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UK parliament panel to question banks' approach to tax and accounting

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The debate about the UK tax system will focus on the financial industry today with the first hearing by the panel on tax, audit and accounting, which was formed by the Parliamentary Commission on Banking Standards (PCBS) at the end of last year.

When it was set up, the panel set out a list of 20 questions it wanted respondents to address, covering topics such as alternatives to tax relief on debt and whether banks exploit regulatory and information arbitrage between the Financial Services Authority (FSA), HM Revenue & Customs (HMRC) and auditors, as well as how well International Financial Reporting Standards (IFRS) operate.

Critics of large taxpayers will be disappointed, however, if they expect the panel to come out with a report savaging how banks and other financial institutions conduct their tax and accounting affairs.

The panel’s role is not to draw conclusions but to gather evidence that will allow the PCBS to get through a large amount of work in a short period of time. The panel will report back to the PCBS, which will then decide if more work is required.

The four-person panel has experience from the highest levels of government. Lord Lawson, the lead member, is a former Chancellor of the Exchequer. He is joined by Lord McFall, who chaired the Treasury Select Committee for nine years when he was a member of parliament, Mark Garnier, a Conservative MP, and Pat McFadden, a Labour MP.

Two academics from the Oxford University Centre for Business Taxation, Michael Devereux and John Vella, will be first to give evidence at today’s hearing, before the panel hears the views of Stella Fearnley, professor in accounting at Bournemouth University, David Cairns of the University of Edinburgh Business School, whose expertise is in financial reporting, and Prem Sikka, of the Centre for Global Accountability at the University of Essex.

Evidence from Hans Hoogervoorst, chairman of the International Accounting Standards Board (IASB), and Sue Lloyd, the IASB’s senior director of technical activities, will end the session.

The PCBS was set up in July 2012 to examine the standards and culture of the UK banking sector in light of the competition and regulatory investigations into the manipulation of the Libor rate-setting process and to report on anything that could be learned about corporate governance, transparency and conflicts of interest, regulation and government policy.

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