MP Margaret Hodge was particularly scathing in her criticism.
The experts told the committee the climate for advising on aggressive tax plans had changed, and that reputational risks were being taken into account when advising clients.
Jane McCormick, UK head of tax at KPMG; Bill Dodwell, head of tax policy at Deloitte; Kevin Nicholson, head of tax at PwC and John Dixon, head of tax at Ernst & Young faced a three hour committee session as part of the PAC’s investigation into tax avoidance.
The four witnesses were accused of being in an “illegitimate game to try and outwit the taxpayer” and of being “poachers becoming gamekeepers and then going back to poaching” when staff are seconded to advise government on tax legislation.
“The more we can understand the minds of government, the more we can help shape policy, and policy will be more attuned to our clients, who represent businesses in Britain. It’s a win-win,” said Dixon.
The panel also rejected the idea that HMRC does “deals” over tax with big corporations.
But MP Margaret Hodge responded: “I think it’s very difficult to say the Goldman Sachs negotiation was anything other than a sweetheart deal.”
The four witnesses also rejected the accusation that it was in their interest to keep the tax system complicated because their services are required more. Nicholson said “nobody” benefits from a complex tax system, and said he’d rather have simplicity and transparency in the system.
On the subject of tax havens, Hodge questioned what the Big Four were doing there and accused them of being “economical with the truth.”
“If you’re a small country without natural resources, the only way you’re going to attract revenue is to have an attractive tax regime, let’s be honest,” Dixon said. “Those countries rely on tax treaties with countries like the UK and the US.”
The four witnesses were accused of being “too cosy” with HMRC and also of baiting the Revenue by using the “best brains” to trick them.
“It is a game in which you and HMRC are trying to outwit each other – and you are winning,” said Hodge. “You have some of the best brains – 9,000 people in the four firms dealing with tax advice, against fewer in HMRC dealing with these areas.”
Nicholson said, “The companies that we’ve talked about – these are known companies. They are not sitting in a cupboard somewhere that HMRC don’t know about. They have a lot of powers to question, and to investigate these companies.”
Dodwell was accused of being “naïve” when he said companies were not based in tax havens for the sole purpose of avoiding tax. “There must be legitimate business operations going on in these areas for them to be based there,” he said.
After Nicholson said more money should be invested into improving the tax system internationally, Hodge retorted, “Maybe if your clients paid a little more tax, we’d have a little more revenue to do more.”
“I think HMRC has substantially improved in the last five to eight years,” Dodwell said. “They have a decent understanding of the business with which they work.”
McCormick said, “We are frequently asked by Treasury and HMRC to provide technical support in various areas, particularly when new legislation is being looked at. And I think that is useful.”
Hodge questioned whether the firms should be awarded government contracts. “Nobody would pay your fees if they didn’t think you would help them pay less tax,” Hodge put it to them. “They come to you to minimise the tax, in my view, to avoid tax. Should you therefore be getting business from government that’s paid for out of the public pound?”
“We are experts and I think we have a valuable role to pay in helping government shape its policy,” replied Dixon.
“We have an equal right to go through the procurement process,” agreed PwC’s Nicholson. “Without the tax system work there would be no revenue coming in to the Exchequer. I don’t see any reason at all why, if we’re the right firm, we shouldn’t be allowed to work on government contracts.
“My own view is that I think it’s questionable,” responded Hodge.
In a scathing attack Hodge said it disappointed her that the four experts, who she said were clearly intelligent individuals, did not work in the public sector.
“You could contribute so much to the public good, and you choose to work in an area that reduces the revenue that we could use to build schools, hospitals and other infrastructure,” she said.
The four rejected that analysis of their work. Nicholson said, “I’m sorry, I can’t accept that. I’m proud of the work we do.”
The witnesses accepted that some schemes that had been created in the past were not appropriate in terms of tax planning and that the environment was different now.
Dodwell said, “It was appropriate at the time it was entered into. It wouldn’t happen in this time.”
Hodge asked whether they would be saying the same thing in 10 years’ time on the current environment.
Dixon said, “The advice that we give is based on substance, it’s based on facts, we try and make it as enduring as we can.”