Tuesday, 20 December 2011 10:25 AM
By Ian Dunt Follow @IanDunt
Allegations about tax avoidance in the highest echelons of the corporate world have been vindicated in a Commons report.
The public accounts committee (PAC) substantiated claims from UK Uncut, which campaigns against corporate tax avoidance, and suggested there are £25 billion of outstanding tax issues with big companies which Her Majesty's Revenue and Customs (HMRC) has failed to deal with.
"This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations," PAC chair Margaret Hodge said.
"We uncovered both specific and systemic failures which must be addressed."
The £25 billion bill alluded to in the report is bigger than the entire UK deficit in 2002 and only slightly below the £30 billion level in 2006.
The sum is equivalent to £1,000 for every British family or a cut of 6p from the basic rate of income tax.
Companies such as Vodafone have vociferously denied the figures about outstanding tax made by groups like UK Uncut, but the Commons committee used evidence from a whistleblower and a private eye to reach similar conclusions.
One deal which allegedly let Goldman Sachs off the hook for £20 million would not have been made public without the intervention of the whistleblower, MPs said.
"It is extremely disappointing that senior HMRC officials were not prepared to cooperate with our inquiry in a spirit of openness. We accept that there is a need for confidentiality to protect individual taxpayers, but this must not be used as a cloak to protect the department from scrutiny," Ms Hodge added.
"It is absurd that we had to rely on the media and the actions of a whistleblower to find out about the details of individual settlements."
There was widespread outrage at the report from across the political spectrum, with union leaders joining forces with right-wing pressure groups like the Taxpayers' Alliance to back the findings.
"This report will increase suspicions that big businesses are treated differently," said Emma Boon of the TaxPayers’ Alliance.
Len McCluskey, general secretary of the union Unite, said: "At last confirmation of what has been long said - that the government is too lax when it comes to collecting the money corporations owe this nation.
"Some £25 billion is being squandered because the government prefers to go easy on its friends in the City."
The report issued a startling attack on permanent secretary for tax Dave Hartnett, who is reported to have enjoyed 107 lunches with big firms' tax lawyers and advisers between 2007 and 2009.
In some of the most strongly worded criticisms of a civil servant seen in a Commons report, the committee accused him of breaching internal HMRC rules by authorising a large tax settlement he had been involved in, having "too cosy" a relationship to big companies and giving "imprecise, inconsistent and potentially misleading answers" to MPs.
The latter charge relates to committee hearings during October and November this year, when he tried to stonewall questioning from MPs in the course of their investigation.
Mr Hartnett, who is reported to be receiving a pension of somewhere between £75,000 and £80,000 a year when he stands down next year, was defended by HMRC, which attacked the MPs for questioning his integrity.
"The report is based on partial information, inaccurate opinion and some misunderstanding of facts," a spokesman said.
"The idea Dave Hartnett cuts a large tax bill in return for a glass of wine and a cheese sandwich is just plain nonsense.
"If he was interested in feathering his nest he would have accepted one of the many highly lucrative offers of work he regularly receives from the private sector."
The National Audit Office (NAO) is currently investigating the business settlements mentioned in the report.
MPs were particularly concerned at the imbalance of capital and skills between HMRC and the big City firms, with Ms Hodge comparing the relationship to "David and Goliath".
Big firms are able to afford expensive advisors, consultants and lawyers, while HMRC has few staff members with deep knowledge of tax affairs and stands to lose employees and funding as spending cuts bite in the new year.
The report will be treated as a significant vindication of UK Uncut, which has been at the forefront of several high profile direct action events over the last year.
Earlier this year, many of its members were arrested following an attempted occupation of Fortnum and Mason's. In a subsequent Commons debate home secretary Theresa May refused to distinguish between UK Uncut campaigners and the masked anarchists who caused property damage on the streets outside.
Chief secretary to the Treasury Danny Alexander told journalists at the Treasury this afternoon: "We need to make sure we have public confidence in the tax system. I believe that we do."
He said the coalition had worked to strengthen measures against tax evasion and avoidance, including spending on additional tax inspectors, adding: "All of those things serve to ensure we will raise more and more money from those who choose not to pay their fair share of taxes."