PwC promoted ‘industrial scale’ tax avoidance

The “big four” accountancy firm is said to have helped hundreds of companies cut tax bills by setting up arrangements to divert their profits via Luxembourg.

The report found that the “complex strategies and contrived structures” PwC provided “bear all the characteristics of a mass-marketed tax avoidance scheme”.

MPs investigated following the leak of hundreds of documents last November that appeared to show how the firm secured deals with Luxembourg tax authorities for 343 multinational companies between 2002 and 2010.

‘Industrial scale’

Margaret Hodge, chair of the public accounts committee, said: “We believe that PwC’s activities represent nothing short of the promotion of tax avoidance on an industrial scale.

“The effect has been to reduce the amount of corporation tax that some multinational companies pay in the countries in which they make their profits.”

PwC said that it disagreed with the conclusions of the report, but said it needed “to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully”.

“The tax system is too complex, as governments compete for investment and tax revenues. We take our responsibility to build trust in the tax system seriously and will continue to support reform,” PwC said in a statement.

Picture: Margaret Hodge, public accounts committee chair

Tax authorities were urged to take urgent action by MPs, who said the tax industry “evidently cannot be trusted to regulate itself”.

The report cited the example of Shire Pharmaceuticals – based in Basingstoke – as one company said to have diverted profits to Luxembourg.

The report said Shire paid tax on only 0.0156 per cent of its profits to the Luxembourg tax authority. The main rate of corporation tax in the UK is 21 per cent.

Neither PwC nor Shire could demonstrate that the company’s presence in Luxembourg was designed to do anything other than avoid tax Public accounts committee report

The report said: “The effect is to shift profits from other countries, where tax rates are higher, to Luxembourg.

“The ‘substance’ of Shire’s business in Luxembourg, used to justify these arrangements, consists of two people out of the 5,600 staff the company employs globally.”

Shire said that it always complied with tax obligations in the jurisdictions in which it operates.

Margaret Hodge said: “Unless HMRC takes urgent action, this irresponsible activity will go unchecked, causing harm to both the public finances and the reputations of the companies involved.”