HSBC and PwC Latest in Tax Evasion Scandal

12th February 2015

By Lyndsey Hall

The latest financial giants to be embroiled in tax evasion scandal are HSBC and PricewaterhouseCoopers.

HSBC’s Swiss private bank has been found to have helped wealthy clients worldwide evade hundreds of millions of pounds worth of tax, according to the BBC. In documents leaked by whistleblower Herve Falciani in 2007, there are accounts from 106,000 clients in 203 countries, including almost 7,000 clients based in the UK.

The documents were stolen by a computer expert who worked for HSBC in Geneva in 2007, but the data was only handed over to HMRC in 2010. The Revenue has identified over 1,100 account holders who have not paid their taxes, but only one has been prosecuted for tax evasion.

The report even suggests that HSBC helped its clients evade tax by advising them of changes in the law so that they could stay ahead of the game. When the European Union Savings Directive was introduced in 2005, the bank wrote to its Swiss account holders and suggested ways of getting round paying the tax they owed.

According to HMRC chief executive Lin Homer, only 130 of the 1,100 cases are still outstanding, with £135million in unpaid taxes having been recovered so far, and two thirds of the cases being “found to be compliant” with UK tax rules, due to the account holder having non-dom status, amongst other reasons.

Meanwhile, in Luxembourg, PwC has been accused by MPs of promoting tax avoidance “on an industrial scale”. The Big Four accountancy firm is said to have helped hundreds of clients cut their corporation tax bills by setting up bases in the tiny European state, which is a known tax haven.

The tax avoidance schemes, which are technically legal, involve companies diverting profits to Luxembourg and other tax havens via a series of loans from one part of the business to another. The profits are then taxed in the country that they come to rest in, but often at tiny rates.

Chancellor of the Exchequer George Osborne referred to this exact type of tax avoidance in his Autumn Statement 2014, declaring a new Diverted Profit Tax of 25% on profits generated by multinationals intended to be moved out of the UK. Unfortunately, the new tax does not come into effect until April 1st 2015.

According to the report, PwC advised clients such as Amazon, Ikea, Coca-Cola, Vodafone, and many other household names; the majority of which have UK headquarters. Margaret Hodge, chair of the Public Accounts Committee (PAC) said that “the effect has been to reduce the amount of corporation tax that some multinational companies pay in the countries in which they make their profits”.

The gap between the tax that should have been collected, and the tax that actually was collected was £34 billion in 2012-13, £3.1 billion of which was lost to tax avoidance, according to HMRC. Let’s hope that gap starts to close after April 1st and the Revenue start to cut small businesses some slack.

What do you think of the latest tax scandals to hit the headlines? Should big multinational corporations be allowed to cheat the system while the little guy faces the full force of Her Majesty’s Revenue and Customs? Let us know your thoughts in the Comments or on Twitter and Facebook.

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