Bloomberg News

Lawmakers Demand U.K. Tax Agency Recovers 25 Billion Pounds

December 20, 2011

Dec. 20 (Bloomberg) -- Lawmakers called on the U.K. tax agency to recover as much as 25 billion pounds ($39 billion) from unresolved disputes with companies and said officials must be more open about what the government is owed.

The Public Accounts Committee of the House of Commons said in a report published in London today that it found “specific and systemic” failures at Her Majesty’s Revenue and Customs. It demanded greater accountability to Parliament from the agency on how it settles tax bills with big businesses.

There is “a far too cozy relationship between HMRC and large companies,” Margaret Hodge, a lawmaker from the opposition Labour Party who heads the panel, said in an e-mailed statement. “Parliament and the public have legitimate concerns that large companies are being treated more favorably than ordinary taxpayers.”

The panel issued its report a month after the National Audit Office, Britain’s spending watchdog, announced it will appoint external specialists to monitor tax settlements with large companies. Such cases include one in which Goldman Sachs Group Inc. was excused from paying as much as 10 million pounds ($15.5 million) in interest on unpaid tax.

David Hartnett, the agency’s top official, told the panel last month that tax settlements with companies now have to be endorsed by senior managers rather than leaving the approval to those who negotiated the deals. In previous testimony, he said the deal with the New York-based investment bank was a “mistake.”

Goldman Sachs reached an agreement with the authorities to pay back taxes it owed on National Insurance payments for bankers’ bonuses while forgoing interest payments. According to a Guardian newspaper report in October, which cited documents leaked to Private Eye magazine, Goldman Sachs had avoided paying National Insurance on bonuses for bankers working in London by setting up an entity in the British Virgin Islands. The offshore unit technically employed the staff, who were seconded to the U.K. capital.

The Treasury vowed last month to extend an austerity program by two years, cutting 23 billion pounds off public spending in an effort to reduce the budget deficit.

--Editors: Eddie Buckle, James Hertling

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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