In the midst of government cuts in funding of social programmes due to ‘austerity measures’ there now seem to be deals on the table with major corporations which will cut taxes by billions of pounds. According to the NAO (National Audit Office), these corporate tax cuts are costing the UK severely during this time of financial crisis.
For example, PAC, the Public Accounts Committee states that an agreement has been reached between Vodafone and Goldman Sachs in which over £6 billion are being cut off taxes owed by Vodafone. They have ended a long dispute in which HMRC agreed to take £1.25 in taxes from bonuses, but in reality, PAC believes it should be closer to that £6 billion figure.
The issues which will come under the investigation of NAO are threefold. First, it will be sought to determine whether or not these ‘sweetheart deals,’ as they are being referred to are reasonable. Secondly, NAO will look at whether or not HMRC sought legal counsel before arranging the deals and thirdly, it has come into question as to whether or not HMRC actually followed protocol – their own stated procedures.
News is circulating that there are at least 10 of these large corporate deals in which HMRC settled for much less than was owed in taxes. However, two of the most prominent beneficiaries of these questionable tax deals remain to be Vodafone and Goldman Sachs. Amongst key issues which will be under scrutiny is the length of time these companies are being given to settle tax payments that are already believed to be only a fraction of what is truly owed.
Vodafone is on record as saying that the settlement was the end result of complex legislation and that the legal argument had been ongoing for the past 9 years. Even so, the soon to be released PAC and NAO reports will make clear what their exact issues are with HMRC and where they feel the agency has acted in a way contrary to their own policies.