HMRC And Vodafone

Dame Lesley Strathie was a career civil servant (since 1971). She died in 2012. As CEO an annual salary of £175,000 applied (£30,000 greater than a prime minister's official salary). Strathie was appointed permanent secretary and chief executive of HMRC in November 2008. One predecessor had left in 2007 with a pay-off worth £2.3m. This after HMRC had lost discs containing the personal details of 25 million people. The Data Protection Act 1998 imposes legal obligations to protect information. The Commons Treasury committee had already criticised the performance of the organisation when staff morale was low, but even so, Strathie was named a dame in the Queen's Birthday Honours (2010).

Attempting to defend the position:

“In any commercial business you will decide which customers

you want to acquire and which customers you want

to divest yourself of. We serve everybody.

We don't have a choice about who we serve.”

HMRC is not a commercial business

DA

This does state that as a public servant she wished she didn't have to serve the public and appeared to suggest she would cheerfully drop people and not bother with them if they act in a way that gives the Inland Revenue the slightest trouble. So, accusations of astonishing arrogance. Questioned by MPs about business tax arrangements, Strathie insisted that 'no mistakes' had been made by her staff. If 'no mistakes' had been made then this suggests everything must have been deliberate.

Tax chiefs admitted to the Treasury Select Committee that almost twenty four million individuals could have had their tax liabilities miscalculated over recent years. Six million were expected to get letters demanding an average of £1400 or offering a refund by cheque regarding identified errors in PAYE accounts (so it could never get to a tax haven. How many BIG 'earners' actually pay tax directly, if at all? - DA). The rest (17.9 million) were 'unresolved' dating back to 2005. They should be dealt with by 2012.  Tax demands for underpayment are expected, but demands in excess of £2000 will not have interest applied. But just to muddy the waters: “only those who will not engage with us will be charged interest”. According to the current chief taxman (Dave Hartnett) only those owing £300 or less would have their bills waived. This applies to 900,000 taxpayers. The apparent “cost” the Exchequer: £160m. Of course, it costs the government nothing and is just revenue that escapes capture. It seems that the majority must pay interest (the average is £1400). While 1.4 million will have to pay an extra £1400 (£1.96bn in), 4.5 million will get refunds of an average £400 (£1.8bn out). The difference is just £160m.

Averages are very misleading, 

like the average salary of £26,000

DA

Vodafone

Hartnett agreed to let Vodafone off a £6bn tax debt. The agreement between HMRC and Vodafone came after negotiations between (anonymous) revenue officers and John Connors (Vodafone head of tax). Until 2007, Connors was a senior official at HMRC where he worked closely with Hartnett. Tax avoidance was connected to profits from a subsidiary based in a tax haven. Taxable profits from a business operating in the UK somehow manages to move money to the tax haven before UK tax is applied. Written-off in full. And this after it emerged HMRC had undercharged 1.4 million Britons a total of nearly £2bn in tax and would be clawing it back. Hartnett was forced to give 'an apology' by Chancellor George Osborne. Presumably, like a Clegg apology.

Originally, Vodafone bought German engineering firm Mannesmann for 183bn euros (£112bn). Attempting to avoid paying UK taxes, it set up a subsidiary in Luxembourg (tax haven) where profits would be taxed at less than 1%. This broke anti-tax avoidance rules. Manipulating legal teams, the phone company paid £800,000 and a further £450,000 over 5 years. HMRC ruled that Vodafone would not have to pay tax on its Luxembourg subsidiary (tax haven) profits. Other tax avoidance games were apparently played by Vodafone. The 'unbelievable cave-in' by HMRC was deemed customer-confidential by HMRC.

The Public Accounts Committee considered claims (from a whistleblower) that an agreement to waive a potential tax bill of up to £7bn from Vodafone may have been outside the powers of HMRC. Chair Margaret Hodge, said that the main allegation is that senior officials at HMRC have acted ultra vires [beyond their powers]. In a dispute that dates back to 2000 when Vodafone acquired Mannesmann, Hartnett has been accused of letting Vodafone forgo a reported £6.75bn in tax. A senior HMRC official was asked by committee member Stephen Barclay:

“[The settlement] seems strange on a numbner of levels.

First it included the 2011 and the 2012 profit,

but given the settlement was reached in 2010,

I would welcome your thought on how they

knew what the profit would be in 2012?”

Answer: refused by virtue of legal privilege

Hartnett has avoided full scrutiny by also citing legal privilege. It also seems apparent that HMRC does not have the powers to include estimates of future earnings. The claim was made that HMRC officials had let-off the US bank (Goldman-Sachs) paying £20m, but instead pay just £10m. Hartnett admitted making mistakes while settling high-yield tax disputes with multinational companied.

This whole affair descends into dark intrigue

and is quite nauseating. But money clearly

talks the loudest and integrity and truth

both take a back seat in the shadows.

George Osborne it seems has no stomach to deal with BIG business issues that amount to £bns, yet forces cuts, cuts, cuts everywhere onto the 'average' (there's no such animal as average - DA) taxpayer in the UK. It amounts to systemic abuse of the small man. This nails Osborne's, Cameron's et al colours to the mast. No surprises here.