PwC "disagrees" with Hodge over its work (Source: PwC)
PwC has rejected the findings of the Public Accounts Committee, which has accused the financial services firm of promoting “tax avoidance on an industrial scale”.
The committee, led by Labour MP Margaret Hodge, published a report this morning slamming PwC for “artificially diverting profits to Luxembourg through intra-company loans”. She claimed its activities “bear all the characteristics of a mass-marketed tax avoidance scheme”.
Among a number of firms helped by PwC, it highlighted Shire
Pharmaceuticals as an example of such avoidance, setting up loans totalling $10bn (£6.52bn), which “significantly” reduced its tax liabilities. PAC noted that just two members of Shire's staff worked in Luxembourg, out of a payroll of 5,600 people.
“Neither PwC nor Shire could demonstrate that the company’s presence in Luxembourg was designed to do anything other than avoid tax,” Hodge said.
The backbencher, who this week ruled herself out of the race for London mayor, also claimed that PwC's evidence submitted in January 2013 was “misleading”.
“We believe there is no clarity about the boundary between acceptable tax planning and aggressive tax avoidance,” she said, calling on the government to do more to regulate the tax industry “as it evidently cannot be trusted to regulate itself”.
PwC agreed that the tax system was “too complex” and said it would support reform.
“We take our responsibility to build trust in the tax system seriously,” the firm said in a statement.
But it firmly rebutted Hodge's claims about the running of the business.
“We stand by the evidence we gave the Public Accounts Committee and disagree with its conclusions about the work we do. But we recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.”
Shire told City A'M it "has always and will always comply fully with all of our tax obligations in jurisdictions in which we operate".
A spokeswoman for the pharma firm added: "A key goal for any company, including Shire, is to try to manage tax affairs in a way that minimizes uncertainty and allows effective and stable planning for the future.
"We consider effective and lawful management of our tax affairs to be an appropriate and responsible part of our drive for efficiency and re-investment into research and development of innovative medical treatments."
What is the Public Accounts Committee recommending?
It is calling on HMRC to set out how it plans to take a more active role in challenging the advice being given by accountancy firms to their multinational clients, with a particular view to the mass marketing of schemes designed to avoid tax.
It wants HMRC to push for a more rigorous and meaningful definition of what substance means when defining where a business is located for tax purposes.
It “strongly” believes the government should intervene by introducing a code of conduct for all tax advisers, as was recommended in its April 2013 report.
The government should consult on how it regulates the industry and enforces this code, and financial sanctions should be imposed for non-compliance.