LONDON — Goldman Sachs, Vodafone and other big businesses were treated too favorably by British tax officials, potentially costing the nation billions of pounds of revenue as a result, according to a government report released on Tuesday.
The report did not say how much the deals — often struck at expensive restaurants — cost the government. But the government said there were 2,700 unresolved cases with big companies, with potential tax of £25 billion ($39 billion) as of March 31.
The finding comes at a time when spending cuts and tax increases are squeezing households as part of a government austerity plan to reduce the national budget deficit.
Partly based on information from a whistle-blower at Goldman Sachs, the report paints a damning picture of tax officers who attend lunches and dinners with company officials while negotiating tax deals. One senior tax official had as many as 107 such meals in two years, according to the report.
“The department’s working practices must be seen by the taxpaying public to be absolutely impartial,” Margaret Hodge, a member of Parliament and the chairwoman of the committee of public accounts, said in a statement. “The impression being given at the moment is quite the opposite, of far too cozy a relationship between Her Majesty’s Revenue and Customs and large companies.”
The tax office rejected the conclusion of the report, saying it was “based on partial information, inaccurate opinion and some misunderstanding of facts.”
The report did not identify any companies, but Mrs. Hodge mentioned two names in a BBC interview on Tuesday that had been previously cited in newspaper reports: Goldman Sachs and the British telecommunications giant Vodafone.
Vodafone called the allegations “unjust, unwarranted and based on gross untruths.” Goldman Sachs declined to comment.
Some economists have said corporate tax revenue is already expected to shrink in the coming years as company earnings decline with the weak economy, making it harder for the government to plug the deficit hole. Prime Minister David Cameron’s government had pledged earlier this year to be more aggressive in going after individuals evading taxes.
The report also pointed to tax officers’ lack of accountability to taxpayers, Parliament or anyone else. It said the deals with companies were made behind closed doors and without public scrutiny.
“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,” Mrs. Hodge said, criticizing the tax office for failing to cooperate fully with the committee investigation.
“On the Goldman Sachs deal we had minutes of a meeting held in H.M.R.C. where the chief lawyer called the deal unconscionable,” Mrs. Hodge told BBC Radio 4, referring to the tax office’s own lawyer.
The report singled out David Hartnett, the permanent secretary for tax, for favoring corporate taxpayers in his negotiations and overseeing a mistake in calculating the amount of interest owed on late tax payments. Mr. Hartnett announced this year that he planned to retire in 2012.
Mr. Hartnett admitted to a Parliamentary committee in September that tax officials had failed to follow correct procedures when agreeing to two major tax deals, but he did not provide any names. Newspapers have reported that the errors involved Vodafone, which paid £1.25 billion to settle a tax dispute, and to Goldman Sachs.
Mrs. Hodge called for changes in the way tax officials deal with corporate taxpayers, including managing their relationships with large companies better to “avoid the perception of conflicts of interest.”
“What we’ve uncovered,” she said, “was really a very uncomfortable state of affairs.”
Article source: http://feeds.nytimes.com/click.phdo?i=ad7b0660baf47a9295427c7f2591bd2f