MPs expose tax firms' 'inside track' on loopholes

MPs and unions today fiercely criticised an "unhealthily cosy relationship" between the Treasury and big accountancy firms that enables wealthy people and companies to avoid paying tax.

The public accounts committee said that it was "very concerned" at the way the "big four" accountancy firms - Deloitte, Ernst & Young, KPMG and PwC - were able to exploit loopholes in the tax laws.

It noted that staff were regularly seconded from these accountancy firms to advise the Treasury on technical issues when drafting legislation, only to return to advise clients on how to use those laws to avoid tax.

This "insider knowledge" on changes to Britain's tax laws enables them to identify loopholes in legislation quickly, the committee said.

Committee chairwoman Margaret Hodge said the practice represented a "ridiculous conflict of interest" which should be banned.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said.

She warned that HM Revenue & Customs was engaged in a "battle it cannot win" in seeking to stem the losses to the exchequer from tax avoidance.

It had far fewer resources than the big four firms which employ almost 9,000 staff and earn over £2 billion a year from their tax work in Britain.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for an end to the "revolving door between HM Treasury and the tax avoidance industry.

"At a time when cuts are forcing millions into poverty and thousands into homelessness, the continued existence of the tax avoidance industry should shame any civilised nation.

"Trade unions like PCS and Unite and campaigners like the Tax Justice Network and UK Uncut should feel proud that they have forced this injustice into the public glare."

PCS general secretary Mark Serwotka said: "This cosy network around the Treasury and the big accountancy firms helps wealthy individuals and companies to deprive our exchequer of tens of billions of pounds a year.

"This then helps the government to peddle the myth that there's no money for our public services."

This article first appeared in the Morning Star