The influential public accounts committee says HM Revenue & Customs is “fighting a battle it cannot win” against tax avoidance due to its lack of resources compared to the large market for tax avoidance advice.
In a report into tax avoidance, published today, the PAC says the four firms employ nearly 9,000 people and earn £2bn from their tax work in the UK, earning around £16.2bn globally. It says HMRC has far fewer resources and is engaged in a “never-ending game of cat and mouse”.
he PAC calls for the big four accountants to be banned from advising the Government on tax policy as they use the “insider” knowledge gained to help clients avoid paying tax.
The report says it is a case of a poacher turning into a gamekeeper who then returns to poaching and slammed the “unhealthily cosy” relationship between the Treasury and accountants.
KPMG, Deloitte, PriceWaterhouseCooper and Ernst & Young all admit to tax staff being seconded to Government to advise on tax legislation.
PAC chair Margaret Hodge says: “The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with Government. They second staff to the Treasury to advise on formulating tax legislation.
“When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them. The poacher, turned gamekeeper for a time, returns to poaching.
“This is a ridiculous conflict of interest which should be banned in a code of conduct for tax advisers, as we have recommended to the Treasury and HMRC.”
All four firms says they have not sold “aggressive” tax avoidance schemes for 10 years but PAC says they are still helping firms avoid paying taxes.
MPs also called for a simpler tax system but claimed the Office for Tax Simplification is too under-staffed for radical reform. It says it is merely ensuring “good housekeeping” rather than tackling problems of complexity.
The report said the PAC would investigate the use of tax reliefs to avoid tax at a future hearing.
HMRC director general Jim Harra hit back at the report by highlighting 11 tribunal victories, 50 court case wins and billions of pounds protected since the end of last year.
He says: “The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.”