The UK government has an “unhealthily cosy relationship” with the Big Four accountancy firms, according to a report by the Public Accounts Committee (PAC), an influential parliamentary body.
The report is critical of Her Majesty’s Revenue and Customs’ (HMRC) “continuing weakness” in tackling tax avoidance as it engaged in a “battle it cannot win”. It cites how the Treasury uses seconded staff from accountancy firms for advice in the drafting of legislation.
“Through their work in advising government on changes to legislation they have a detailed knowledge of UK tax law, and the insight to identify loopholes in new legislation quickly,” comments the report.
PAC chairwoman Margaret Hodge, who last November was highly critical of Starbucks and other multinational corporations (MNCs) over the low amount of corporation tax paid on their UK activities, commented: “This is a ridiculous conflict of interest which should be banned in a code of conduct for tax advisers.”
Hodge expressed scepticism over firms’ “protestations of innocence” in declaring their focus was now on acceptable tax planning, rather than aggressive tax avoidance.
“Tax reliefs are one of great areas where accountancy firms and lawyers and companies themselves take advantage of perfectly legitimate intentions of the government and use them to avoid tax,” she commented
She added that the UK tax system was overly complex and should be simplified so companies cannot give advice on strategies for avoidance, on the assumption that HMRC is “so poorly resourced they won’t challenge it”.
The PAC report inevitably also received criticism, with an HMRC spokesperson retorting: “The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them.”
A Treasury spokesperson was also critical, commenting: “The analysis and conclusions in the PAC report bear almost no resemblance to reality of what government is doing or what is happening.
“In particular, as a matter of principle, the suggestion that government shouldn’t work with business and indeed anyone affected by its policies is totally absurd.”
A response was also issued by KPMG, which said in a statement: “When requested to by government departments we do provide individuals on secondment. Their role is to provide tax technical input and commercial experience so that the authorities can make informed choices on tax policy. Our secondees do not write legislation or make policy decisions.”
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