Big businesses have always been getting away with murder, and now the latest report reveals just how much power they wield over the HMRC

 

According to experts working alongside the Labour Shadow Chancellor, John McDonnell: Her Majesty’s Revenue and Customs is in the thrall of big business and can no longer properly do its job. That is why so many multinational corporations and dodgy billionaires can get away with paying little to no tax in the United Kingdom.

In a new, independent report compiled by a host of academics and experts, Reforming HMRC: Making It Fit For The Twenty-First Century, both the Department and Government have been heavily criticised for the current climate of widespread, multinational tax evasion.

For example, there have only been 13 offshore-specific prosecutions for tax evasion made by HMRC since 2009 — despite some suggesting that as much as £16 billion is lost per year because of tax fraud.

The Department, currently, has a mere 81 specialists investigating transfer pricing practices — a significant tool used for tax avoidance by multinationals. However, investigating just one multinational company can take up to 20 staff a staggering 22 months.

This problem has been further extenuated by the dramatic budget cuts which have befallen HMRC in recent years: £3.2 billion in 2015-16 compared to £4.4 billion in 2005. Moreover, since 2004, roughly 40,000 regular staff have been effectively lost; meaning that the Department’s entire organisational structure has been left desperately stretched and undermanned. There are even Government plans to further reduce staff by the early 2020s: from 100,000 in 2004 to an estimated 50,000 by 2020.

One of the co-authors of the report, Professor Prem Sikka, writing in the Guardian, said: ‘[I]n providing a business-friendly tax regime, the government has effectively privatised tax policymaking and enforcement. The current executive chair of HMRC has been a vocal opponent of a clampdown on tax avoidance and referred to taxation as “legalised extortion”. HMRC’s non-executive directors come entirely from big business, with previous connections to KPMG, the CBI tax committee, Smith & Nephew, Brunner investment trust, Aviva, PricewaterhouseCoopers, British Airways, Anglo-American and Cadbury Schweppes, to name just a few’.

Sikka goes onto suggest that representatives of large businesses are permitted by HMRC to design tax laws that could, and often do, advance their financial interests.

Meanwhile, the Government’s reaction to this — despite its political prominence and the ‘tightening the money belt’ sentiment of austerity — has been limp and ineffective. The General Anti-Abuse Rule for instance, introduced by the Government in 2013, is little more than a ‘showpiece’ according to Sikka. What’s more, for HMRC to pursue anyone for tax evasion they must first get permission from a panel of business chiefs — not, you would think, judges or law enforcement.

There is also a fundamental lack of parliamentary oversight, according to the report, as displayed earlier this year when HMRC made a ‘sweetheart deal’ with Google that meant the corporate giant paid, effectively, less than 3 per cent in tax from 2005-2014. It has been speculated that Google still owe the British Government nearly £700 million in unpaid taxes.

Ultimately, Sikka and his colleagues concede that their report will not solve all of HMRC’s issues; however it will ‘strengthen public accountability and HMRC’s ability to do what it’s supposed to’.

The report, among other things, recommends the creation of a supervisory board to watch over HMRC’s executive board, with a focus on maximising tax revenues and thus preventing multinational tax evasion. Confidentiality is also something that comes under fire, with the report claiming that this should not obstruct parliamentary scrutiny of HMRC’s dealings with big businesses.

Labour’s John McDonnell has taken the report’s findings and recommendations very seriously. Reforming HMRC is expected to be a significant political pillar in his tenure as Shadow Chancellor, and perhaps even, as Chancellor of the Exchequer one day.

‘Reforming HMRC: Making It Fit For The Twenty-First Century’ was authored by Prem Sikka, Michele Christensen, John Christensen, Christine Cooper, Tom Hadden, Deborah Hargreaves, Colin Haslam, Paddy Ireland, Glenn Morgan, Martin Parker, Gordon Pearson, Sol Picciotto, Jeroen Veldman & Hugh Willmott.

FULL REPORT

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