The+big+four


 * The Big Four **

The big four is a definition referred to the four biggest international accounting firms in the world. These are Pricewaterhouse-Coopers (PwC), Ernst & Young (E&Y), Deloitte Touche Tohmatsu and KPMG. These firms offer consulting in different fields of business such as tax, legal services, corporate finance and audit amongst others. This group of firms audits all the FTSE 100 companies in the UK and most other listed companies employ a big four firm. The Big Four are so influential that even governments use their expertise. to the Committee of Public Accounts (CPA) the big four firms have detailed knowledge of UK tax law through their work in advising government on changes to legislations. This in turn has led to the firms advising their clients about the loopholes in the new legislations. The big fours great influence on governments and legislations does not come without a cost and according to Reuters (2012) the big four firms combined spent 9,4 million dollars on in-house and outside lobbyists in the US in 2011. // Figure 1: the Big Four

** Accountancy firms **

Historically, the state guaranteed monopoly of external auditing has been the making of accountancy firms. In difference from other consultancy businesses, it gives them comparatively easy access to company executives and provides an opening to impress potential clients with zeal about meeting deadlines, attention to detail, the value of surveillance, judgement, control and related implications of cutting costs and inefficiencies. Accountancy firms have developed from just providing accounting and auditing services to provide tax avoidance schemes amongst other services. The commercialisation of accountancy firms is shaping and is shaped by broader changes in contemporary capitalism where traditional values are being increasingly eclipsed by search for higher earnings and financial rewards. Intense competition and pressures to increase earnings, leads to capitalist enterprises constantly seeking new ways of boosting earnings by developing complex structures and by rewarding advisers who can find novel ways of increasing earnings. The opportunities to sell other services as tax avoidance schemes, have fuelled the global growth and expansion of accountancy firms. Parallelling the expansion of multinational corporations, accountancy firms have forged networks and organisational presence in basically every major country and city.

** The role of accountancy firms in tax avoidance **

Accountancy firms have developed from providing only accounting and auditing services to selling other products and services as well. They have developed organisational structures and strategies to sell tax avoidance schemes to corporations and wealthy individuals. This shifts tax burdens to less mobile capital and less well-off citizens. Further it erodes the tax base and puts the firms into conflict with the state. This creates big losses in social investments, which can be directly measured in people being unable to secure the basic essentials of healthcare, education, transport, clean water, pensions among others. Tax avoidance also distorts fair competition in markets.

What some would call tax evasion, accountancy firms prefer the term tax planning. Tax avoidance schemes in itself is not a new phenomenon, but it accountancy firms develop new schemes all the time, which makes it hard for authorities to keep up with them.

There are several examples on how multinational companies manage to avoid taxes by schemes made up by accountancy firms. An example is the US-based energy company Enron which went bankrupt in 2001. Enron was involved in a large scale organised tax avoidance. According to the US Senate Joint Committee on taxation (2003) Enron operated through a global web of 3500 domestic and foreign subsidiaries and affiliates, including 441 registered in the Cayman Islands tax haven, which made it possible to avoid taxes. Enron’s tax avoidance schemes were designed by Arthur Andersen, Deloitte & Touche, Chase Manhattan, Deutsche Bank, Bankers trust and several major law firms.

Video of Margaret Hodge speaking about the services provided through KPMG:

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Video about how the big four companies are helping tax avoidance:

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