Protecting the rich can be taxing

2011 was a year of big news stories. Riots, revolutions and royal weddings grabbed the front pages with such mesmerising regularity that it was easy for some of the less dazzling incidents to pass by almost unnoticed. One story which managed to avoid drawing as much attention as it deserved was that of Dave Hartnett and Osita Mba.

Mr Hartnett is head of HM Revenues and Customs, the agency which is in charge of collecting our taxes. Earlier in the year Mr Mba, an employee of Mr Hartnett’s, raised concerns about a deal between HMRC and investment banking behemoths Goldman Sachs in which up to £20 million worth of unpaid corporation tax seemed to have been overlooked. Mr Hartnett was called before the Public Accounts Select Committee and, after much hand wringing and blame shifting, was eventually forced to admit that HMRC might be owed up to £25.5 billion in unpaid corporation tax.

£25.5 billion is a fairly large chunk of the budget deficit. The same deficit which is being used as an excuse to dismantle our public services. You might be excused for wondering if any of this huge tax debt is ever going to be paid. Well, after the obligatory mumblings from HMRC about lack of resources and client confidentiality and a few obscure Tory back-benchers being wheeled out for some choreographed indignation, it would seem to be back to business as usual. Dave Hartnett remains the head of HMRC and up to 2,700 large companies still have outstanding tax debts (Incidentally, at the time of writing, Osita Mba faces the sack over ‘disclosing sensitive information’).

The culture of ambivalence towards large companies and their tax debts has been compounded even further this week with the news that HMRC is to target 20,000 small businesses for spot checks on their paper work. Businesses which fail to produce backdated tax returns face fines of up to £3,000. HMRC expects the crackdown to net around £15 million in fines, a fraction of the amount owed by large businesses but enough to push many smaller businesses into insolvency. This stands in stark contrast to David Cameron and George Osbourne’s pledge to help small businesses, which they described as ‘the life-blood of the economy’.

This contradiction is only the latest in a long list of instances where government rhetoric has failed to match reality. NHS spending cuts, tuition fees, forest sales and the environmental agenda are just a few examples. But why is it that governments and organisations such HMRC seem so keen to give big businesses a break at the expense of smaller businesses and the public services which the electorate rely on?

Well, our first clue is the fact that our friend Dave Hartnett has the enviable honour of being ‘the country’s most wined and dined civil servant’. Some of the world’s biggest banks, law firms and accountancy firms, including Goldman Sachs, treated Mr Hartnett to corporate hospitality a total of 107 times between 2007 and 2009. Whether this is simply a perk of the job or a conflict of interest is debatable. But in light of the huge failings on Mr Hartnett’s part to ensure that such organisations are subject to the same scrutiny as the rest of us, it could be seen as inappropriate.

Clue number two. In 2010 Vodafone were let off a staggering £5 billion in unpaid tax. John Connors, the man in charge of Vodafone’s tax affairs, is a former senior official at HMRC and colleague of Mr Hartnett’s. Number three. David Varney, former chairman of HMRC and the man responsible for setting up the protocols for dealings between major businesses and HMRC was previously the CEO of O2 at the time they were found guilty of perpetrating a massive VAT avoidance scheme. I’m running out of room, but you could literally fill a book with this mumbo jumbo.

So it’s no wonder our tax service seems to have little interest in chasing the big fish. All evidence points to a harem of political and corporate money-launderers content to fatten themselves while the rest of us get shafted. There is a reason we must watch as unemployment soars and our doctors and teachers are robbed of their pensions but its nothing to do with economic recession and everything to do with the avarice of crony capitalism. Further failings of the tax system are sure to be in the news in 2012, but will they once again be pushed to the middle pages by more scenes of rioting and strikes? As long as we’ve still got a government obsessed with vested interests and double standards, I’d say it was a pretty safe bet.