UK Markets open in 3 hrs 43 mins

'Big Four' Tax Firms Defend Their Role

(c) Sky News 2013

The UK's "big four" accountancy firms have been grilled by MPs over their involvement in helping multinational corporations minimise their UK tax burden.

Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee (PAC), told the heads of tax at KPMG, PwC, Ernst & Young and Deloitte that certain activities to reduce tax liabilities were "shocking".

Companies which deliberately advise wealthy firms and individuals on how to cut the tax they pay to the Treasury should be barred from receiving lucrative public contracts worth hundreds of millions of pounds a year, Ms Hodge said.

But the accountancy firm executives rejected claims that they were marketing "aggressive" tax avoidance schemes to clients and insisted their work benefited the UK by encouraging companies to locate and recruit here.

The four heads of tax appeared for a grilling lasting almost three hours at the House of Commons in the midst of huge public controversy over the low tax bills paid by multinationals like Amazon, Google (NasdaqGS: GOOG - news) and Starbucks.

Last year the PAC grilled executives from the three US corporations and following a backlash Starbucks said it would give money voluntarily to HM Revenue and Customs.

In his speech to the World Economic Forum in Davos last week, Prime Minister David Cameron said there were "some forms of avoidance that have become so aggressive that I think it is right to say these raise ethical issues".

He warned Britain would use its presidency of the G8 to press for action from the world's most powerful governments.

Ms Hodge said PwC reported income of £162m from public sector contracts, Deloitte £159m, KPMG £94.5m and Ernst & Young £72.6m.

"You all get a not insubstantial amount of money from the taxpayer, and yet your main purpose in your tax businesses is to cut the tax paid to the Treasury for the common good," Ms Hodge said.

"Do you think you should be excluded from providing services to the public paid for by the taxpayer?"

When Jane McCormick of KPMG said "our main purpose is to help our clients pay their tax", Ms Hodge cut her off, dismissing her answer as "laughable".

"Nobody would pay your fees if they didn't think you would help them pay less tax. They come to you to minimise their tax," the PAC chairwoman said.

"My own view is that it is questionable whether you should be getting public contracts. I don't think people who audit should be giving tax advice. I don't think people who give advice deliberately to cut the tax payable should be getting public business."

Kevin Nicholson, head of tax at PWC, said: "I think we have an equal right to go through the procurement process and, if we are the right people to add value to the Government, then we should be chosen.

Ms Hodge told the four executives - who all confirmed that they earn six or seven-figure packages: "You are a bunch of really clever people, extremely well remunerated, very expert.

"What really depresses me is you could contribute so much to society and the public good and you all choose to focus on working in an area which reduces the available resources for us to build schools, hospitals, transport infrastructure."

Meanwhile, grassroots action group UK Uncut, which has been at the forefront of publicising tax minimisation by large companies, responded angrily to both the accountancy firms and Government.

"The hypocrisy of this is staggering - the Government has given hundreds of millions of pounds to the Big Four accountancy firms in public sector contracts, and has allowed these companies a central role in making the law on tax avoidance," UK Uncut

“People are fed up of being lied to with the government saying one thing and doing the opposite. The cuts aren’t necessary - we won’t stand for the cuts to our public services, to benefits that people need while the Government is pumping money into the pockets of the same accountants and big businesses.

It added: "The politicians are blaming the accountants and the lawyers for enabling tax avoidance, tax dodging businesses say they're doing nothing wrong and are 'creating wealth', and the accountants are blaming capitalism and politicians.

"The truth is that no one wants to take responsibility for the system that puts profits for big business ahead of services and support for people who most need them. And this year, more and more people will take action against this."