Tax Pays: HP Pays Ernst & Young Two Million To Testify

The issue of tax avoidance by corporations is a hot one. In the US and in the UK, legislators and pundits seeking "tax justice" have changed the discussion from one of tax breaks that stimulate "jobs and growth" to one of tax fairness to provide much needed funds for public works and public commitments in time of economic hardship.

In December 2012, I wrote in the UK publication Accountancy on the subject of offshore profit shifting by corporations such as Starbucks, Google, Amazon, and other US multinationals. The UK is mad as hell and not going to take it anymore. It seems US multinationals move profits out of the UK via circuitous supply chain routes leaving no profits, no tax liability and, therefore, no tax revenue there, for all their hoopla here about success abroad.

Shifting

Multinationals are under increasing scrutiny for income shifting and offshoring profits. Francine McKenna reports

US corporations with activities in relatively high tax UK avoid tax on profits by moving income to tax havens. Loopholes in the US tax code allow corporations to do this with impunity. Governments continue to prioritise a 'competitive tax environment for business' in the hope corporations will convert profits into economic growth and jobs. Tax justice and a fair spread of the deficit reduction burden have been ignored.

Multinationals headquartered in the US often reduce income taxes by shifting profits offshore. Profit shifting erodes the corporate tax base and reduces overall tax revenues. Lower revenues are squeezing governments all over the world trying to provide services during a prolonged period of economic uncertainty and high sovereign debt. There are now significant differences in the tax burden among corporate taxpayers and an overall unequal burden on all taxpayers in the US and in the UK.

Here's the PDF of that article from the December 2012 issue of Accountancy.

So it was quite a shock for me to learn that, when the debate landed in the US, HP paid Ernst & Young, probably the preeminent tax advisor of the Big Four accounting firms at least for US multinationals, for testimony before the Senate Subcommittee on Investigations in September.

Maybe it doesn't seem strange to you to see $2 million in "Other" fees to the auditor show up on the HP proxy. Maybe you weren't aware Ernst & Young is already being investigated by the SEC for independence violations related to tax lobbying. According to Reuters, Ernst & Young provided tax lobbying services to audit clients.

Read this article in its entirety at the re: The Auditors, a blog by Francine McKenna.

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