The Guardian, Rajeev Syal and Hélène Mulholland, Tuesday 20 December 2011
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| A protest outside a London shop over alleged unpaid taxes by Vodafone. Photograph: Jeff Blackler/Rex Features |
Related Articles:
- HMRC admits corporate tax deal errors
- UK Uncut targets Goldman Sachs's £10m tax
- Vodafone's tax case leaves a sour taste
- MPs to investigate corporate tax avoidance
Revenue and customs managers are facing demands for reform after MPs accused them of using "a veil of secrecy" to keep from scrutiny their "sweetheart" corporate tax deals worth billions.
A report by
the Commons public accounts committee says it has uncovered "specific and
systemic" failures in Britain's tax-gathering agency while investigating
deals with Vodafone and Goldman Sachs, which have attracted mass protests.
The
committee chair, Margaret Hodge, accused HM Revenue & Customs (HMRC) of
making a "policy decision" not to disclose information and using a
"veil of secrecy" by citing "taxpayer confidentiality",
which denied accountability to the public or parliament about whether deals
provided good value for money.
She said it
was "crazy" that the panel of MPs had been forced to rely on leaked
information from a whistleblower and the satirical magazine Private Eye.
Hodge told
BBC Radio 4's Today programme: "At a time when it's hugely important that
we maximise the revenue that comes in, when it's absolutely imperative that
everybody is treated equally in front of the law, whoever they are, however big
or small they are, I think it's very, very important that the public are
satisfied that there's equity here, and that HMRC are working on our behalf to
maximise revenue that ought to come in to the Treasury."
The MPs
found that owing to a "mistake", admitted by HMRC, Goldman paid up to
£20m less tax than had been due on its bonus payments. Vodafone settled a long
dispute by paying £1.25bn, but the committee heard allegations that the tax
bill should have been £6bn or more.
The
committee hearings found that two undisclosed firms had struck similar deals,
and suspect that there may be other questionable deals among £25bn of
outstanding unresolved tax bills.
Hodge said:
"You are left feeling that the sort of deals that are made with big
business are different – sweetheart deals in some instances – from the sort of
way in which corner shops are treated, small business are treated or
hard-working families are treated."
She also
drew on a report by the National Audit Office, which found HMRC had not stuck
to its own procedures in four "top value" cases by failing to provide
proper separation between those who made the deals on the public's behalf and
those who authorised them, who were "often the same guys".
Hodge also
pointed out the imbalance between big corporations' tax experts and the small
number of tax experts in HMRC, likening it to a "David and Goliath"
situation whereby big companies use very expensive advisers and lawyers while
HRMC "by their own admittance, have very few people who have deep
knowledge of tax affairs".
"First
of all it astounded us that only one of the four people who are so-called tax
commissioners – those are the top executives in HMRC – has knowledge of tax
affairs. So again it's your David and Goliath, you've got the companies
well-advised, HMRC not well-advised.
"And
the second thing to say is this is big money at stake – £25.5bn out there which
could be collected – everybody has an interest in that. And if you hide behind
secrecy, if you're not transparent, of course there are suspicions, which we
held, that there aren't fair deals made."
The
permanent secretary for tax, David Harnett, was found to have a "cosy
relationship" with many of the businesses with which he had to negotiate.
Hodge said
that HMRC must provide trust in the tax system.
"We
suddenly started uncovering what I feel is a very uncomfortable state of
affairs. And we must have confidence in our tax authorities, that they're
treating everybody equally in front of the law, and that they're doing their
utmost to bring the proper amount of money into the revenue for us to spend on
public services."
The
criticism brought a robust response from HMRC, saying it rejects some of the
report's conclusions, although it agreed transparency was needed.
The
report's publication will trigger a judge-led inquiry into corporate tax. Sir
Andrew Park will look at deals done with some five companies, seeing whether
HMRC complied with its legal advice and its internal guidelines.
The
170-page report says HMRC's refusal to provide information on corporate deals
had allowed tax officials to escape scrutiny while they wrote off up to £20m in
the Goldman Sachs case.
It reserves
some of its strongest criticisms for Hartnett and Anthony Inglese, the department's
chief lawyer, for having given evidence that MPs found "imprecise,
inconsistent and potentially misleading".
Hartnett
unexpectedly announced his impending retirement earlier this month. He did not
initially disclose to parliament his role in the Goldman Sachs deal, but later
admitted he "shook hands" on it.
The report
says that this, in conjunction with informal meetings with City corporations,
has given the perception that the department had "too cosy" a
relationship with big business.
The report
calls for reform so that negotiating teams are no longer permitted to sign off
deals they do with firms. The department has, since criticism by MPs, made some
changes, but these do not go far enough, the committee says.
The plight
of Osita Mba, the revenue solicitor-turned-whistleblower who first alerted the
National Audit Commission and two parliamentary committees to the Goldman Sachs
deal, has also been addressed by the committee; it urges the department not to
try to pursue him with the sack or prosecution.
Although
Hartnett has admitted mistakes have been made, he has denied
"misleading" any committees in evidence. Officials close to Inglese
said that he has also acted properly.
A spokesman
for HMRC said: "The report is based on partial information, inaccurate
opinion and some misunderstanding of facts.
"Senior
HMRC officials sought to be co-operative by providing as much information as
possible within the legal constraints of taxpayer confidentiality under which
they work.
"Taxpayer
confidentiality was a legal requirement, fundamental to tax administration in
the UK and across the world, while parliamentary scrutiny was delivered via the
National Audit Office, to whom HMRC provided unfettered access to all their
papers.
"HMRC's
internal processes are robust and this was confirmed by a recent review by the
National Audit Office of large business settlements," he added.
However,
the spokesman continued: "We agree public confidence in our processes is
important, and, as we have already informed the committee, we propose to make
further improvements to our governance and to increase transparency about our
work with large business."
The
minister in charge of the department moved to shore up confidence in Britain's
tax authority, but, significantly, did not comment specifically on the
recommendations made by the committee.
David
Gauke, exchequer secretary to the Treasury, said: "The government has full
confidence in HMRC and its current leadership. I welcome the fact that the
department is already taking steps to strengthen its governance further,
including the appointment of two new commissioners with tax and financial
expertise."
In a
separate move, the tax pressure group UK Uncut will issue legal proceedings in
the high court on Thursday against HMRC over the Goldman Sachs deal. It will
seek the disclosure of all internal documents related to the deal.
Related Article:
 |
Revenue
chief Dave Hartnett's role in the Goldman Sachs deal is
currently being
investigated by HMRC. Photograph: Sarah Lee
for the Guardian
|
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