At a time when the issue of black money is hogging headlines in India, the International Consortium of Investigative Journalists (ICIJ) on Thursday came out with an exposé on how the world’s biggest four consulting firms help the corporates siphon money to tax havens to evade taxes. The ICIJ, which accessed email conversations and sensitive Government records of tax havens, exposed how PwC, KPMG, Ernst & Young and Deloitte helped their various clients in moving out the money to several tax havens.
In the expose, ICIJ said, “For more than a decade, tax gurus at PricewaterhouseCoopers (PwC) helped Caterpillar Inc., the US heavy equipment maker, move profits produced by its lucrative spare-parts business from the US to a tiny subsidiary in Switzerland.” The investigative journalists’ organisation had accessed emails between Thomas F. Quinn, partner of PwC and Caterpillar’s top executives and found out shuffling of eight billion dollars’ transfer from US to Swiss.
“Thomas F. Quinn, a PricewaterhouseCoopers partner who helped design the tax-savings plan, wrote a PwC colleague that if they wanted to keep the strategy alive, they needed to “create a story” that “put some distance” between the managers and the spare-parts business. “Get ready to do some dancing,” Quinn said. The colleague, managing director Steven Williams, replied: “What the heck. We’ll all be retired when this … comes up on audit. … Baby boomers have their fun, and leave it to the kids to pay for it,” – said the ICIJ report exposing PwC.
ICIJ said in Luxembourg (a tax haven), internal company documents reviewed by them show, “PwC helped Pepsi, IKEA and other corporate giants from around the world embrace inventive profit-shifting strategies that allowed them to collectively slash their tax bills by billions of dollars.”
“In the US, authorities charged, KPMG peddled offshore tax shelters that created billions of dollars in fake losses for rich clients, then misled the Internal Revenue Service about how the shelters worked. In Dubai, anti-corruption advocates claim, Ernst & Young helped the Middle East’s largest gold refiner obscure practices that may violate international standards aimed at combatting trafficking in “conflict gold,” which comes from regions where competition for the mineral breeds bloodshed.
“In New York, authorities charged, Deloitte helped a British bank violate sanctions against Iran, submitting a “watered-down” report to regulators that omitted information about how the bank might be evading money-laundering controls,” said the ICIJ’s expose on the Big 4 consulting firms in the World.
Terming these Big 4 consulting and accounting firms as “architects of offshore money maze”, ICIJ said in its detailed report that these companies operate 81 offices in tax havens across the world. Deloitte employs around 150 people alone in the tiny English Channel islands of Jersey and Guernsey.
Confidential documents obtained by the ICIJ exposed that the Big 4 firms had a close relationship with Portcullis TrustNet, a Singapore-based offshore services firm that sets up hard-to-trace offshore companies for clients around the world. “PwC, for example, helped incorporate more than 400 offshore entities through TrustNet for clients from mainland China, Hong Kong and Taiwan, the records show.,” said ICIJ.
In June 2013, ICIJ had exposed 10,000 illicit bank account holders in British Virgin Islands and Singapore. The names of as many as 500 Indians figured in it. However, Indian agencies have not yet acted on this expose, though the list clearly mentioned names with addresses in India and accounts in foreign banks.
The Special Investigation Team (SIT) on black money trail is still seized with data provided by German and France authorities in 2011. In the 2G scam investigations, the Enforcement Directorate has sent LoRs to several tax havens including Singapore, Switzerland, Mauritius, Cayman Islands and Malaysia in search of money trails.