Magazine article Newsweek

Think Globally, Skip Tax Locally: Getting Accounting Firms to Change Their Ways Is like Trying to Get Teenagers to Clean Up Their Act in Return for the Keys to the Family Car

Magazine article Newsweek

Think Globally, Skip Tax Locally: Getting Accounting Firms to Change Their Ways Is like Trying to Get Teenagers to Clean Up Their Act in Return for the Keys to the Family Car

Article excerpt

Byline: Allan Sloan

Getting big accounting firms to change their willful ways is like trying to get teenagers to clean up their act in return for the keys to the family car. They'll promise anything but will revert to form at every opportunity. Just look at the much-ballyhooed proposals to "reform" accounting by separating auditing business from consulting. That's designed to remove temptation for firms to go easy on auditing clients in hope of attracting lucrative consulting work.

PricewaterhouseCoopers, one of the Final Four accounting firms, is doing just such a split. But don't cheer yet. Because PwC is splitting up in an antisocial way. It's pulling a maneuver reminiscent of companies like Stanley Works, which want to be considered American but also want to move offshore to avoid paying U.S. income taxes.

The new PwC Consulting will minimize--maybe even totally avoid--U.S. income taxes by swapping national identities at will. And get this. Even as the firm is adopting foreign nationalities of convenience, it has registered with the American government as a lobbyist on its own behalf to hustle consulting contracts with the Office of Homeland Security. You've got to love it. PwC Consulting doesn't want to pay taxes to Uncle Sam, but it's sure eager to take our tax money to help protect us from evildoers.

To be fair, PwC Consulting isn't any more tacky than its rival Accenture, the former Andersen Consulting, which is also based in Bermuda. Among its contracts: running the Internal Revenue Service Web site. We should probably be grateful the IRS site doesn't have a Bermudan tax-avoidance link.

PwC's setup is undoubtedly legal. But is it right? When the United States is at war and President Bush is invoking patriotism, is it right to set up in Bermuda for tax purposes while keeping your headquarters in the United States and benefiting from a society you've decided you don't want to pay taxes for?

Accenture says my take on its behavior is wrong, because the firm, created only recently, has never been a U.S.-based corporation. A spokeswoman says Accenture considers itself a worldwide company that's based in Bermuda for convenience. PwC Consulting says it can't talk to me about any of this because it's in the process of registering a stock offering with the Securities and Exchange Commission. So my analysis of PwC Consulting's strategy is based on its SEC filings, supplemented with background information. …

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