Tax isn’t taxing when you’re Goldman Sachs

Posted: December 21, 2011 in Uncategorized

by Alex Hern

The public accounts committee has released its report on the HMRC’s treatment of tax disputes, and it is damning of the revenue’s practices.


The stakes are high.

As the committee’s report points out:

At 31 March 2011, the Department was seeking to resolve over 2,700 issues with the biggest companies, including disputes over outstanding tax, with potential tax at stake of £25.5 billion.

The problem isn’t just the amount of potential tax take; it’s also the public’s concern that HMRC isn’t attempting to get that money in a fair and transparent way.

For instance, when the committee turned its attention to the Vodafone tax bill, which we’ve covered previously, it had grave concerns about the fact that the HMRC refused to answer its questions, citing “taxpayer confidentiality”.

Their report states:

• The General Counsel and Solicitor said he could not comment on whether lawyers had advised that £1.25 billion was the correct settlement amount or whether the settlement included interest.

• The Permanent Secretary for Tax chose not to answer questions on why the company had been given five years to settle its tax liability without being charged interest, despite this information being put in the public domain by the company itself.

An order of magnitude less, but the committee also had concerns about that failure of HMRC to charge Goldman Sachs interest on its unpaid tax bill:

The importance of following established governance procedures is well illustrated by the case which resulted in a loss of interest. The C&AG told us this resulted in a loss of up to £8 million, although evidence we subsequently received from a whistle-blower suggests it could be as high as £20 million. The Department has admitted that its failure to charge interest on the liability was a mistake.

Osito Mba, the whistleblower mentioned, provided the committee with Table 1, showing Goldman Sachs’s unpaid national insurance contributions and the interest accrued on them.

Table 1:
In the end, the £23 million was paid, but the £10.8 million wasn’t, in a negotiated settlement offered by HMRC to avoid litigation.

All of this reinforces the image that HMRC has one rule for the rich and another for everyone else. As we reported last year, the actual tax gap – when unpaid tax from small businesses and individuals is taken into account, as well as the biggest companies which the committee looked at – may be as high as £40 billion.

In addition, of this £40 billion, over £35 billion of it is attributable to non-error. In other words, deliberate tax evasion and avoidance. This figure is made all the more shocking, however, when it is compared to another type of cheat the government is cracking down on – welfare cheats, as illustrated by Chart 1.

Chart 1:

The amount paid to welfare recipients in excess of what they should be receiving is an eighth of the amount of tax underpaid, and the proportion of that £5 billion which is excessively paid on purpose is also much smaller.

The majority of benefit fraud is accidental, while the majority of tax evasion and avoidance is on purpose.

Despite this, as the committee reported:

The Permanent Secretary for Tax attended a significant number of informal meetings over lunch and dinner with large companies with whom HMRC was settling complex tax disputes, when formal HMRC minutes were not necessarily taken.

Compare this to the treatment of Sue Marsh, a disability campaigner who has written for this site in the past:

“I have severe crohn’s disease. Probably one of the most severe cases in the country. I have had 7 major life saving operations to remove over 30 obstructions (blockages) from my bowel.

“I take chemo-shots every two weeks that suppress my immune system, ensuring that I regularly have to fight infections. Exhaustion, pain and nausea plague every single day of my life.

“I have osteoprosis and malnutrition. I have had major seizures and a stroke.

“Nonetheless, I have just heard from my own Disability Living Allowance application, that it has been rejected. Completely. I will receive no support at all from DLA. Despite claiming successfully in the past, despite only getting weaker and more frail and less able to live independently, my reconsideration was rejected.”

The government is enacting increasingly inhumane measures to get back more and more of the small welfare pie, while ignoring the feast of revenue that a clampdown on tax evasion could bring in.

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