Tag Archives: Margaret Hodge

Britain, Business, Economic, Finance, Government, Society

The Revenue must call multinationals to account…

TAX AVOIDANCE

The relationship between the Government’ Revenue Service and how big corporations are being advised on how best to avoid paying tax is often uncomfortably close. Suspicions are such, that no sooner have civil servants finished writing a new addition to the corporate tax laws, is then quickly followed by a recruitment drive by top accountancy firms to provide ideas on how to get round it. Tax avoidance measures are costing the Exchequer billions in unpaid taxes.

The belief that HM Revenue and Customs (HMRC) has too cosy a relationship with the big multinationals has gained new credence when, just last week, a Commons select committee suggested in its report that the tax authority seems to ‘lose its nerve’ when it comes to pursuing the biggest names in business.

The chairman of the House of Commons public accounts committee, Margaret Hodge MP, said:

…In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full.

Noticeably, one of the key findings of the committee’s report was that last year the department collected less tax in real terms than it managed to collect in 2011-12, despite its stated aim of cracking down on tax avoidance. For the average man and woman in the street, who are desperately struggling through the age of austerity, this is an extraordinary state of affairs. With public services being cut at a faster rate than ever before, most people will surely find it astonishing that the corporate world is getting an easier ride than before.

There is, however, an indifferent logic behind the tendency of HMRC to strike deals that seem advantageous to the big firms. Multinational corporations hire very expensive lawyers, who invariably find a way round most of the complex tax rules. At some point, the HMRC calculation seems to be that it would rather cut its losses and do a deal than prolong the agony for an uncertain gain at some indeterminate point in the future.

That is the logic, but it is morally indefensible – especially when the tax authorities show no such leniency when it comes to wringing every last penny from the minnows of British business. Little compunction from HMRC often forces small firms to the wall, even if they are struggling to pay their VAT on time.  These small and medium sized firms (SMEs) put up less of a fight, which is why they are pursued so ruthlessly.

Taxation has to be seen to be fair. For that to be the case, the UK system needs to meet two standards. First, it is imperative we introduce new laws that massively reduce the scope for avoidance. There is a strong argument that the tax code is now too complex, and that this complexity has produced a multiplicity of loopholes that are being exploited. And secondly, HMRC needs to have the resources (and the will) to pursue multinationals as relentlessly as it pursues the country’s smaller firms.

Fairness demands that multinationals know their obligations and are obliged in meeting them.

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BBC, Government, National Audit Office

£369m severance payments at the BBC. A probe is possible…

NATIONAL AUDIT OFFICE REPORT

BBC executives who authorised severance payments amounting to £369 million to their own staff may be investigated by the police. The warning came from Conservative MP Rob Wilson who has written to the National Audit Office (NAO) and BBC director-general Lord Hall asking for full disclosure of the names of those responsible. Mr Wilson has promised to take evidence of fraud to the police.

MPs who sit on the influential Public Accounts Committee have called for ‘full accountability’ and castigated the ‘greedy and excessive payments’ paid by a ‘self-serving elite’ at the head of the BBC.

As corporation bosses insisted there was no need for a ‘witch-hunt’, pressure is growing on those responsible to face internal disciplinary action and to meet the full force of the law if any of the deals proved to be fraudulent.

In a report published this week, the NAO found pay-outs were made to 7,500 staff over eight years, including £61 million to 401 senior managers. The report states that the corporation had paid staff more than they were entitled to in almost a quarter of the cases it reviewed, putting ‘public trust at risk’.

It is understood that a £680,400 farewell payment was made to the BBC’s former chief operating officer and a £949,000 payment to another former senior executive.

Evidence will be taken next week before a special hearing of the Public Accounts Committee. Former director-general Mark Thompson, who is cited as being personally involved in several of the biggest deal payoffs, will not attend. Mr Thompson says he has a ‘diary commitment’.

Writing to the NAO’s head, Amyas Morse, Mr Wilson asked whether it had unearthed any evidence of fraud, collusion in fraud, misuse of public funds, or other wrongdoing in relation to severance payments at the BBC in recent years. Mr Wilson says, that, based on the reply received, he will consider whether there are grounds to refer the matter to the police.

The BBC’s newly appointed director of news and current affairs, James Harding, has claimed that licence fee payers did not want the corporation to be ‘apologetic’.

Mr Harding, a former editor of the Times, said:

… The BBC has rightly made its fair share of apologies over the past year. I, both as a licence-fee payer and a future employee don’t want an apologetic BBC, I want an ambitious BBC. You don’t want to be apologetic about the BBC, you want to be ambitious about the BBC, that’s the essential choice.

The BBC’s director of strategy and digital, James Purnell, is the only member of the corporation’s executive committee to have given an interview on severance payments since the NAO report was published.

Mr Purnell, a former Labour minister, appeared on BBC2’s Newsnight programme on Monday evening, and has resisted calls to point the finger of blame at individuals responsible for agreeing the payments. He said:

… It was a collective decision. On things like this you can have a witch-hunt or you can learn from your mistakes and that is exactly what we are going to do.

But Conservative MP, Richard Bacon, who also sits on the public accounts committee said that unless (and until) people are named you will not get accountability. Mr Bacon added:

… At the top of the BBC there is a self-serving elite who just look after themselves. These payments were greedy and excessive.

The NAO report also revealed that the BBC still plans to make 15 further severance payments of more than £150,000, even though Lord Hall is on record as saying that such deals would be scrapped in April. Mr Purnell said it would be illegal to ‘unpick’ them because those involved had been sent letters setting out their severance terms.

Labour MP Margaret Hodge, who chairs the committee, urged Lord hall to scrap the deals. She says he needs to be very firm and should not be allowed to back down on these payments.

The NAO has stressed that it had not found any evidence of illegality during its investigation of severance deals to senior managers.

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Britain, G8, Google, Government, Politics

Google’s tax ploys criticised by MPs…

GOOGLE has been accused of ‘relying on deeply unconvincing arguments’ to avoid paying millions of pounds in British taxes.

The online search engine was described as ‘brazen’ for denying ‘clear evidence’ that it made millions from selling advertising in the UK, a powerful body of MPs found.

Last year, Google paid just £7.3 million in corporation tax on sales of £3 billion. Tax analysts say the figure should have been at least £200 million higher.

The shortfall deprives Her Majesty’s Revenue and Customs (HMRC) of money to fund public services, leaving ordinary taxpayers in Britain to make up the difference.

Matt Brittin, former Managing Director of Google in the UK and current Vice President of the company, last year told MPs all of its sales were made from its European HQ in Dublin, and its British subsidiary was merely a ‘service company’. This allows it to pay tax in Ireland, which has a corporation tax rate of just 12.5 per cent compared with Britain’s 23 per cent.

But Google was hauled back in front of MPs last month after fresh evidence emerged UK staff were involved in selling.

In its report published this week, the Public Accounts Committee found Google’s arrangements were ‘manifestly artificial’ and ‘have no purpose other than tax to enable it to avoid UK corporation tax’.

Margaret Hodge MP, who chairs the committee, said:

… Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful… This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK-based staff are engaged in selling.

She previously said that, contrary to its corporate motto, Google ‘does do evil’ by avoiding taxes in the UK.

Her comments come ahead of the G8 meeting next week hosted by Britain, where global leaders will come under pressure to crack down on tax havens and tax dodging by multinational corporations.

Google openly admits using Bermuda to lower its global tax bill, and last year funnelled more than £6 billion into the offshore haven.

There were ‘clear discrepancies with the claims made to us by Mr Brittin in November 2012’, the report said. It found 70 per cent of Google’s sales involve UK staff as well as Irish workers, and its UK workers are largely paid by commission and have monthly sales targets.

Evidence also emerged of Google invoices sent out bearing British addresses, and Mr Brittin admitted ‘a lot of the aspects of selling’ did take place in the UK.

Mrs Hodge also criticised HMRC, saying:

… It is extraordinary that the department did not challenge Google over the complete mismatch between the company’s supposed structure and the substance of its activities. We could not understand how a few journalists, whistleblowers and MPs have uncovered what the department could not.

Google has said that it complies with all the tax rules in the UK, and it is politicians who make those rules. It added:

… It’s clear from this report the Public Accounts Committee wants to see international companies paying more tax where their customers are located, but that’s not how the rules operate today. We welcome the call to make the current system simpler and more transparent.

David Cameron, the British Prime Minister, said he would use the G8 summit to try to broker a deal on tax avoidance. Mr Cameron said that in a globalised world, no one country can on their own effectively stamp out either tax evasion or aggressive tax avoidance and this is exactly the sort of issue the leaders of the eight major economies should be addressing.

Conservative MP Stewart Jackson, who sits on the committee, said:

… The Government must look again at multilateral and bilateral tax protocols via the chairmanship of the G8, strengthen capacity at HMRC and look at simplified tax legislation as a matter of urgency.

Mr Jackson’s colleague, Steve Barclay MP, said there’s clear evidence Google is conducting sales operations and making astronomical profits in the UK – to suggest otherwise is plain fantasy.

A statement from the Treasury has said that the Government remains committed to creating the most competitive corporate tax system in the G20, but says this goes hand in hand with our call for strong international standards to make sure global companies, like everyone else, pay the taxes they owe.

HMRC says that, since 2010, it has collected over £23 billion in extra tax through challenging large businesses’ tax arrangements. It insists it will relentlessly pursue businesses that don’t play by the rules.

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