THE UK Government has been called on to take urgent action after MPs accused one of the UK's largest accountancy firms of promoting "tax avoidance on an industrial scale" to several multinational companies.

In a damning report, the Commons' influential Public Accounts Committee censured PriceWaterhouseCoopers(PwC), whose promotion of tax arrangements, it said, "based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme".

A political row over tax avoidance broke out between the Conservatives and Labour this week over hedge funds and donors but one Labour backbencher also hinted that Smythson, the luxury stationers for which Samantha Cameron, the Prime Minister's wife, acts as an adviser, had shifted its headquarters to Luxembourg to lessen its tax burden.

In a speech, Justin Welby, the Archbishop of Canterbury, touched on the subject, calling on firms to pay more tax in the countries where they made their profits.

The committee investigated tax avoidance following the leak of hundreds of documents last November, which appeared to show how PwC secured deals with Luxembourg tax authorities for 343 multinational companies between 2002 and 2010.

Margaret Hodge, its chairwoman, said: "PwC's activities represent nothing short of the promotion of tax avoidance on an industrial scale. The effect has been to reduce the amount of corporation tax that some multinational companies pay in the countries in which they make their profits."

The report explained that many of the companies which received advice from PwC - citing Amazon, Ikea, Burberry, Accenture, Coca-Cola and Vodafone - were household names and that at least 80 had UK headquarters.

"These deals appeared to contradict the evidence which PwC had given us in 2013," the report said.

"PwC had told us that it does not sell schemes but the Luxembourg leaks suggest that PwC had advised many multinational firms to adopt similar complex financial structures for the purpose of avoiding tax."

It called for the Government to take a more active role in regulating the tax industry "as it evidently cannot be trusted to regulate itself".

The committee said there were long-standing concerns about the way in which some multinational companies paid little corporation tax despite doing a large amount of business in the UK.

It said common features of deals arranged by PwC that it had investigated saw the companies all set up subsidiaries in Luxembourg where they were protected by advance tax rulings from the authorities.

Most of these used a complex system of intra-company loans from the Luxembourg subsidiaries to subsidiaries located elsewhere, the MPs said.

Interest on these loans was deductible against profits in other countries while the interest paid to Luxembourg was taxed at a very low rate as a result of the agreement negotiated with the tax authorities, the report said.

"The schemes thereby reduced the amount of corporation tax that multinational companies have to pay in the countries in which they are truly operating."

The report cited the example of Shire Pharmaceuticals, which, while it had external borrowings of £800m, made interest payments on intra-company loans worth $10bn(£6.5bn) to a company it had established in Luxembourg.

It said: "The effect is to shift profits from other countries, where tax rates are higher, to Luxembourg. The 'substance' of Shire's business in Luxembourg, used to justify these arrangements, consists of two people out of the 5600 staff the company employs globally.

"Neither PwC nor Shire could demonstrate that the company's presence in Luxembourg was designed to do anything other than avoid tax."

The report said Shire paid tax on just 0.0156 per cent of its profits to the Luxembourg tax authority.

Ms Hodge noted how many other major firms were named in the Luxembourg tax rulings published by the International Consortium of Investigative Journalists in November 2014 and MPs' concerns went beyond the behaviour of PwC and Shire alone.

"Unless HMRC takes urgent action, this irresponsible activity will go unchecked, causing harm to both the public finances and the reputations of the companies involved," she added.

PwC said in a statement: "We stand by the evidence we gave the Public Accounts Committee and disagree with its conclusions about the work we do.

"But we recognise we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.

"We agree the tax system is too complex, as governments compete for investment and tax revenues.

"We take our responsibility to build trust in the tax system seriously and will continue to support reform."