This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/politics/2013/may/02/tax-chief-bank-goldman-sachs

The article has changed 5 times. There is an RSS feed of changes available.

Version 1 Version 2
Tax chief waived £20m owed by bank 'for fear of embarrassing chancellor' Tax chief waived £20m owed by bank 'for fear of embarrassing chancellor'
(about 7 hours later)
The former tax chief Dave Hartnett chose to waive up to £20m that Goldman Sachs owed to HM Revenue and Customs after expressing concerns that it would cause embarrassment to George Osborne and the tax authorities if they failed to settle the dispute, newly released documents suggest. A controversial "sweetheart" tax deal between HM Revenue & Customs and Goldman Sachs, worth up to £20m, was agreed in part to avoid embarrassment to George Osborne, according to the government's former head of tax.
The previously unseen email has emerged at the high court where UK Uncut Legal Action, the anti-cuts campaign group, has brought a case challenging the decision to waive the charges by HMRC officials. Dave Hartnett wrote that he decided to settle the long-running dispute after Goldman Sachs threatened to pull out of a prized new tax framework a week after the chancellor had announced that the bank had signed up to it.
Hartnett personally overruled legal advice, the HMRC's own guidelines and HMRC's internal review board, which all stated that HMRC was in a position to force Goldman Sachs to pay back the money owed, the court heard. The disclosures have emerged in an email and a witness statement placed before the high court on Wednesday where the campaign group UK Uncut Legal Action is asking for a judgment to declare that the 2010 settlement between Goldman and the tax authority was unlawful.
Shortly after the oral deal had been made between Hartnett and Goldman to waive the £20m that the bank owed, the HMRC's high-risk corporate programme board, an internal oversight board, rejected the deal and recommended that negotiations be re-opened to recoup the money owed. The court heard that Hartnett, then the permanent secretary for tax, personally overruled legal advice, the HMRC's own guidelines and its internal review board, which stated that HMRC was in a position to force Goldman Sachs to pay back the money owed.
In the email, sent by Hartnett to other senior tax officials, he states that when Goldman Sachs was informed of the board's decision to reject the deal and force the bank to pay the interest, the bank "went off the deep end". The revelations may embarrass the chancellor who has been careful to avoid being dragged into an ongoing public debate over the Revenue's right to negotiate multimillion pound deals to end disputes with large corporations while pursuing ordinary taxpayers for small sums.
He also warns of potential political embarrassment, stating: "The risks here are major embarrassment to the chancellor of the exchequer, HMRC, the large business service of the HMRC, you and me, not least if GS withdraw from the code." Hartnett struck a deal in a "handshake" with Goldman Sachs on 19 November 2010 to end a dispute over national insurance contribution payments dating back to the 1990s, the court was told.
In Hartnett's written witness statement, he states: "Goldman Sachs had been involved in tax avoidance in the past and we regarded their signing of the code as a valuable step in securing improved tax behaviour from them. This would have been under threat had we reneged on the settlement (they said they would withdraw from the code if HMRC reopened the settlement)." But 11 days later, the deal was rejected by the Revenue's high-risk corporate programme board because it had failed to collect any interest on the disputed sum. That day, Osborne announced that the top 15 banks including Goldman Sachs, had signed up to a new code of conduct .
Hartnett says that this would be a source of embarrassment for Osborne because a week earlier the chancellor had publicly announced that the government was cracking down on tax avoidance by big banks and had successfully forced the top 15 banks, including Goldman Sachs, to sign up to the code of practice on taxation designed to reduce tax avoidance. Hartnett sent an email on 7 December 2010 expressing concern that Goldman Sachs "went off the deep end" and threatened to withdraw from the government's bank code of practice, which was published in December 2009, when it was informed of the board's decision to reject the deal and force the bank to pay the interest. There could be a potential political embarrassment if the board's decision stood: "The risks here are major embarrassment to the ChX [chancellor of the exchequer], HMRC, the LBS [the large business service of the HMRC], you and me, not least if GS withdraw from the code."
Ingrid Simler, for UK Uncut, said Hartnett's email showed he was worried by the prospect of embarrassing the chancellor. "There was a risk to the chancellor, that is admitted my lord, and it is disclosed in Dave Hartnett's witness statement," she said. In a witness statement for the court, Hartnett wrote that the Goldman Sachs threat to withdraw from the code of practice "would have embarrassed the chancellor".
Hartnett says in his statement that Goldman's threat to withdraw from the government's code of practice for banks, which was published in December 2009, worried him. Hartnett retired as head of tax last summer following stinging criticisms from the public accounts committee over the Goldman Sachs deal.
"I was concerned that withdrawal would have embarrassed the chancellor, who had announced on 30 November 2010 that the top 15 banks including Goldman's had signed up to the code," Hartnett's witness statement reads. Murray Worthy, director of UK Uncut Legal Action, said the case exposed a "controversial cover-up at the heart of government by HMRC and former tax chief Dave Hartnett to avoid political embarrassment for George Osborne".
Hartnett stood down as head of tax last summer, following stinging criticisms from the public accounts committee over the Goldman deal. Rosa Curling, a solicitor from the law firm Leigh Day, which is representing UK Uncut Legal Action, said: "Our hope is that this legal action will not only declare this decision to 'let off' Goldman Sachs for tax owing unlawful, but also deter any more deals being done behind closed doors."
Murray Worthy, director of UK Uncut Legal Action, said the case had exposed a cover-up at the heart of government by HMRC and Hartnett to avoid political embarrassment for Osborne. Ingrid Simler QC, for UK Uncut Legal Action, said HMRC reached a settlement in a dispute over national insurance due on bonuses with Goldman Sachs in 2010 without requiring the payment of interest. The potential cost to the taxpayer of the HMRC/Goldman Sachs settlement is officially put at £8m but an HMRC solicitor-turned-whistleblower, Osita Mba, claimed the sum could be as high as £20m.
"George Osborne announced the bankers' code for tax avoidance with great fanfare, claiming that he was forcing banks to pay their fair share. Yet on the same day Goldman Sachs were threatening to withdraw from the code if HMRC forced them to pay the tax they owed. The bank was allowed to skip the interest bill after Hartnett was wrongly advised there was a "legal impediment" to collecting it, said . The error was quickly noticed but, despite legal advice that the agreement with the bank was not binding, HMRC unlawfully withdrew a county court claim for what was owed without seeking to renegotiate, she said.
"HMRC waived millions of pounds owed by Goldman Sachs against legal advice and HMRC's own guidelines to salvage Dave Hartnett's personal reputation and George Osborne's veneer of tough tax talk," he said.
Anna Walker, campaigns director at UK Uncut Legal Action, said: "This case shows the lengths that the government will go to in order to preserve the public perception that government is getting tough on tax avoidance. HMRC have tried tirelessly to cover up this deal. They have stonewalled the public accounts committee, whitewashed the NAO report, criminalised a whistleblower and have fought this legal case every step of the way.
"In the runup to the G8, where David Cameron and George Osborne will pronounce themselves as global leaders in tackling tax avoidance, this case shows what is going on behind closed doors and the headline-grabbing announcements – tax avoidance as usual, sweetheart deals to avoid red faces of ministers and giving in to threats from big business."
UK Uncut Legal Action is seeking a ruling that the deal reached between Goldman Sachs and HMRC was unlawful because it was in direct contradiction of HMRC's own statutory duty to collect tax properly, and its own guidance.
Simler said HMRC reached a settlement in a dispute over national insurance due on bonuses with Goldman Sachs in 2010 without requiring the payment of interest. The potential cost to the taxpayer is officially put at £8m but a whistleblower, Osita Mba, said the sum could be as high as £20m.
The bank was allowed to skip the interest bill after Hartnett was wrongly advised there was a "legal impediment" to collecting it, said Simler. The error was quickly noticed, but, despite legal advice that the agreement with the bank was not binding, HMRC unlawfully withdrew a county court claim for what was owed without seeking to renegotiate, she said.
This went against HMRC guidelines stating that taxpayers should be treated equally and no discounts or deals should be done. Simler said: "The issues in this case are of great importance both to taxpayers and HMRC as well."This went against HMRC guidelines stating that taxpayers should be treated equally and no discounts or deals should be done. Simler said: "The issues in this case are of great importance both to taxpayers and HMRC as well."
The case continues. James Eadie QC, appearing for HMRC, said UK Uncut was using the courts "to pursue politics by other means". He said the Goldman Sachs deal had been examined in detail by the National Audit Office and found to be neither irrational nor improper.
The scale of the government's "sweetheart" tax deals – individual secret agreements drawn up between tax officials and corporations to settle disputes – was revealed this week by the Guardian after four settlements were shown to be worth £4.5bn between them.
If UK Uncut's challenge is successful, HMRC will come under further pressure to say how much tax was owed by each of the four unnamed companies before the deals were struck.
It also emerged on Thursday that Google and its auditor Ernst & Young will be recalled to parliament to restate their evidence on the internet search company's tax position following an investigation into its advertising sales practices.
A spokesperson for the Treasury said the chancellor would not comment on what he knew about Hartnett's decision to waive Goldman's alleged debt: "Taxpayer confidentiality means that decisions are always made by HMRC without any ministerial knowledge or involvement."