LONDON BRIEFING:Taxpayers are likely to conclude that there is one rule for big firms and another for the rest, writes FIONA WALSH
TAX COLLECTORS don’t expect to be popular but at least in the past they’ve been able to enjoy a certain level of faceless anonymity as they prise our hard-earned cash from our hands.
Not so Dave Hartnett, permanent secretary for tax at Her Majesty’s Revenue & Customs (HMRC), and Britain’s top tax man. As Whitehall’s most wined and dined civil servant, Hartnett is pretty popular, at least with customs’ corporate clients, and he’s also well on the way to notoriety rather than anonymity.
Hartnett has presided over a series of tax blunders that have meant millions of people have been landed with unexpected bills for underpayment, while millions of others have received equally unexpected refunds. That incompetence alone was enough to spark calls for his head last year, as the tax demands landed on people’s doormats just before Christmas.
The £165,000-a-year (€190,000) civil servant appeared to have survived that particular difficulty but, following revelations over a “sweetheart” tax deal with Goldman Sachs, his position looks increasingly untenable.
Earlier this month it emerged that Hartnett had been behind a deal that allowed the US investment bank to escape as much as £10 million in tax on bankers’ bonuses. On top of that, he has been accused of misleading parliament over the extent of his involvement in the settlement with Goldman.
Under the deal with customs, and after a five-year legal wrangle, Goldman was allowed to avoid paying the interest due, estimated at some £10 million, on its £30 million tax bill for salaries and bonuses paid through an offshore company in the British Virgin Islands.
More than 20 other firms used similar tax avoidance schemes but, unlike Goldman, settled and paid interest on their debt when the loophole was closed.
Hartnett had told MPs on the treasury select committee in September that he did not deal with Goldman’s tax affairs. However, under hostile questioning earlier this month when he appeared before another Westminster committee, the Commons public accounts committee, he was repeatedly accused of being economical with the truth. Committee chairwoman Margaret Hodge quoted customs’ minutes, which said Hartnett had personally “shaken hands” on the Goldman settlement, something the civil servant said he did not recall.
He further infuriated the committee by refusing to divulge details of the sums involved in the arrangement, citing “taxpayer confidentiality”.
To many MPs, though, the Goldman deal is simply the last straw. Hartnett has presided over several other controversial settlements with large corporates, notably Vodafone, which was allowed to pay little more than £1 billion of a £7 billion tax bill related to its takeover of the German firm Mannesmann.
Hartnett’s status as the most wined and dined mandarin is not just Whitehall gossip, but is based on the results of freedom of information requests, which reveal that over a three-year period, he accepted 107 invitations to five-star venues such as the Savoy and the Park Lane Hilton.
He was entertained by corporate taxpayers not just in the UK, but around the world, in New York, Washington and Sydney.
Individual taxpayers do not, of course, enjoy similar access to the head of customs and the Goldman deal has served to heighten the feeling that there is one rule for corporate taxpayers and another set of rules for the rest of us.
There are growing calls from MPs for fundamental reform of the tax collection system and for greater accountability from the HMRC, which has admitted to writing off more than £40 billion in uncollected taxes over the past five years. It’s not even clear if that extraordinary figure, which would make a noticeable dent in Britain’s public deficit, includes tax lost in its various sweetheart settlements.
Moreover, it’s little surprise that the growing Occupy movement has lighted on Hartnett and the HMRC as a glaring example of inequality. On Monday, protesters marched from their base outside St Paul’s Cathedral to protest outside HMRC’s offices on Whitehall.
Highlighting the plight of 146,000 pensioners who have just been landed with tax bills because of miscalculations, the protesters demanded that the rich and powerful pay their fair share of tax and called for an end to secret deals.
“Hey ho, David Hartnett’s got to go!” the protesters chanted as they strode down the Embankment to Whitehall. Unsurprisingly, their requests for an interview with Britain’s top taxman were not granted. But the message was clear – and when they’re shouting your name in the streets of London, it’s probably time to reconsider your position.
Fiona Walsh writes for the Guardiannewspaper in London