Accountants under Fire from Government
The current global financial meltdown has brought to light many bitter truths about how the complacency and greed of those in power can bring down entire economies and adversely affect the lives of millions. Another story that has emerged in recent weeks is that according to the Commons Public Accounts Committee, four of the biggest accountancy firms in the UK have helped some of their richest clients to avoid paying taxes in the country.
What is at the heart of this affair is a shocking conflict of interest. The very same companies that seem to have aided their wealthiest clients, mainly multinational corporations and rich individuals to avoid tax, are those that have the power to provide expert accountants to advise the government on drafting tax laws and regulations. So the firms essentially helped their clients get away without paying tax by exploiting loopholes from the same laws they helped to create.
The Chair of the Public Accounts Committee, Margaret Hodge, has called the findings tantamount to a tax avoidance scam run by the biggest accountancy firms in the country. Ms Hodge said that these big forms were in a powerful position in the tax world and had an unhealthily cosy relationship with the government. She has called for the Treasury to discontinue the practice of using expert accountants from the companies to draft tax laws.
The firms in questions are those known as the ‘big four’ – namely Ernst & Young, Deloitte, KPMG, and PricewaterhouseCoopers. These companies have revenues of more than £2bn from working in the UK, and according to the report earn over £25bn internationally. The PAC report has come about as a result of the prime minister’s plans to deal with what he called ‘staggering levels of worldwide tax evasion and avoidance’.
The report fromPAC strikes at the heart of the financial crisis in a way because according to some the loss of tax revenue is directly responsible for the financial crisis we continue to be in today. As such, the big four accountancy firms, which are in fact at the centre of the global tax avoidance industry, have been the agent of this sustained financial recession.
The firms, of course, maintain that they perceived no conflict of interest and that advice to the government was given only when asked for. Following the report, David Cameron wrote to EU leaders proposing various steps to help tackle the growing and widespread problem of tax evasion by the wealthiest in society. Some of the suggestions made by the Prime Minister include transparency of information across the world to tackle evasion, including through offshore trusts. Deals with multinationals to declare tax paid in each nation. Implementation of an EU accounting directive to enable developing countries to have access to payments to governments made on oil, gas and mining industries.
The fact is that the time has come to take swift measures to curb the growing political and financial power of a handful of big corporations in the world, which essentially comes at the cost of growing inequality and impoverishment.