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Large companies set their own tax strategy, says Treasury minister

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Large corporate taxpayers – rather than tax advisers in the big law and accountancy firms – set their own tax strategy and appetite for ‘tax risk’, David Gauke has said in a Commons written answer.

The exchequer secretary was responding to a question from Andrew Rosindell, Conservative MP for Romford. MPs on the Commons public accounts committee, which is investigating tax avoidance, will question representatives of the big four accountancy firms on 31 January.

Rosindell asked the chancellor what assessment he had made of the role of accountancy firms and commercial law firms in ‘recent instances of aggressive tax avoidance by large corporations’.

Gauke replied: ‘The UK played a leading role in a 2008 OECD report into the role of tax advisers. The report acknowledged that intermediaries play a vital role in the tax system, helping taxpayers understand and comply with their tax obligations, but it also observed that some tax intermediaries act as promoters of aggressive tax planning. The key conclusion was that the large corporate taxpayer, not the tax intermediary, sets the overall strategy and appetite for tax risk, and decides whether or not to adopt particular tax planning opportunities.

‘HMRC recognises that this continues to be the case, and that tax advisers play an important role in supporting responsible tax planning …’

In January 2009 Tolley’s Practical Tax Newsletter reported that the OECD’s Forum on Tax Administration (FTA) recognised that the vast majority of tax advisers help their clients to avoid errors and deter them from engaging in unlawful or 'overly-aggressive' activities.

The FTA added that larger firms in particular were ‘more attuned to reputation risks’ in the light of an ‘increased public focus on professional integrity and attendant media publicity’.

The newsletter, published by Tax Journal’s publisher LexisNexis, noted that Paul Morton, head of group tax at Reed Elsevier – which owns LexisNexis – had said there may be a growing public awareness that companies make an important contribution to national revenue and that ‘some contribute more than others’.

Morton, writing in Tax Journal in October 2008, said: ‘This may lead a company to conclude that driving [a group's effective] tax rate down below a certain point could be counter-productive in the longer term.’