PwC accused of ‘lies’ over mass sales of Luxembourg tax dodges

'It is very hard for me not to see that this is anything other than a mass-marketed tax avoidance scheme,' said a furious Margaret Hodge

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MPs have accused the head of tax at PwC of “lying” over what they said was the accounting firm’s mass marketing of Luxembourg-based tax avoidance schemes, during angry exchanges at the Commons Public Accounts Committee yesterday.

Members had recalled Kevin Nicholson in the wake of the leak of thousands of documents detailing deals done by more than 340 multi-national companies with the tiny European state.

The growing scandal is even now calling into question the suitability of its former Prime Minister, Jean-Claude Juncker, to be President of the European Commission.

A furious Margaret Hodge MP said to Mr Nicholson: “If I look at evidence in the public domain, there are around 343 companies and 548 letters all of which are on PwC notepaper. It is very hard for me not to see that this is anything other than a mass-marketed tax avoidance scheme.”

She pointed to repeated instances at a hearing last January where Mr Nicholson had denied such a charge.

Ms Hodge, who previously worked at PwC as a consultant, something she declared during the hearing, said: “Mass marketing is if you have a scheme you market to other companies. That is why I accused you of lying, and I don’t do that lightly. You have advised on the same scheme, you have written to Luxembourg yourself.  I don’t see how that isn’t mass marketing.”

She also pointed to a complex flow diagrams, blown up for the committee hearing, on PwC headed paper concerning the tax arrangements of the drugs group Shire Pharmaceuticals that was sent to Marius Kohl of Luxembourg’s tax authority.

“It looks to me like a bunch of demented worms. Explain the ‘before and after’. Explain what has changed,” she challenged Mr Nicholson.

The tax chief, who appeared shaken by the hostility of the questioning he faced, said the committee could not expect him, as PwC’s head of tax, to explain the affairs of an individual client.

However, he insisted that PwC had not breached its code of conduct by selling a scheme specifically to avoid tax and without any other commercial value – a charge levelled by committee members.

He had earlier told the committee: “I stand by what I said [at the earlier hearing] but if I can clarify anything I will. It was not a scheme. They are all different. We look at each individual company’s needs.”

The committee also grilled Shire’s head of tax, Fearghus Carruthers. MPs pointed to the company having just a two-man office in Luxembourg whose employees were paid only €135,000 (£106,000). They argued that this meant decisions on $10bn in loans could not have been taken there and that it had purely been set up to avoid tax.

Ms Hodge said: “You’re telling me you’re putting nearly $10bn in loans through two middle-aged guys in Luxembourg?” Told that the unit made $400m in profit she said: “Two incredibly productive guys who earn just €130,000? You are stretching credibility by suggesting that these two employees are seriously the guys taking decisions on loans of $10bn. If the decisions aren’t taken in Luxembourg, this isn’t just avoidance, for me it is fraud.”