Anger in UK over £4.5bn corporate tax deals

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Opposition MPs in the UK have called for more transparency about tax settlements between big business and government after the publication of a leaked memo that reportedly said that four such deals had been settled for £4.5bn.

Such deals have garnered controversy in recent months, with Goldman Sachs’ own “sweetheart” deal with the tax authority set to be scrutinised in the High Court on Thursday this week.

Figures released on Tuesday showed it paid $144m in corporate tax last year to HM Revenue & Customs.

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The Guardian reported that a leaked memo sent by Dave Hartnett, the former head of HM Revenue & Customs to David Gauke, Treasury minister, in December 2011 said: “Settlements of above £1bn are now not uncommon and £4.5bn . . . has come from just four settlements with bespoke governance.” This figure is far greater than originally reported.
The size of the settlements indicates how much money is at stake. 

Margaret Hodge, the Labour MP and chairman of the public accounts committee, which has led the charge on tackling tax avoidance by large companies, called for more transparency around settlements.

She said: “We now know that four settlements alone were worth £4.5bn, which just shows what huge sums of money are involved. What we don’t know is how much was actually owed.”

A judge-led inquiry into the four deals concluded last year that the agreements resulted in a reasonable overall outcome for the exchequer but raised concerns over how they were struck. In three of the four big settlements there was no, or limited, separation between those negotiating and approving the settlements.

In its report on the inquiry, the National Audit Office put the value of the four settlements, and the one involving Goldman Sachs, at £3.6bn.

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The leaked memo came before a judicial review on Thursday that will scrutinise a “sweetheart deal” deal struck by HMRC with Goldman Sachs in which the investment bank settled a long running tax dispute with the tax authorities who had mistakenly let Goldman off paying between £6m and £20m of interest.

The review – brought by anti-austerity campaigners UK Uncut who were funded by thousands of small donations – would be highly embarrassing for HMRC and Goldman if the deal was proved to be unlawful.
Even if it is ruled to be unlawful, however, the deal will still stand after a ruling last year that it could not be overthrown.

More embarrassing details of Goldman’s tax affairs could emerge on Thursday, even of a crucial settlement meeting between HMRC and Goldman Sachs at the offices of the investment bank in November 2010 where David Hartnett, permanent secretary for tax, shook hands on a deal.

The hearing could also shed light on the relationship between HMRC and the National Audit Office. In a confidential email, seen by the FT, it is clear that senior HMRC officials discussed the case with the National Audit Office. In the email, Mr Harnett makes clear that the NAO’s Amyas Morse: “told me that he has made clear to the NAO that his expectation is that nothing of substance will be found in the review”.
It was whistleblower Osita Mba who triggered the leaks and allegations that sparked a parliamentary investigation into the affair. He was put on paid leave by the Revenue and has claimed protection under the Public Interest Disclosure Act.

Goldman Sachs sparked controversy this year when it considered delaying some staff bonuses until after April 6, so that staff could benefit from a fall in the top rate of income tax from 50 per cent to 45 per cent. It rowed back on the proposals after a public outcry.

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