Why double standards by HM Revenue and Customs mean you pay more
The taxman is accused of double standards on Tuesday by treating ordinary workers and small firms less favourably than large companies.Photo: AFP
HM Revenue and Customs have failed to collect more than £25 billion in “unresolved tax bills” from major firms — the equivalent of £1,000 for every British family — a committee of MPs claims.
The revenue has recently sought to raise hundreds of millions of pounds in extra revenues by cracking down on tax avoidance by workers. Penalties for those submitting self-assessment tax forms late are being increased and professional workers are being aggressively targeted by tax inspectors.
Last year 1.4 million people were sent backdated tax demands totalling almost £4 billion after problems with the PAYE system.
Yet at the same time, the parliamentary public accounts committee says revenue executives have become “unduly cosy” with larger firms and have tried to hide from public scrutiny details of a series of secret deals with companies.
The disclosure that ordinary workers may suffer from a less forgiving tax regime than large corporations at a time of economic hardship will anger voters and embarrass the Coalition, which has pledged to raise billions of pounds more by clamping down on avoidance schemes.
Margaret Hodge, the former Labour minister who chairs the committee, said: “This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations. We uncovered both specific and systemic failures which must be addressed.
“There is more than £25 billion outstanding in unresolved tax bills and it is essential there should be proper accountability to Parliament for the settlements reached.
“Parliament and the public have legitimate concerns that large companies are being treated more favourably than ordinary taxpayers.
“The department’s working practices must be seen by the taxpaying public to be absolutely impartial. The impression being given at the moment is quite the opposite, of far too cosy a relationship between HMRC and large companies.”
Richard Bacon, a Tory MP on the public accounts committee, said it appeared that the revenue took “a softer approach to powerful firms while being tougher on small businesses. “Whether accurate or not, this notion is toxic for HMRC’s relationship with the vast majority of taxpayers,” he said.
HMRC officials summoned to appear before the committee refused to give details of deals agreed with large firms, including Vodafone and Goldman Sachs. Instead the committee had to rely on allegations from a whistle-blower, the HMRC lawyer Osita Mba.
In some of the most damning comments made by MPs against serving public officials, concerns are raised that “many millions of pounds may be lost to the public purse”.
Mrs Hodge said: “It is extremely disappointing that senior HMRC officials were not prepared to co-operate with our inquiry.
“It is absurd that we had to rely on the media and the actions of a whistle-blower to find out about the details of individual settlements.”
The committee also criticises governance arrangements at the revenue with the same officials responsible for negotiating and approving deals with major companies.
The report warns that the revenue may be ill-equipped to deal with changes to child benefit which will strip millions of higher-rate taxpayers of the perk from next year.
The changes to child benefit, announced by George Osborne last year, will be administered by HMRC from 2013 but could lead to families’ financial affairs being mishandled.
HMRC executives are likely to come under intense pressure after publication of the reports.
The National Audit Office has now appointed a former judge to investigate the allegations. Dave Hartnett recently announced he will retire as HMRC Permanent Secretary for Tax in the summer, after admitting an error led him to sign off on a tax avoidance dispute. Goldman Sachs, the investment bank, did not have to pay a multi-million pound interest bill on unpaid tax on bonuses after Mr Hartnett was wrongly advised there was a “legal impediment” to collecting it.
The potential cost to the taxpayer is officially put at £8 million but Mr Mba said the sum could be up to £20 million.
MPs also suspect that the revenue struck a “sweetheart” deal with Vodafone, saving the mobile phone company billions of pounds in tax.
Noting that Mr Hartnett alone had enjoyed 107 dinners and lunches with companies, tax lawyers and advisers over two years, the MPs raised concerns that relations could seem “unduly cosy”.
HMRC rejected the committee’s conclusions. “The report is based on partial information, inaccurate opinion and some misunderstanding of facts,” a spokesman said.
“Senior HMRC officials sought to be co-operative by providing as much information as possible within the legal constraints of taxpayer confidentiality.”
David Gauke, a Treasury minister, said the Government had “full confidence” in HMRC.
Monday, 19 December 2011
Why double standards by HM Revenue and Customs mean you pay more - Telegraph