Oct 12 2011

UK HMRC’s ‘cock-up’ and the spectre of secrecy

Posted by: Nick Shaxson in: Thoughts

From The Guardian:

Britain’s tax authorities have given Goldman Sachs an unusual and generous Christmas present, leaked documents reveal. In a secret London meeting last December with the head of Revenue, the wealthy Wall Street banking firm was forgiven £10m interest on a failed tax avoidance scheme. HM Revenue and Customs [HMRC] sources admit privately that the interest-free deal is “a cock-up” by officials, but refuse to say who was responsible.

This kind of thing (it’s not just this; read the Guardian story for full details), following my investigations in Treasure Islands, is why I called for the resignation of HMRC head Dave Hartnett (with whom the buck stops, kind of) to step down. The Guardian story, which was the fruit of original digging by good old Private Eye, goes on:

“Hartnett is due to be questioned on Wednesday by the Commons public accounts committee. The leaked documents suggest that a previous PAC chairman, Edward Leigh, was misled when he was told it was illegal to reveal details of such cases to parliament.
. . .
Leigh said: “It just underlines the absurd culture of secrecy that still pervades Whitehall.”

Of course this is all about business conducted by such squeaky-clean places as the British Virgin Islands.

Oh, and something else. I already published something fairly meaty on the UK-Swiss tax deal, which makes Hartnett looks pretty bad. (And which, by the way, nobody has been able to demonstrate that it is wrong; in fact the German Ministry of Finance has formally confirmed the loophole.

Something meatier on this subject will be appearing before too long, demonstrating how the deal will, considering the long term effects, end up being revenue-negative for the UK overall.

7 comments so far

Alien Edouard 10th October, 2011 7.34 pm

Nick – we discussed this extensively a few weeks ago (http://bit.ly/jYXz7m)

The big picture is that Goldman Sachs is an American company, and that the vast majority of its senior employees (certainly those eligible for the type of offshore compensation arrangements set up by Goldman Sachs) are US citizens or other non-UK nationals.

Goldman Sachs, its shareholders, partners and employees are doing the UK the favor of having a substantial presence in London, creating a large number of support or administrative jobs for locals. The company’s senior employees were educated (mostly in the US) at no expense to the UK taxpayer, put their kids in (mostly American) private schools, rent homes from British landlords, fly home for healthcare and would not even drop dead in a NHS ER, and only cause public disorder through an occasional parking ticket. Like most Americans moving here, they bring to the UK skills that the locals don’t have, and have no hope of ever acquiring in this life or next.

The idea that the UK tax authorities should try to maintain anything other than “friendly” relationships with Goldman Sachs, and other similar US institutions, is simply contrary to the best interests of the UK.

As for the Swiss deal, I am waiting with trepidation for your new analysis, which I anticipate will draw heavily on Mark Morris’ “expertise” (who by now seems to have understood that Switzerland is not part of the EU, there is hope and progress!).

Nick Shaxson 10th October, 2011 8.12 am

edouard, yes of course goldman sachs never took advantage of the uk’s courts system, its property rights, its roads, its regulated airspace, markets, telecoms spectrum(s,) and so on. Have you ever considered engaging brain before putting fingers to keyboard?

Alien Edouard 10st October, 2011 9.46 am

Goldman Sachs repays the UK a few times over for the usage it makes of its infrastructure. It does so by employing thousands in London, including many UK nationals in support and administrative functions, and paying them well over the UK median (fully taxable wage).

It also brings to London thousands of non-UK (mainly American) senior employees, who bring in skills that the local population does not have and have no hope of ever acquiring (it is a little like a Brit moving to Zambia). Not only do these skills arrive in the UK for free (the cost has been borne by the US taxpayer and/or by the employee him/herself), but these people pay local income tax, rent houses from British landlords, hire local cleaners, eat in local restaurants, etc.

Do you ever try to see the broader picture before hitting the “rant” button?

Nick Shaxson 10st October, 2011 3.43 pm

hmm, yes, and then there’s just the teeny-weeny issue of the financial chaos, isn’t there? and, er, you didn’t answer my earlier comments which negate your repetition here. and do please point out where I was ‘ranting’

Alien Edouard 10th October, 2011 2.01 pm

We had a similar argument before (here http://treasureislands.org/art-uncut-on-u2-protest/), that time related to the (non-) domiclie regime. Then, like now, your answer was around the UK courts system, its property rights, its roads, its regulated airspace, markets, telecoms spectrum(s,). It feels like groundhog day….

I comprehensively demolished your argument in that other tread. Just replace “non-doms” with “Goldman Sachs” and I would demolish your argument here as well, but I do not have the energy to write another 10+ entries to get to that point.

Can’t wait for your analysis of the Swiss-UK deal. Was Mark Morris involved? He now seems to begin to understand trhat Switzerland is not in the EU, so there is progress.

Nick Shaxson 10st October, 2011 8.38 am

Bizarre reply. Your arguments fell down to the ground – and the only way you can feel you won is by not actually reading – or perhaps not thinking about – what I said. I can only conclude that You are living some sort of financial fantasy land.

ivan chan 10th October, 2011 12.13 pm

Goldman Sachs operating in London? Trust me, they got the better half of the bargain.
If there’s ever a dollar left on the table….

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