MPs warned on Friday that top accountancy firms are gaining inside knowledge on tax loopholes by seconding staff to advise the government, and urged the practice be banned.
The Commons Public Accounts Committee said it was “very concerned” at the “inappropriate” way employees from the so-called Big Four accountancy firms — Deloitte, Ernst and Young, KPMG and PricewaterhouseCoopers — advise the government on tax legislation.
Committee chairman Margaret Hodge described the practice as a “ridiculous conflict of interest” which should be banned.
“The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government,” Hodge said.
The committee warned that HM Revenue & Customs (HMRC) was engaged in a “battle it cannot win” as it seeks to stem losses from tax avoidance.
“It is inappropriate for individuals from firms to advise on tax law and then devise ways to avoid the tax,” said the report from the committee, which is a cross-party scrutiny panel composed of 14 lawmakers.
“The four firms second staff to HM Treasury to advise on technical issues in drafting legislation. They conceded that this may give rise to a perception that they have an influence on the formulation of tax policy that smaller businesses do not have.
“The four firms maintained that their involvement had improved the quality of legislation, but we are concerned that the very people who provide this advice then go on to advise their clients how to use those laws to avoid tax.
“We were told by the four firms that the advice they offer to clients in regard to specific tax laws is in line with what Parliament intended those laws to achieve,” the report added.
The influential committee also proposed a code of conduct to prevent such a conflict of interest.
“HM Treasury should ensure that the code of conduct we have proposed for tax advisors sets out how conflicts of interest should be managed when a firm advises government on the formulation of tax law and subsequently provides tax advice to clients in related areas,” it said.
MPs slam accountants for using inside info
