Big Four accounting for influence

11 July 2018
We pay our taxes, so why don’t corporations? This new report shows how the four main accountant firms are embedded in EU policy-making on tax avoidance, and concludes that it is time to kick this industry out of EU anti-tax avoidance policy.

Billions of euros are lost each year due to corporate tax avoidance, depriving public budgets of much-needed funding.

The EU plays an increasing role in the creation of tax-avoidance related rules following numerous scandals, many of which have highlighted the role of tax advisers in designing and selling tax avoidance schemes to multinational corporations.

The Big Four accountancy firms – Deloitte, EY, KPMG, and PricewaterhouseCoopers (PWC) – are the goliaths of the tax planning world.

Given their role as key players in the tax avoidance industry it is remarkable that the EU and its member state governments consider them legitimate and neutral advisers in policy-making. They are omnipresent in the EU’s policy processes to tackle corporate tax avoidance (despite their vested interest) and work through several channels of influence:

  • Public procurement contracts: The Big Four receive tens of millions from the European Commission in public procurement contracts each year. The Commission’s tax directorate paid PWC, Deloitte, and EY €7 million in 2014 to carry out studies and analyses in “various tax and customs areas”. This means the enablers of major tax avoidance are paid for studies that inform the making of tax-avoidance related laws. 

  • Lobby groups: The Big Four have driving seats in various lobby associations trying to influence EU policy responses to tax avoidance.

  • Advisory groups: The Commission’s advisory groups have a history of tax avoidance industry being invited to give advice on how to stop tax avoidance.

  • Revolving door: The shared culture and assumptions between the Big Four and EU public officials working on tax-related policy are perpetuated by normalised revolving door between the two. Decision makers do not recognise that this constant staff-swap between firms that sell tax-avoidance, and the institutions responsible for tackling it, might breed conflicts of interests, and weaken the impetus for public interest regulation.

Time to kick the Big Four out of policy making on tax-avoidance?

Despite all the evidence - from tax scandals to parliamentary enquiries - of the role the Big Four play as intermediaries that facilitate and profit from corporate tax avoidance, they continue to be treated in policy-making circles as objective and legitimate partners.

In the report, Corporate Europe Observatory and the authors suggest that it is time to put an end to allowing the Big Four to take part in EU's tax policy:

It is time to kick the Big Four and other players in the tax avoidance industry out of EU anti tax avoidance policy. This must start with recognition of the conflict of interest in allowing tax intermediaries to advise on tackling tax avoidance. Only then can an effective framework emerge which ensures public-interest tax policy-making is protected from vested interests.

Read the full report:

Download the full report. The summary briefing is available in EnglishDeutschEspañol, and Français.

About CEO

Corporate Europe Observatory (CEO) is a research and campaign group working to expose and challenge the privileged access and influence enjoyed by corporations and their lobby groups in EU policy making.

The report is made with support from PSI European Branch - EPSU - European Federation of Public Service Unions.

 

Also see