell, PwC head of tax Kevin Nicholson and Ernst & Young head of tax John Dickson faced the wrath of PAC chair Margaret Hodge and her colleagues as the anti-avoidance atmosphere reaches fever pitch.

Many accountants who spent the day wrestling with last-minute tax returns can still tune in to the re-run, and review what watchers made of the proceedings via comments on Twitter.

It was a bruising encounter, described by ICAEW staffer Sarah Buckley as an example of how under-resourced select committees struggle to grasp complex issues like tax law. "It's theatre, not scrutiny," she tweeted.

"Epic stuff," added Rebecca Benneyworth, who was full of praise for how the profession's representatives conducted themselves in the face of questioning that suggested they were lying and that secondments to central government impugned their independence. "An object lesson in how little politicians understand about tax and business, and in moderation and patience from Big Four," Benneyworth added.

At the same time, the committee forced the firms to acknowledge their roles in advising some of the corporations that have been in the spotlight before the committee for "immoral" tax avoidance.

Jeremy Newman said on Twitter: “The Big 4 partners behaved amazingly well in the face of outrageous levels of provocation, IMHO”

ICAEW boss Michael Izza also called for the committee to stop undermining the profession: “I was disappointed to again hear our profession being misrepresented as tax avoiders by a UK parliamentary committee today,” he said in a blog post following the session.

The One Show

While many in the profession disagree with Richard Murphy’s stance on tax, the sight of him cosying up to Rob Brydon on the One Show sofa to discuss tax avoidance and the PAC session on Thursday evening should send shivers down the spines of those who oppose his views.

Murphy’s primetime appearance and the surge in political and popular opposition to tax avoidance are signs that the profession could be losing the battle of public opinion.

Murphy said the PAC session “didn’t land any big punches”, but claimed it confirmed his assertion that these big firms do sell tax avoidance: “It took two hours for them to admit it. We also learnt that they’ve got so many branches in tax havens that one of their partners didn’t even know where his firm had offices and had to be reminded.

“As well as selling tax avoidance, they’re helping write the law for the government,” he said.

PAC chair Margaret Hodge also appeared on the One Show and said that despite not having specialist tax knowledge, she always makes sure she’s done her preparation.

With reference to tax advisers writing the law for the government, Hodge said it was a case of “poacher turned gamekeeper and then back to poacher again”.

Further reading:

Comments

pac

david5541 | | Permalink

 I like austin mitchell good for him and margeret hodge to be sitting on the PAC - did enayone else see the commons debate on corp tax avoidance? apparently there are loads of IT companies working for uk gorvernment who dont pay their corp tax in the uk.

IT companies

mikefleming3028 | | Permalink

HMRC have just released the Data set for December 2012 listing all of their costs for that month in excess of £25000. It lists numerous payments to Aspire (Cap Gemini) of 

£142,984,938.81, yes that`s just short of a staggering  £143M for one month`s IT support etc.Ther are similar costs incurred in each of the previous months and its all part of a multi billion £ contract. HMRC latest press releases on the subject stated that these costs had been reduced but they seem to be going the other way. As to whether this is good value for money I will leave it up to the reader to judge but Cap Gemini are a Company based and controlled in France, as to where they pay their tax I am sure HMRC will know if asked but my money is not in the UK.   If you are interested to learn what else HMRC  spend our taxes on  go to http://www.hmrc.gov.uk/transparency/spending-over-25k.htm and dowload 

and down load any one of the excel S/Sheets

Hypocrisy is nothing new    1 thanks

chicken farmer | | Permalink

Older readers will recall that some years back the Inland Revneue and Customs & Excise did a sale and leaseback of all their properties to a  company resident in the Bahamas.

Bill Dodwell .......can I have your babies?!

tiredmummy | | Permalink

Having watched the PAC last night I have to say Bill Dodwell Can I have your babies?!

Seriously tho, as a sole practioner on the other end of the scale to the four representatives, I was moved by how well they came across. We watched as a family and even my 9 year old daughter stayed up to watch and was enthrawled. Excellent!!!

 

PAC

Gloucester_Acco... | | Permalink

It would have been nice if Margaret Hodge let them answer the questions she asked them!

In my opinion there is nothing wrong with adopting a tax efficient business structure.  What is morally questionable is artificial arrangements that are put in place purely to shift profit to lower tax jurisdictions.

In the case of intangible assets like the Starbucks brand, determining an arms length value for the use of the brand is going to be very subjective.

sue scherzo's picture

PAC pretty awful committee!    2 thanks

sue scherzo | | Permalink

I accept that the big 4 is selling high profile tax avoidance schemes should not really be benefiting from govt contracts, but the tax law allows for most of this...so the simple(?) answer would seem to be a rewrite of legislation.

We cannot have tax law by dint of 'opinion' whoever the arguement is between.

Donation by Intimidation

JackHarper | | Permalink

I and my clients prefer to be taxed by law and  do not wish to be taxed by Hodge or Murphy. And unlike Starbucks they will not make a Donation induced by intimidation, excoriation, or urine extraction. Hodge's latest specialisation is nuclear waste.Er....

Public Sector Pension Black Hole...

markfd | | Permalink

...is apparently £1,600 per UK household p.a. (according to the CPS), so it's no wonder the public sector union's Max Clifford (ie Murphy) is running around trying to collect more cash towards his client's over generous retirement provisio.

PAC    3 thanks

HUGH W DUNLOP | | Permalink

What was once the big 5, and possibly before that the big 6 or 7, is now the big 4. Could we be about to lose one of them as a result of the RSM Tenon audit, or non audit? The song 'Ten green bottles' comes to mind.

But it still begs the question 'Does HMRC, or its masters, have the willpower to stop tax avoidance? For only £1 billion they could employ a team of tax experts, forcing them to sever all connection to the profession and industry, who would have the ability to draw up tax laws that would have no loopholes in them. The return on such a relatively small investment would bring in returns in year one alone of £14 billion or more, plus such returns would be reached year upon year. No firm, such as any of those currently embroiled in this saga, could afford to lay out such a sum on its own.

If anyone sells illegal drugs or firearms, punishment is inevitable. why are those who sell tax avoidance schemes which later are proved illegal not similarly punished? 

Measuring tax avoided    1 thanks

Ubergeek | | Permalink

How much tax does your firm help clients save each year?!

What a stupid question! These politicians really haven't a clue about the tax system. Unsurpringly, Richard Murphy, in a tweet was also surprised that this was not measured.

How is it to be measured? Are firms to sit down, work out the myriad possible tax scenarios for each client and then record the savings under each scenario? Presumably then we are to record the maximum number to suit the purposes of politicians out on a stupid witch hunt!

PAC is a complete farce and a total waste of taxpayers money!!

They would be better off rethinking tax legislation and getting it right in the first place. The professions have lamented for decades the pace at which ill conceived legisaltion is drafted and then, after poor scrutiny, allowed onto the statute books. But, politicians being politicians are always looking for scapegoats and would rather fight the profession to win public sympathy.

Poor dabs like Murphy are useful puppets for this purpose. Enjoy the limelight while you can Richard!

susanna russell-smith's picture

Margaret Hodge - a simple    3 thanks

susanna russell... | | Permalink

Margaret Hodge - a simple soul as she defined herself, simply couldn't get it.  If the Government did not seek technical guidance from technical experts, they'd have a system created by people like herself which would end up infinitely more full of loopholes than it is.  She implies that the technical guidance is corruptly given, with loopholes knowingly built in by those who give the guidance - I don't believe it, any more than she was inclined to believe virtually everything that was said by the big 4 reps.  No-one forces the government to ask for help from the profession but, unless they opt for Hugh Dunlop's good suggestion, this is the only way they are going to achieve reasonably workable laws.

One thing the big 4 failed to get across was that reliefs and initiatives like Patent Box have been created by government deliberately in order to give tax breaks and thus encourage growth and investment - what is the point of introducing them but then villifying anyone who uses them? 

I wish also that they had been able to get across more forcefully that their main function was to ensure that their clients paid the right amount of tax under the law - not the minimum, as it was continually described - but using those reliefs and incentives that had been specifically provided for those clients' situations.  It is not the issue that accountants benefit from the complexity of the tax laws - it is that companies and individuals suffer from it and need accountants to help them simply get it right.  

The points about the difficulties caused by globalisation were well made, but clearly still not fully understood by anyone on the PAC. It would seem that international treaties and agreements are the areas in which governments should be looking to invest time and money in order to achieve a fairer global tax system.

In the face of ignorance, sarcasm, downright rudeness, impugning of integrity and accusations of dishonesty in many areas, particularly by Hodge and Mitchell, I was incredibly impressed with the calm, reasonable, patient professionalism of the big 4 reps.  

I am not keen on aggressive tax avoidance, indeed am generally more of a Murphyite, but it is up to government to fix the law properly to suit its purpose, not berate those who comply with it.

PAC    1 thanks

HUGH W DUNLOP | | Permalink

Thank you Susanna for your comment. If only you worked for HMRC we might see the end of tax avoidance.

PAC    1 thanks

Brian Ogilvie | | Permalink

Yes,well summarised Susanna

They say we get the politicians we deserve,which - if true - is a worrying thought when it comes to 'Chair' Hodge et al !

Taxation also has an interesting thread on this topic: http://snipurl.com/26dkws2

ONLY A RETHINK    1 thanks

david5541 | | Permalink

"[quote=susanna russell-smith]

Margaret Hodge - a simple soul as she defined herself, simply couldn't get it.  If the Government did not seek technical guidance from technical experts, they'd have a system created by people like herself which would end up infinitely more full of loopholes than it is.  She implies that the technical guidance is corruptly given, with loopholes knowingly built in by those who give the guidance - I don't believe it, any more than she was inclined to believe virtually everything that was said by the big 4 reps.  No-one forces the government to ask for help from the profession but, unless they opt for Hugh Dunlop's good suggestion, this is the only way they are going to achieve reasonably workable laws.

One thing the big 4 failed to get across was that reliefs and initiatives like Patent Box have been created by government deliberately in order to give tax breaks and thus encourage growth and investment - what is the point of introducing them but then villifying anyone who uses them? 

I wish also that they had been able to get across more forcefully that their main function was to ensure that their clients paid the right amount of tax under the law - not the minimum, as it was continually described - but using those reliefs and incentives that had been specifically provided for those clients' situations.  It is not the issue that accountants benefit from the complexity of the tax laws - it is that companies and individuals suffer from it and need accountants to help them simply get it right.  

The points about the difficulties caused by globalisation were well made, but clearly still not fully understood by anyone on the PAC. It would seem that international treaties and agreements are the areas in which governments should be looking to invest time and money in order to achieve a fairer global tax system.

In the face of ignorance, sarcasm, downright rudeness, impugning of integrity and accusations of dishonesty in many areas, particularly by Hodge and Mitchell, I was incredibly impressed with the calm, reasonable, patient professionalism of the big 4 reps.  

I am not keen on aggressive tax avoidance, indeed am generally more of a Murphyite, but it is up to government to fix the law properly to suit its purpose, not berate those who comply with it".

ONLY A TOTAL RADICAL RETHINK OF THE COMPLEX TAX RULES INHERITED by the coalition since the fall of the conservative government in 1997 WILL HELP.THESE RULES seem to have perpetrated an environment where multinationals for instance can easily charge the Uk subsidiaries royalties!(instead of the subsidiaries paying out dividends! to their holding company!) for intangible assets! of all things is a result of year on year tweeking which incentivised and confused each published budget since then. with every carrot in the headines came complex mixed anti-avoidance sticks- each time confusing legislation which was meant to be straight forward.

when all this is combined with the masive privatisation and absorption of national debt and a trippling of house prices which could have been controlled by interesat rates  and the employment legislation leading to a compensation culture driving out full time permanent employess and firms re-hiring contractors its no wonder everyone is trying to stay away from the minefield of law and cases called tax law, (regardless of the insidious attempts of HMRc self assessment system staff to bring penssioners for example into the self asseasment framework)

susanna russell-smith's picture

Thanks, Brian    1 thanks

susanna russell... | | Permalink

I appreciated Mike Truman's article only marginally more than the spat that followed it! At risk of starting another such thread here, I will only very quietly murmur my support of the award he suggests!