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April 13, 2016

Tax avoidance disqualifies Big Four firms from bidding for international development contracts: Diane Abbott

The UK Shadow Secretary of State for International Development, Diane Abbott, told the BBC Radio 4’s Today programme that a Department for International Development (DfID) under her leadership would not grant the Big Four firms consultancy contracts due to their involvement "in facilitating tax avoidance on an industrial scale".

According to Abbott a Labour DfID would stop using the services of the Big Four accountancy firms to deliver aid projects if they or their clients continue to use "tax havens at the direct expense of the world’s poorest nations", the BBC reported.

Abbot said all of them, KPMG, PwC, Deloitte and EY, have offices in the British Virgin Islands, a British overseas territory at the centre of the tax avoidance industry.

"It cannot be right that at the same time that they are making millions out of facilitating tax avoidance, which it doesn’t just deprive the British exchequer but a lot of countries [of tax revenues], they are also making millions out of contracts from international development. I would, obviously within the framework of the law, seek to stop that from happening," Abbott said.

Asked what impact that would have as a different set of advisers could instead be hired to advice on how to shield money in the British Virgin Islands or elsewhere, she said:

"The UK is at the epicentre of the tax avoidance industry and we need to bear down on it in a number of different ways. Transparency is absolutely key.

"But I believe the opprobrium that could fall on the Big Four, which up to now have avoided a lot of scrutiny in their role in tax avoidance, might encourage them to improve their ways."

The BBC presenter reminded Abbot that when Ed Miliband was the leader of the Labour Party, Big Four firms provided donations in kind in the form of secondments to shadow cabinet ministers.

"You would say, I assume, to your colleagues in the shadow cabinet: don’t take money from the Big Four, don’t give them contracts," he asked.

Abbot answered: "No, I’m not talking about individuals taking money. I’m talking about millions of pounds being given to them [the Big Four] by Dfid.

In response to Abbott’s comment, a DfID spokesperson said:

"The UK’s Aid Strategy is focused on ending extreme poverty, including by tackling corruption so poor countries can build proper tax systems and robust institutions and stand on their own two feet. DFID is one of the most transparent donors in the world according to a new report out today [13 April], and we encourage others to follow our lead.

"To help millions of the world’s poorest people in some of the most dangerous places, DFID quite rightly works with a wide variety of partners, from charities to specialist private sector contractors.

"We radically overhauled our approach to using contractors in 2012, including bringing in a tough new code of conduct – this has already saved taxpayers more than £500 million."

Update: This article was modified on 15 April to include the response of DfID.

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