MPs plan to quiz representatives of the biggest accounting firms over their role in helping big companies minimize their tax bills, as politicians across Europe consider steps to clamp down on tax avoidance.
A spokesman for the Public Accounts Committee said it would hold a hearing on Jan. 31, at which senior tax specialists from PricewaterhouseCoopers, Ernst and Young, KPMG, and Deloitte would testify.
Sources close to the committee said the tax advisers would likely receive a harsh grilling, akin to that meted out to executives from Google Inc., Amazon.com Inc. and Starbucks Corp. in November, when the three were accused of engaging in “immoral” tax avoidance.
“It’s about trying to cut the problem off at source. Most of these tax avoidance strategies are cooked up by the big four,” one source close to the committee said.
A combative hearing could be damaging for the firms, which have long enjoyed considerable influence in tax policy making in the U.K.
The Conservative and Labour parties have received tax advice from the firms, representatives have participated in government consultative bodies on tax and former tax partners from KPMG and PricewaterhouseCoopers sit on the board of the U.K. tax authority.
The four firms declined to comment on the accusation that they had helped their clients avoid taxes – an entirely legal activity but one which has opened companies up to public criticism.
Last week, investment bank Goldman Sachs Group Inc. scrapped plans to delay paying bonuses to its bankers in Britain to exploit an income tax cut for top earners after a rash of negative media headlines, a plan the Bank of England governor Mervyn King described as “depressing.”
Last year, Starbucks said it would voluntarily make tax payments of £20-million ($31.4-million) over the next two years, even though it may not be liable for this much, after a Reuters investigation showed the company had paid no U.K. corporation tax in the previous three years.
All the companies involved said they strictly complied with tax law.
Bill Dodwell, Deloitte’s head of tax policy, who will give evidence at the session this month, said in a statement that his firm was happy to help the committee.
“We hope that the experience and expertise Deloitte can offer will be useful to the Committee’s deliberations,” he said.
A spokeswoman for Ernst & Young said the firm welcomed the inquiry and the “opportunity to participate in it.”
Big budget deficits have forced governments to increase taxes on individuals and cut back on public services.
The realization in recent years that the tax burden on big business has been falling, as companies find innovative ways to cut their tax bills, has prompted considerable public anger and increased pressure on governments to take action.
Some U.K. parliamentarians have suggested that companies that are deemed not to pay their fair share of taxes should be barred from bidding for government contracts, although tax experts said this could be legally difficult, or even impossible, to implement.