MPs summon PwC tax chief to attend Luxembourg tax deal hearing
Public accounts committee will demand intricate details from Kevin Nicholson about tax avoiding schemes in Grand Duchy
One of Britain’s top tax advisers at PricewaterhouseCoopers has been summoned to give evidence before MPs in the wake of revelations about controversial tax deals for PwC clients in Luxembourg.
Kevin Nicholson, PwC UK’s head of tax, who worked as an HRMC tax inspector in the early 1990s, will appear on his own before parliament’s public accounts committee on 8 December.
No one from PwC Luxembourg is expected to join him, nor will Rick Stamm, PwC’s New York-based global head of tax, be present. The Guardian and more than 20 other news outlets around the world published analyses this month of a cache of hundreds of leaked tax rulings secured by PwC Luxembourg on behalf of its clients. They exposed patterns of aggressive tax avoidance.
The revelations triggered an emergency debate in the European parliament as politicians from all sides called into question the track record of the new European commission president Jean-Claude Juncker, who had dominated Luxembourg politics as prime minister between 1995 and 2013. During that time large numbers of multinationals shifted functions such as internal financing and intellectual property licensing to the Grand Duchy.
Juncker has sought to brush aside criticisms, insisting: “I am not the architect of the Luxembourg model because this model doesn’t exist.”
On Thursday, he comfortably survived a censure vote as his centrist allies saved him from humiliation at the hands of anti-EU parties of the right. On the parliament’s left there has also been anti-Juncker sentiment, but it was unable to muster the 10% of MEPs needed to bring a motion, and the bloc refused to vote with the far-right parties.
A motion brought by Britain’s Ukip, France’s Front National, and Italy’s 5 Star movement described Juncker as unfit to lead the EU executive because of his track record in Luxembourg. It was defeated by 461 votes, with 101 voting in favour and 88 abstaining.
The hearing next month will not be the first time Nicholson has had to account for PwC’s record to MPs on the public accounts committee, which is chaired by Margaret Hodge MP, a fierce critic of tax avoidance. Last year he appeared alongside counterparts from Ernst & Young, KPMG and Deloitte. He was quick to blame deficiencies in the international rules on tax, which, he said, needed updating.
“One of the challenges now is we’re seeing a lot of discomfort, unrest and unhappiness around the fact that businesses are selling a lot in the UK but they are not seeing the profit [in the UK],” he said. “And part of the reason for that is the way the international rules were designed puts the value in different places. One of the debates we need to have now is how do you get tax and profits in the right places.”
During the hearing Hodge confronted Nicholson with a leaked tax structuring document relating to a string of London’s best-known office blocks. She said she was shocked by the structure of ownership set out in a diagram which showed corporate entities in Jersey, Luxembourg and Delaware. On that occasion Nicholson was able to simply say he did not know the structure and could not comment.
PwC said: “We stand by the evidence we gave to the public accounts committee in January 2013 and are very willing to clarify any of the points made.”
Next month, however, Nicholson can expect to be grilled on intricate details of a host of leaked Luxembourg tax agreements, many of them relating to UK and Irish clients. With documents now published by the International Consortium of Investigative Journalists, and widely reported on, it will be harder for Nicholson to deflect scrutiny.
It remains to be seen, however, whether he will seek to defend the track record of PwC Luxembourg, which is a distinct legal partnership from PwC in the UK. Nicholson is also expected to face questions over the level of involvement that UK staff have had in tax advice officially emanating from Luxembourg.
Last year PwC made revenues of £2.81bn of which £714m came from its tax advisory practice. Meanwhile, PwC Luxembourg had turnover of €276m (£219m) for the year to June 2013, up more than 12% on the previous 12 months. Tax advice accounted for 29% of revenues, up from 24% two years ago. The Luxembourg partnership employs about 2,300 – equivalent to one in every 240 people resident in the small country. New offices for the fast-growing practice were officially opened last week at a ceremony attended by prime minister Xavier Bettel.
