No more cuts needed - IF we tax fairly

[breadandbutterfly]

www.guardian.co.uk/politics/2011/dec/20/inland-revenue-sweetheart-tax-deals

HMRC hid 'sweetheart' tax deals for big business, MPs say

HMRC accused of lacking fairness and transparency over corporate tax settlements 'kept from scrutiny'

"Hodge told BBC Radio 4's Today programme: "At a time when it's hugely important that we maximise the revenue that comes in, when it's absolutely imperative that everybody is treated equally in front of the law, whoever they are, however big or small they are, I think it's very, very important that the public are satisfied that there's equity here, and that HMRC are working on our behalf to maximise revenue that ought to come in to the Treasury."

The MPs found that owing to a "mistake", admitted by HMRC, Goldman paid up to £20m less tax than had been due on its bonus payments. Vodafone settled a long dispute by paying £1.25bn, but the committee heard allegations that the tax bill should have been £6bn or more.

The committee hearings found that two undisclosed firms had struck similar deals, and suspect that there may be other questionable deals among £25bn of outstanding unresolved tax bills. "

CinnabarRed's post isn't that old!

I'll see if she still posts under that name and PM to ask if there are new developments - that post (along with many others on that valuable and well informed thread) showed up a lot of what had been misreported in the press. And the actual tax law at the time of the actual events (which is what a lot of the post was based on) certainly hasn't changed.

However you term the sums in dispute, do not get side-tracked from the title. The sums in question are simply nowhere near enough to obviate the need for cuts.

Here is CinnabarRed's tax thread.

Hi all

Everything I previously posted about Vodafone still holds true. No facts have changed since I posted.

I'm very happy to answer any specific questions on Vodafone or any other tax matter, that you care to put to me, whether on this or on my thread.

Goldman Sachs, BTW, was a god almighty fuck up from HMRC and has caused Revenue officials acute embarrassment.

HTH.

"And who becomes the moral arbiter of what is/is not hard work? You? Me? Surely it's the government whom we elect to make decisions like that on our behalf. And how do they do that? Well they change the law........"

i can't believe posters still try to engage with MrNiceguy2 plus various alter egos. his arguments are so dim as to seem parody. his sole function on this forum is to exasperate and send fleeing rational minds in sheer horror at his numptyness. only way is to ignore him but it's car crash MNting in a way.

(cue post re. hurling insults and all other barrel scraping tactics)

There's only a limit per year though MrsM and it's a much higher limit for a stocks & shares ISA. The principle though is I'm legally avoiding tax. And my point is that if that's fine because it's legal then it's hard to then say someone else doing something equally legal is somehow wrong.

I think the problem is that most people don't realise that the government IS acting in the interests of all by making cuts now. Most sensible people realise that we cannot continue borrowing. Only a fool would think the answer to a debt crisis is to borrow more money.

So it's a choice of cutting now where the UK government decide and at a pace of it's own choosing. Or we continue to stick our head in the sands until no-one wants to lend to us anymore or only at a rate so high it's unpalatable and then we are forced to make much deeper cuts at a pace not of our own choosing.

There isn't a cut proposed which is universally agreed. Whether we cut defence, libraries, school buses, NHS, pensions, benefits....whatever. Someone will always disagree. If you can think of a cut which noone will object to, we're all ears.

I find that tax avoidance is one of those irregular verbs we find so often in English:

• I plan sensibly to reduce my taxes
• You follow the letter of the law when calculating your tax bill
• He avoids tax

-They are morally bankrupt

Where you draw the line is absolutely in the eye of the beholder.

CinnabarRed - I really like that post!

(Plans to nick and re-use it!)

V amusing, CinnabarRed.

But that doesn't mean that 'they' never are morally bankrupt or that 'he' doesn't avoid tax.

+1 @ Cinnabar's post.

No, OP, you're right, it doesn't. All it does is show that different people have different moral standards when it comes to subjective opinions.

My personal view is that the rule of law is even more important in tax than other areas because it is so complex and difficult to understand, even for professionals. Parliament makes the law, HMRC administers the law and the courts interpret the law. Over the past 5 years the courts have gone out of their way to overturn tax avoidance schemes if they possibly can, which I find deeply encouraging.

FWIW, my line in the sand is when a taxpayer includes an "artificial" or non-commercial step in their affairs with a view to reduce tax. Which is why I have a real issue with Goldman Sachs, but far less of an issue with Vodafone.

(Edith - I used that joke in this year's Hardman lecture to the ICAEW, which I didn't deliver but did write the first draft. So feel free to use whenever you like!)

Cinnabar. What happened then with Goldman Sachs? From the sounds of the stuff I've read, it was a cock up on the part of HMRC rather than any premeditated tax avoidance. Is that not the case?

Niceguy Goldmans was as cinnabar says a more contrived scheme and hmrc went against previous practice on settling such cases.

Details here -limk

I think there was a concession on interest if you disclosed and paid tax on such schemes . As I understand it goldmans didn't go for this deal yet still got off on laying interest owed.

Yup, Gigondas has it spot on. An entirely contrived NIC avoidance scheme, quite clearly contrary to parliamentary intent and which Goldman tried to bluster their way out of.

One point that I really want to emphasis is that there are often times, particularly in corporate tax, when it's genuinely unclear how a particular situation should be taxed. I've been involved in cases where neither HMRC nor the company has been able to find a suitable "strict" interpretation of the law. As it happens, the taxpayer and HMRC have been able to come to reasonable compromises through negotiation.

Let me give you an example. The taxpayer in question was a pharmaceutical group and had racked up enormous losses - several hundred million pounds - developing potential drugs. In fact, the group was made up of the original R&D company and three more that it had bought over the years to access different ideas/patents/technology that it needed for its research. All four R&D companies had made large losses which they were carrying forward.

The group was about to start selling its very first product after almost 20 years of development. The question was: how should the brought forward losses be offset against the profits the group was about to start making? The law, strictly interpreted, would have stopped the group being able to use the losses in the three acquired companies, even though all three had contributed vital ideas to the end product.

We all (HMRC and taxpayer) agreed that the law which denied the losses wasn't intended to catch the group's situation. We also all agreed that it wouldn't be fair for the group to access all the losses in one go because it was, at the end of the day, arguably within the scope of the unfair legislation (only unfair in this situation BTW - perfectly reasonable to prevent tax avoidance).

So we agreed that the losses would be spread over several years. The group was able to use them all over time, but paid some tax each year because its profits were larger than the losses it was allowed to utilise in any given year.

Personally, I think that's a good outcome all round. Mature, sensible, professional.

I have to say that in my view the issue isn't that HMRC is too close to large corporates - I think the relationship between the two is generally appropriate and HMRC generally assign their most intelligent staff to large corporates. I think that the issue is that the service given to small taxpayer is often piss poor and belligerent. I want to see the quality of the relationships with large corporates replicated across all taxpayers.

Thanks for the explanations. Like I said earlier, i read that the GS thing was more a cock up than a contrived situation. That does change my opinion for that situation but in the overall scheme of things I still think HMRC does a good job in hard circumstances. It collects a lot of money but it obviously has room for improvement.

Nope. HMRC and HMT officials aren't allowed to accept any corporate hospitality, and if you know of people who have then they need reporting. Even accepting tea/coffee/biscuits/lunch at meetings and seminars has to be reported and recorded. I can say hand on heart that in more than 15 years working with HMRC I have never once seen a company offer, nor an official accept, gifts or entertaining in any shape or form.

Euurgghhaagh. Excuse me while I choke. CinnabarRed, whilst I'm sure what you say is true for the average HMRC staff member, it blatantly is not true for the top brass - a large part of the problem with Dave Hartnett was not just that he had made some extremely dubious decisions re the tax liabilities of several large companies, but that he had made these decisions after enjoying numerous lunches, dinners and other acts of 'hospitality' from these companies. Yes, they had been recorded, as per the regulations, but it's just incorrect to say they were never given and naive in the extreme, given what he went on to do, to suggest that these 'bribes' did not affect his judgement.

There is a reason he's had to resign.

He is resigning because of a number of errors made - I think it has been explained here or in CinnabarRed's other posts that the Vodaphone deal was the best HMRC could get, whilst the Goldman Sachs deal was a mistake.
Having worked for the Big 4 accountants, I can confirm the comment above about HMRC not accepting gifts. The hospitality, if you can call it that, listed here docs.google.com/spreadsheet/ccc?key=0AmtkahkxhghNdFU0TkZHZEJLLXZfTGZLQVh0UzFVTVE&hl=en_GB#gid=5 which David Harnett enjoyed would be mainly sandwiches or cheap in-house catering at an office, whilst in a meeting or at a talk/presentation.
His job includes talking to tax professionals and big businesses and eating whilst there makes sense.
from experience, these dos would not affect anyones judgement, they are not any good.

MrsMicawber - I hope you have reported the incident.

Agreed. MrsM, if not too late then please report the incident.

I've been at any number of lunches also attended by senior HMRC and HMT officials. Including Hartnett, Melanie Dawes, Freada Challoner, Michael Foot, etc. Not one was anything grander than sandwiches, hot savoury pastries, and fruit in-house. None included alcohol of any description. All were in the context of either working lunches or breaks during seminars.

If that constitute bribery then HMRC officials are incredibly cheap! Corporate entertaining of clients is exactly as you describe - lavish lunches in posh restaurants, Wimbledon, the opera. But HMRC/HMT just don't get invited or attend such events.

Criticise Hartnett's decisions by all means, but it's not fair or accurate to say he's been bribed.

I am 100% sure that the bribes Hartnett received were more of the Wimbledon tickets order than the soggy sandwiches order; will refer to my old Private Eyes when I have time to find specific details.

Of course I agree that soggy sandwiches is as much as run-of-the-mill civil servants receive; but the ones making these decisions that cost the taxpayers millions or billions do not fall into that category.