‘The poacher turned gamekeeper’: Hodge blasts open tax avoidance debate

The debate over corporate tax dodging escalated a notch today, when Margaret Hodge accused big accountancy firms of a fundamental conflict of interest in their interaction with government.

Speaking ahead of a new public accounts report on tax avoidance, the chair of the committee said large accountancy firms were sending staff to advise the Treasury on tax legislation and then returning to them to identify the loopholes they themselves put in.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said.

"They send staff to the Treasury to advise on formulating tax legislation. When those staff return to their firms, they have the very inside knowledge and insight to be able to identify loopholes in the new legislation and advise their clients on how to take advantage of them.

"The poacher, turned gamekeeper for a time, returns to poaching."

The explosive comments came as Hodge mapped out the staggering disparity of manpower between HM Revenue and Customs and tax avoiders.

In the area of transfer pricing alone there are four times as many staff working for the big four accountancy firms than for HMRC.

The big four employ nearly 9,000 people and earn £2 billion from their tax work in the UK. They earn around $25 billion from this work globally.

Hodge demanded the UK take a lead in reforming international tax law to prevent firms going overseas, setting up a computer and a few members of staff in a tax haven, and then reaping the benefits.

"The UK must take the lead in demanding urgent reform of international tax law, so that companies have to pay a fair share of tax where they actually do business and make profits," she said.

Campaigners want the UK to conduct robust work on simplifying the tax code but only six people have been assigned to work in the Office of Tax Simplification.