PricewaterhouseCoopers is guilty of promoting tax avoidance by major multinationals “on an industrial scale”, the House of Commons’ Public Accounts Committee has declared following a lengthy inquiry.
In one action orchestrated by PwC, a Shire Pharmaceuticals' subsidiary in Dublin lent billions to another subsidiary in Luxembourg, thus helping to ensure that Shire paid a pittance in corporation taxes to the Luxembourg authorities.
Shire is incorporated in Jersey, but it controversially moved its domicile to Dublin in 2008 for tax reasons. The majority of its 5,600 employees are based in the United States. Three hundred work for it in the UK, 100 in Ireland, but none in Jersey.
In Luxembourg, it has two employees. One of them is paid €135,000. Together, they are responsible for managing loans between different Shire companies worth £10 billion. Pummelled "Neither PwC nor Shire could demonstrate that the company's presence in Luxembourg was designed to do anything other than avoid tax," said the chair of the PAC, Labour MP Margaret Hodge.
Last year, the MPs pummelled PwC's UK head of tax, Kevin Nicholson, and his counterpart in Shire, Fearghas Carruthers, when they were twice summoned to give evidence.
PwC’s repeated claims they were “not in the business” of creating, promoting or selling tax avoidance schemes was “misleading”, the PAC ruled, in one of the harshest findings it has produced.
The global accountancy firm had tried to argue that it had done hundreds of tax-arrangement deals with the Luxembourg authorities, but that each had been “tailored to the needs of individual clients”.
Both PwC and its clients have adopted “a very narrow and self-serving interpretation”, the PAC found, adding that it is “also sceptical that (UK Revenue and Customs) was kept fully informed”.
Revenue should set out plans actively to challenge the advice being given by accounting firms to multinational firms to use tax avoidance schemes based in Luxembourg and elsewhere.
The British Government must now move to regulate the tax accountants industry more strongly given that all of the evidence now is that it “evidently cannot be trusted to regulate itself”.
“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,” she declared.
“PwC’s code does little more than shroud the way PwC exploits flaws in international tax law to devise and offer aggressive tax avoidance schemes to its clients,” says the report.
A scheme set up “solely for tax avoidance, and with no other commercial purpose” can still comply with the code, doing “nothing” to stop its staff trying to “avoid tax, deprive the exchequer of money, and damage PwC’s reputation”. Subsidiary companies Shire has external borrowings of around £800 million. However, its subsidiary companies lend £10 billion to each other, which allows the parent company to shift profits to lower tax jurisdictions, such as Luxembourg.
With nearly £24 billion worth of sales, Shire – which specialises in treatments for attention deficit disorders, Crohn’s Disease and rare genetic conditions – paid only a 0.015 per cent tax on its profits to Luxembourg.
Having voiced "long-standing concerns" about low corporation tax payments by multinationals in the UK, the Public Accounts Committee investigated not just Shire, but Google, Amazon and Starbucks, too.
