The top tax partner at PricewaterhouseCoopers, Kevin Nicholson, misled parliament over complex Luxembourg financing structures the accountancy firm helped to set up for scores of multinationals to avoid tax, according to MPs.
In a report published on Friday, the public accounts committee dismisses Nicholson’s repeated claims that PwC was not in the business of selling tax avoidance. MPs pointed to evidence unearthed in investigations published in November in the Guardian and more than 20 news outlets around the world, under the auspices of the International Consortium of Investigative Journalists (ICIJ).
Committee chair Margaret Hodge said: “Contrary to its denials, the tax arrangements PwC promotes, based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme.”
Nicholson had been recalled to give further evidence last December after MPs felt his 2013 evidence had been put in question by the Guardian’s investigations. Fearghas Carruthers, the head of tax at drug firm Shire, a PwC client which also featured in the investigation, gave evidence too.
Two years ago Nicholson told MPs: “We are not in the business of selling schemes. We do not mass-market tax products, we do not produce tax products, we do not promote tax products.”
The MPs’ report comes as political leaders in the European parliament promised their own special committee to examine tax rulings granted not just by Luxembourg, but by all member states.
The special committee’s work will last a year and it has powers to examine a wide range of paperwork at the European level.
The move disappointed many MEPs, however, as more than a quarter had petitioned for leaders to endorse a full committee of inquiry, with powers to review papers from member states as well as internal Brussels documents.
The Guardian’s investigation into PwC’s activities in Luxembourg was made possible by the leak of thousands of pages of confidential tax rulings secured by the accountancy firm, which found their way to the ICIJ.
In a statement responding to MPs’ criticisms of Nicholson, PwC once again said: “We stand by the evidence we gave the committee and disagree with its conclusions about the work we do.”
The statement added: “We recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.”
But PwC Luxembourg remains furious at what it calls the “theft” of its documents. Criminal charges have been brought against two former PwC staff members after it complained to prosecutors.
Of Shire’s Luxembourg structure, the MPs’ report says: “Shire has arranged its affairs so that interest payments on intra-company loans reduce significantly its overall tax liabilities … The ‘substance’ of Shire’s business in Luxembourg, used to justify these arrangements, consists of two people … One of Shire’s Luxembourg based staff holds 41 directorships of other companies.”
The report recommends that British tax authorities should press for tougher international rules that would require multinationals to show real substance in companies where their profits arise.
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