• Register
Return to: Home > News > Advisory > CEO: Big Four’s influence over EU tax policy is a conflict of interest

CEO: Big Four’s influence over EU tax policy is a conflict of interest

A report by the Corporate Europe Observatory (CEO) has criticised the continued treatment of the Big Four as “neutral and legitimate partners” in EU policy-making circles.

In Accounting for Influence, the Brussels-based watchdog claimed that the accounting firms’ advice constitutes a conflict of interest due to their own involvement with tax avoidance schemes.

A study for the European Parliament estimated that corporate tax avoidance costs the EU between €50bn ($58.56) and €70bn a year. According to CEO, such large-scale tax avoidance is largely facilitated by the Big Four, who “push large scale abusive tax avoidance schemes to multinational corporations”.

The Luxembourg Leaks scandal in November and December 2014 revealed how many multinationals avoid billions in tax by channelling money through Luxembourg, aided by the Big Four. This was followed by the Panama Papers in 2016 and Paradise Papers in 2017, which exposed the widespread use of offshore tax avoidance structures, again facilitated by big accounting firms, the report said. 

But, CEO pointed out, despite evidence that the Big Four play a role in facilitating, encouraging, and profiting from corporate tax avoidance strategies, the Big Four receive “tens of millions of euros” from the European Commission in the form of public procurement contracts each year.

A significant proportion of these contracts are related to tax policy. In October 2014, for example, the Directorate-General for Taxation and Customs Union (DG TAXUD) paid nearly €7m to PwC, Deloitte and EY to carry out “studies and comparative analyses in various tax and customs areas”. CEO argues that this essentially means that major tax avoidance facilitators are being paid by the EU to produce the background material used as a basis for decision-making around tax.

Another €10.5m was awarded to PwC, Deloitte, and KPMG for services to DG TAXUD in January 2018 – after the LuxLeaks, Panama Papers, and Paradise Papers scandals – for studies on “various taxation and customs issues.” CEO argues that it is “absurd that the question of possible conflict of interest does not appear to arise in such cases” and challenges the EU’s outsourcing tax expertise to tax avoidance enablers.

The report also criticises the Big Four’s involvement with lobby vehicles such as the European Business Initiative for Taxation, the European Contact Group, Accountancy Europe, and AmCham EU.

CEO said Accountancy Europe ¬– which spent €2.2m lobbying the EU in 2016 – has a board that is “full of Big Four figures”.

The organisation also expresses concern over the Big Four’s involvement with the Commission's advisory groups, citing the Joint Transfer Pricing Forum and the Platform for Tax Good Governance as particularly problematic in terms of tax avoidance.

The report is also critical of what it calls a “normalised revolving door” between Big Four employees and EU and member state officials in terms of roles. The report gives the example of the Director of Tax Policy becoming a Tax Manager at Deloitte after 30 years at DG TAXUD, and numerous officers at DG TAXUD starting their careers at Deloitte.

The report stated: “The idea that a constant swapping of personnel between private mega-firms that actively engage in selling tax avoidance structures and the institutions responsible for tackling tax avoidance might breed conflicts of interest just doesn’t seem to be recognised.”

CEO concluded: “It is time to kick the Big Four and other players in the tax avoidance industry out of EU anti-tax avoidance policy… Only then can an effective framework emerge to ensure public-interest tax policy-making is protected from vested interests.”

 

By Eleanor Jerome 

Top Content

    The UK: uncertain waves rule Britannia

    he UK’s accountancy profession is currently in a period of much uncertainty. The Competition and Markets Authority (CMA) has released its review into the listed audit market which could cause the biggest shake-up the profession has seen in years, the Kingman Review has described the Financial Reporting Council (FRC) as not being fit for purpose and called for it to be replaced. All the while the country remains in a deadlock on Brexit negotiations.

    read more

    Views from the Eurozone

    With Brexit looming, populist governments gaining footholds in a number of countries and movements such as the Yellow Jacket protests in France, 2018 was anything but a quite year for the eurozone. Here leaders report to the IAB on their markets.

    read more

    Eastern promise and how to find it

    With China rising as a global power, Jonathan Minter spoke with ShineWing’s Zhang Ke and Marco Carlei at the World Congress of Accountants 2018 in Sydney, to discuss the cultural challenges that occur when Chinese networks look beyond their border, and the dividends available for those who overcome them.

    read more

    Spain: looking to widen demand

    As Spanish accounting professionals prepare for new audit regulations, the Paul Golden asks what they need to do individually and at firm level to maintain and increase demand for their services.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.