Is HMRC cleaning up its dodgy dealings with Big Business?
As at 31 March 2011, the total tax HM Revenue & Customs was seeking to ‘resolve’ with big business was over £25 billion, some of which included disputes over outstanding tax.
Information about how the taxman, specifically the outgoing Permanent Secretary Dave Hartnett, made ‘sweetheart’ deals with multinationals like Vodafone and Goldman Sachs only came to light when details were leaked to the press, and the subsequent bad PR, and Ministerial enquiry led to an investigation by the Public Accounts Committee into the handling of tax disputes.
The report, which was published in December, was not desperately complimentary towards HMRC. The committee said “We have serious concerns about how the Department handled some cases involving large settlements, where governance arrangements were bypassed or overlooked until it was too late. In some cases the same officials negotiated and approved the settlements, which is clearly unacceptable…There needs to be proper separation between the negotiation of tax settlements and the authorization of such settlements. And the Department must address issues of accountability so that Parliament and the public can be satisfied that best value is secured.”
The report went on “The Department has made matters worse by trying to avoid scrutiny of these settlements and has consistently failed to give straight answers to our questions about specific cases, which has severely hampered our ability to hold it to account for the settlements reached.” Finally, the report said precisely what we were all thinking, “We have serious concerns that large companies are treated more favourably by the Department than other taxpayers… the Department must ensure it avoids any perception of undue leniency in its dealings with large companies and must be seen to treat every taxpayer equally before the law.”
The committee also referred to a ‘mistake’ of somewhere between £8m and £20m. And that’s only the one they found.
But it’s OK, HMRC is pulling its socks up and is now going to appoint an independent 'assurance commissioner' to oversee any tax settlements for more than £100 million reached with large companies. Currently, an expert tax commissioner decision is required for settlements of £250 million or more, but the new rules will refer any case above £100 million to a panel of three commissioners including the new assurance commissioner. HMRC said that this would "almost double" the number of settlement cases subject to extra scrutiny and that the new arrangements would “address the issues highlighted by the Public Accounts Committee in its report, in a way that is workable and cost-effective, without undermining the core tax principles of taxpayer confidentiality and effectiveness of collection.”
No mention there of fairness, but it’s OK, because HMRC said that the Commissioner will be responsible for "protecting the interests of taxpayers at large.” No, not just hefty taxpayers, every single one of us, which presumably includes every single multinational paying a good old whack into HMRC’s coffers. New research from accountancy firm PwC suggests that the UK’s top 100 companies by size contributed a substantial £67.7bn worth of tax in the year to 31 March 2011.
Shiny new Chief Executive of HMRC Lin Homer said,“the new Commissioner will be appointed as Second Permanent Secretary and will provide assurance that is entirely separate from HMRC’s day-to-day casework and customer engagement. This Commissioner will take the role of challenging whether any proposed settlement secured the correct amount of tax efficiently and that taxpayers had been treated even-handedly… If agreement cannot be reached there could be further negotiation or litigation.”
Exchequer Secretary to the Treasury David Gauke, confirmed that the new arrangements would ensure a "clearer separation" between HMRC officials who negotiated settlements and the commissioners who considered them. The report was particularly scathing of Dave Hartnett’s involvement in the Goldman Sachs case. The Treasury are now trying to tell us that Dave (or the new Dave Hartnett) won’t be able to ask himself whether he thinks a cosy deal is kosher.
Whether or not this will actually bring more scrutiny to these back rooms deals, or whether this is just lip service to (attempt to) fight the poor public opinion of HMRC remains to be seen. But I‘m not holding my breath.