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Broken Britain 16: HMRC refuses to investigate money-laundering and tax fraud charges by largest Conservative donor

Three classes of British looting: which is the most culpable?

Professor Prem Sikka, Professor of Accounting at University of Sheffield and Emeritus Professor of Accounting at University of Essex, draws attention to the case of the UK telecoms giant Lycamobile, the biggest donor to the Conservative Party, which has accepted £2.2m in donations since 2011.

Her Majesty’s Revenue and Customs (HMRC) has refused to assist the French authorities and raid Lycamobile’s UK premises in order to investigate suspected money laundering and tax fraud.

Economia, the publication for members of the Institute of Chartered Accountants in England and Wales (ICAEW) which covers news and analysis on the essential issues in business, finance and accountancy, reports:

Following an initial denial (left, Financial Times), Economia confirmed that in an official response to the French government dated 30 March 2017,  a HMRC official noted that Lycamobile is “a large multinational company” with “vast assets at their disposal” and would be “extremely unlikely to agree to having their premises searched”, said the report.

The letter from HMRC to the French government added, “It is of note that they are the biggest corporate donor to the Conservative party led by Prime Minister Theresa May and donated 1.25m Euros to the Prince Charles Trust in 2012”.

This is an ongoing saga: in 2016 Economia noted: “The Tories have come under fire for continuing to accept donations of more than £870,000 from Lycamobile since December, while it was being investigated for tax fraud and money laundering”.

In 2016 In May it emerged that KPMG’s audit of Lycamobile was limited due to the complex nature of the company’s accounts. Later, KPMG resigned saying it was unable to obtain “all the information and explanations from the company that we consider necessary for the purpose of our audit”.

HMRC: “has become a state within a state”.

Prem Sikka (right) continues, “The House of Commons Treasury Committee is demanding answers to the Lycamobile episode – but HMRC is unlikely to prove amenable”.

In recent years, the Public Accounts Committee has conducted hearings into tax avoidance by giant global corporations such as Microsoft, Amazon, Google, Starbucks, Shire and others. The hearings have not been followed by HMRC test cases.

The Public Accounts Committee has also held hearings into the role of the large accountancy firms in designing and marketing avoidance schemes and exposed their predatory culture. In a telling rebuke to PricewaterhouseCoopers, the Committee chair said: “You are offering schemes to your clients—knowingly marketing these schemes—where you have judged there is a 75% risk of it then being deemed unlawful. That is a shocking finding for me to be told by one of your tax officials.”

Despite the above and numerous court judgments declaring the tax avoidance schemes marketed by accountancy firms to be unlawful, not a single firm has been investigated, fined or prosecuted.

There are real concerns that HMRC is too sympathetic to large companies and wealthy elites.

A major reason for that is the ‘revolving door’, the colonisation of HMRC by big business and its discourses: its current board members include non-executive directors connected with British Airways, Mondi, Anglo American, Aviva, PricewaterhouseCoopers and Rolls Royce.

After a stint at HMRC many of the non-execs return to big business. Corporate sympathies are therefore not counterbalanced by the presence of ordinary taxpayers or individuals from SMEs and civil society.

Sikka ends: “In such an environment, it is all too easy to turn a Nelsonian eye on corporate abuses and shower concessions on companies and wealthy individuals”. Read more here.

 

Why should we care?

Because tax revenue pays for the services used by all except the richest, the education health, transport and social services, increasingly impoverished by funding cuts imposed by the last two British governments.

The Shadow Chancellor has twice called for more rigorous examination and tightening of processes at HMRC to ensure that corporations and wealthy individuals are free from political corruption and pay fair rates of taxes.

Will the next government elected be for the many, not the few?

 

 

 

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Sharma and the Agri-Brigade: bureaucrats and white collar workers lacking all essential survival skills, undermine food producers

In England, many organisations ostensibly concerned with the prosperity of farmers hold endless conferences. Analyst Devinder Sharma notes that, in India, agricultural universities, research institutes, public sector units, and other organisations also frequently gather to talk about ways to improve farmers’ income.

india-seminar

He comments sardonically that while the number of seminars/conferences on doubling the farmers’ income have doubled in the past few months, farmers increasingly sink into a cycle of deprivation.

As he points out, in both countries those who talk of allowing markets to provide higher farm incomes are the ones who get assured salary packets every month – we add that in England some are even paid from a levy on farmers.

The British farming press is now pointing out that large numbers of the UK’s 86,000+ family farmers are facing a threat from the government’s new universal credit (UC). If administered as currently designed, it will have a devastating impact on many of the UK’s most economically vulnerable family farms.

Universal credit will be ‘rolled out’ regionally by the DWP to cover the whole of UK by 2022 – calculated on monthly rather than annual income and it will assume that farmers have a “minimum income floor” which assumes that all applicants earn a wage equivalent to the national minimum wage of about £230 a week which is not the case. Private Eye (The Agri Brigade column) comments:

“None of this is remotely appropriate for farmers, and it shows the folly of trying to introduce a single universal form of income support for all.

On many family farms, where one or two people may work up to 250 acres, there is often no income for up to 10 or even 1 I months in a typical trading year. The sale of a crop of lambs, cattle or grain (or receipt of an EU subsidy) means revenue is raised in just one or two months of the year so the DWP’s assumption of a “basic income floor” each month doesn’t apply. There are also fears that receipts by claimants that rake their income above the basic floor in some months will disrupt entitlement to UC in subsequent months. (And farming losses in some months cannot be offset against a profit in others)”

Shades of the I, Daniel Blake experience:

When the UC administered by the DWP comes into force, skilled hard-working farmers will have to visit unfamiliar Job Centres to register for the benefit. ln addition. They will have to undergo face-to-face interviews over their eligibility for UC and be allocated a work coach to advise them on how to improve their access to better paid employment. Given the difficulties it seems certain many family farms currently claiming tax credits (administered by HMRC) will not apply for universal credit despite their poverty.

An unworkable system

Farming UK reports that a spokesman for the Ulster Farmers Union said: “UC makes it impossible to use prospective incomes or losses, which is often what farmers depend on. The fact that farming is seasonal where there will be long periods of time when a farmer will make a loss in expectation of more profitable times at some other stage during the year. In addition, having to do monthly real-time accounts is an extra burden upon farmers, in an already hard-pressed industry, and to hire someone to prepare these accounts would be an extra expense”.

As the title has it:bureaucrats and white collar workers lacking all essential survival skills, undermine food producers”.

 

 

 

Austerity 2: Corbyn “spending cuts would not be needed if big companies paid their tax”

hmrc header

Parliament’s own website heads the summary of the Committee of Public Accounts report on Revenue and Customs: “HMRC still failing UK taxpayers”.

Its lamentable performance in simple tasks such as answering the telephone is on record and its failure to collect a reasonable amount of offshore tax evaded was published in November. It spoke of 11,000 job cuts since 2010 & 40,000 since 2004. Read the summary by the chair, MP Meg Hillier, here: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news-parliament-2015/hmrc-performance-report-published-15-16/

“HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better.

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public. It’s also important that the majority who play by the rules, paying their tax on time and in full, see that those who don’t will face the consequences.

“Tax avoidance also remains a serious concern. Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament. If tax law is to be improved then HMRC must as a priority provide Parliament with comprehensive details of avoidance. HMRC must also rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection.

“It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.”

crickhowell 3

The FT reports that people of Crickhowell agree: the town’s traders have submitted tax plans to HMRC, using offshore arrangements favoured by multinationals. They hope that their ‘tax rebellion’ will spread to other towns forcing the Government to tackle how Amazon, for example, paid £11.9million tax last year on £5.3billion of UK sales. Their rationale: High street coffee shop owner Steve said: ‘I have always paid every penny of tax I owe, and I don’t object to that. What I object to is paying my full tax when my big name competitors are doing the damnedest to dodge theirs.’

Jeremy Corbyn: ”Cuts are not the way to prosperity . . .invest in the economy”

Yesterday, Labour leadership candidate Jeremy Corbyn MP, outlined his vision for a more productive and fairer economy for all at a policy seminar.

jc 2 report coverHe addressed ‘the Conservative myth’ that wealth creation is solely due to the dynamic risk-taking of private equity funds, entrepreneurs or billionaires bringing their investment to UK shores.

If believed, it is logical to cut taxes for the rich and big business, not to bother to invest in the workforce, and be intensely relaxed about the running down of public services as is happening.

He affirmed: “Where there are tough choices, we will always protect public services and support for the most vulnerable”.

Corbyn’s alternative, laid out in The Economy in 2020 and accessed via the campaign website, is to build a rebalanced, prosperity-focused economy, based on growth and high quality jobs.

His leadership campaign has no big private donors. He wants Labour to become a democratic social movement again, dedicated to real change:

jeremy corbyn”Cuts are not the way to prosperity; Britain needs a publicly-led expansion and reconstruction of the economy, with a big rise in investment levels. We must ensure that our national housing, transport, digital and energy networks are among the best in the world.

“This requires the establishment of an National Investment Bank to promote infrastructure upgrades and support for innovation. Labour 2020 will make large reductions in the £93 billion of corporate tax relief and subsidies. These funds can be used to establish the National Investment Bank to head a multi-billion pound programme of infrastructure upgrades and support for high-tech and innovative industries”.

On taxation and tax justice, Jeremy argued: “Paying tax is not a burden. It is the subscription we pay to live in a civilised society. A collective payment we all make for the collective goods we all benefit from: schools, hospitals, libraries, street lights, pensions, the list is endless.

“Under these plans outlined today Labour 2020 will make the tax system more progressive, and follow a five-point plan to tackle tax avoidance and evasion:

  • Stronger anti-avoidance rules brought into UK tax law.
  • The aim of country-by-country reporting for multinational corporations.
  • Reform of small business taxation to tackle avoidance and evasion.
  • Enforce proper regulation of companies in the UK to ensure that they pay what they owe.
  • A reversal of the cuts to staff in HMRC and at Companies House, taking on more staff at both, to   ensure that HMRC can collect the taxes the country so badly needs.

“The UK has shifted from taxing income and wealth to taxing consumption; and from taxing corporations to taxing individuals. We must ensure that those with the most, pay the most, not just in monetary terms but proportionally too.”

“What responsible government committed to closing the deficit would give a tax break to the richest 4% of households?”

Tax cheats (£34-120bn) cost far more than benefits cheats (£1+ bn) – yet far fewer are prosecuted

hmrcAnalysis of HMRC data shows that the political culture is sympathetic to tax avoiders

Summary of an article by Prem Sikka, professor of accounting at the University of Essex, which may be read in full here, adding official data confirming the thoughts of John Wight

Social security benefits come in many shapes, including the state pension, pension credits, income support, disability living allowance, employment and support allowance, jobseeker’s allowances and housing benefits.

  • The total cost of all benefits for 2013-14 is about £164 billion.
  • Around £1.2 billion or 0.7 per cent of the total is attributed to fraud. ‘
  • Benefit fraud has continued to average between 0.6 per cent and 0.8 per cent for the period 2005/06 to 20013/14.

The government has set up a benefit fraud hotline and people are encouraged the blow the whistle on their neighbours and anyone else suspected of fraud. The sanctions:

  • a £50 spot fine, without a court order, on individuals who mistakenly provide inaccurate information on their claims forms.
  • Those suspected of fraud may be able to pay fines of between £350 and £2,000 in lieu for prosecution. From April 2015, the upper limit of the fine will be £5,000.
  • Some may lose their benefits altogether for a fixed period.
  • Private debt collection firms, bailiffs and forced house sales are used to collect penalties.
  • Suspects can be charged under the Fraud Act 2006, which carries a maximum prison sentence of up to 10 years.

The data shows that most of the criminal convictions are for frauds of less than £10,000. In 2011, two-thirds of fines imposed were for £200 or less. The largest fine imposed was £5,000. For the period 2008-2012, some 1,306 offenders received a prison sentence.

Benefit fraud is officially estimated to cost £1.2 billion (2013-2014) but HMRC estimates an annual tax gap – that is tax avoidance, tax evasion and monies of £34 billion (2012-13).

HMRC’s model is challenged by others who put the tax gap at around £120 billion.

Even in 2004, a former World Bank adviser was saying that the UK is losing over £100 billion a year to tax avoidance and evasion. HMRC’s 2013-14 report states that during the year 421 individuals were detained after arrest by HMRC officers, but none were charged.

Preliminary conclusions

The amounts attributed by the government to tax avoidance and evasion are much larger than the amounts attributed to benefit fraud. But the number of prosecutions and convictions for benefit fraud are much greater.

The political culture is more sympathetic to tax avoiders. HMRC was made aware of the HSBC tax frauds in 2008, but so far only one person has been charged. An excuse offered by HMRC is that it likes to make financial recoveries and thus does not go for prosecutions.

The revolving door swings and tax avoiders go scot-free

Vodafone cio to HMRCWe add that in 2013, just as the Treasury was under pressure to review rules allowing Vodafone to avoid paying tax on its massive £84bn windfall from selling its stake in the American mobile phone giant Verizon, HMRC appointed Mark Dearnley, CIO at Vodafone, as its new Chief Digital and Information Officer.

Sikka points out that, on a number of occasions, the courts have declared some of the tax avoidance schemes to be unlawful. This has not been followed-up by any investigation or even recovery of the cost of fighting the schemes. Big accountancy firms are often the brains behind the schemes but no firm or partner has ever been fined even after the schemes have been declared unlawful.

  • The same firms are given taxpayer-funded contracts, such as those relating to privatisation and Private Finance Initiative (PFI).
  • Their partners advise HM Treasury and other government departments.
  • The firms fund political parties and also provide jobs for former and potential ministers.

In April 2013, the government introduced rules to ban companies and individuals who took part in failed tax avoidance schemes from being awarded government contracts. So far, no such business has been barred.

Britain’s government: “of the rich, by the rich, for the rich”

A reader sent this link to an article by John Wight – well worth reading in full – which crystallises the writer’s unease at the difference between HMRC’s treatment of poor tax or benefit defaulters and its leniency to the very rich.

As he writes: “The sheer scale of tax evasion on the part of the rich in the UK is staggering . . . in 2014 more than £80billion was lost to the Exchequer as a result of tax evasion in 2014 . . .

“At the other end of the social spectrum benefit fraud costs just over £1billion each year . . .”

Mr Wight refers to a two tier system of justice:

  • Those found guilty of benefit fraud are maligned, shamed, and demonised.
  • The rich found guilty of tax fraud are allowed to avoid the inconvenience of prosecution and court in return for an undisclosed pay off.

benefit-fraud-cartoon

And adds that “more damning evidence of the extent to which the rich are ‘getting away with it’ is provided by the fact that despite the mammoth difference in cost to the UK taxpayer the resources that have been deployed to crack down on benefit fraud are exponentially more than tax evasion”.

His overview:

“We have in Britain a government of the rich, by the rich, and for the rich, the consequences of which are tangible. With the advent of the worst economic crisis since the 1930s, caused by the greed and recklessness of the banks, the government has effected the transference of wealth from the poor to the rich under the rubric of austerity, a process measured in food banks, payday loans, benefit sanctions, the bedroom tax, and zero hours contracts at one end of the social and economic spectrum, alongside an increase in the wealth of the country’s 1000 richest people over the same period”.

Combining two serious concerns: Britain’s political-corporate nexus and rewards for conspicuous failure

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Accident-prone choice to administer HS2 and the new nuclear power plants with the same flair as BP in Texas and Talisman in Pennysylvania.

john manzoni

A reader sent a link to the news that John Manzoni, a former executive of BP, is to be chief executive of the civil service – for a yearly salary of £190,000.

Rewards for conspicuous failure

Though not failing so frequently as senior civil servant Lin Homer, currently heading HMRC despite an amazing catalogue of failure, Mr Manzoni’s performance was criticised following the BP Texas refinery explosion. The Guardian records:

“A confidential BP report found Manzoni had paid insufficient attention to safety and failed to spot clear warning signs. It accused him of failing to perform his duties in the run up to the explosion and of engaging in a “simply not acceptable” standoff with a colleague”.

Before going to BP, Manzoni was in charge of Talisman when the company was fined more than $60,000 (£37,000) for alleged violations in reporting hazardous chemicals at 52 sites in Pennsylvania. Among these were natural gas wells and sites of hydraulic fracturing; the company neither confirmed nor denied the allegations in a settlement with the Environmental Protection Agency.

Who you know, not what you do?

Earlier this year he joined Lord Browne in the Cabinet Office. His former chief at BP is now chairman of the UK’s leading fracking company Cuadrilla.

The voice of sanity and competence

caroline lucas 4Caroline Lucas, the Green MP for Brighton Pavilion, said:

“It simply beggars belief that someone who’s presided over such a disastrous period at BP, should be allowed to join his former BP boss Lord Browne, to oversee some of the UK’s largest and most controversial projects as chief executive of the entire civil service.

“His appointment strongly suggests that the government’s love-in with big business has blinded them to such a worrying track record”.

David Cameron said he was delighted with Mr Manzoni’s appointment; readers will draw their own conclusions.

Political madness – or is it? As huge debts remain uncollected, HMRC scrutinises compulsory returns from pensioners with modest incomes.

News from a reader in her seventies with income from pensions and savings below the national average, after tax has been deducted, prompted a search of collected data and online reports.

hmrc pensionersHer equally baffled MP had forwarded her case in 2008 to the Treasury Committee and the chairman’s assistant replied: “The issue you describe does seem confusing” and undertook to draw it to the attention of the committee before taking evidence from HMRC in autumn.

Needless to say HMRC compels her to continue, despite having all the information in their departments, which are said to be unable to share it, one officer saying angrily: “Why don’t you employ an accountant?”

Meanwhile, on Wednesday, the Independent reported that Her Majesty’s Revenue and Customs have caught only five of thirty people, some owing hundreds of thousands of pounds – and many owing millions – identified as costing the UK more than £844m.

Strangely, the government has been reducing staff and budget from this revenue-collecting department, despite concerns ant the shortfall in income due. A few examples follow:

hmrc staff shortfall poster2004: 15,000 jobs cut since March 2004 with 165 offices earmarked for closure or in the process of closing.

2008: closure of a further 95 offices across England, Scotland, Wales and Northern Ireland affecting up to 12,300 staff.

2010: the Public and Commercial Services Union warn that a decision by Revenue & Customs to close 130 offices would cause job losses, undermine tax collection and hit advice and support to taxpayers.

2014: the end for all 281 walk-in tax enquiry centres, with a further 23 large sites across the UK facing imminent closure. More than 2,000 fixed-term workers compulsorily redundant despite its own business plan revealing a staffing shortfall (staff levels decline, page 16, below):

HMRC staffing levels chart

The Public and Commercial Services Union criticises HMRC’s intention to privatise more of its debt collection and post handling, reporting huge backlogs of post and private debt collectors already being brought in to chase up tax credits overpayments.

Perhaps this apparent inefficiency and inconsistency is not political madness, but the outworking of a hidden agenda, with privatisation as the objective.

Plutocracy in the news: the FT has at last noticed that the political-corporate revolving door is spinning at an even more alarming rate

A few days ago Anne sent a link & expressed concern about the news that Dave Hartnett, formerly HMRC chief, has secured a new job at Deloitte.

revolving doorrevolving doorHer misgivings were echoed by Margaret Hodge MP, chair of the public accounts committee, which criticised Mr Hartnett for agreeing the deal with Goldman Sachs, which waived up to £20m of interest penalties on offshore bonus payments.

Earlier, David Hencke of Exaro News reported that Ed Lester, former chief executive of the Students Loans Company,had been appointed by the Department of Business, Innovation and Science to head the troubled Land Registry – despite the SLC’s poor performance, including:

  • problems with lost documents,

  • equipment failures,

  • difficulties with the online application system,

  • and answering only 5% of peak time phone calls.

An accelerating trend

Now the FT politely notes “The trend of ministers and officials leaving for the Big Four seems to be accelerating. PwC announced last week they had recruited Alan Milburn, the former Labour health minister, to advise on change in the NHS, sparking anger from local union leaders”.

Opening with Hartnett, it continues with Paul Kirby, who returned to KPMG after heading the Number 10 policy unit, and Neil Sherlock, the former adviser to Nick Clegg, who has moved to a senior post with PwC, adding that some time ago former home secretaries Charles Clarke and Jacqui Smith also made the move as consultants for KPMG.
Number-crunching:

The analysis from publicly available data shows 18 people have left top positions for KPMG, Deloitte and PwC, a sign of the symbiotic relationship between government and the companies at the centre of recent tax avoidance rows”.

Following the money:

The findings also show the companies themselves have spent a total of more than £1m paying for staff to work within the main three political parties, fuelling claims of a “revolving door” between politics and tax planning . . . Since the 2010 general election the three main UK political parties have received £1.14m in kind from three of the biggest accountancy firms: KPMG, Deloitte and PwC. PwC has given £503,442 to Labour in the form of multiple secondments. It has also given £289,619 of advice to the Liberal Democratsand £12,634 to the Conservative party”.

Under the last two governments, big money has increasingly skewed the decision-making process in favour of the corporate world – meanwhile the electorate suffers higher utility bills and other essentials rise in price, further enriching the few.

 

Government ‘sweetheart’ tax deals and yet another revolving door reward for failure

Yeah, we’re all in this together? 

So said the reader who recommended the Guardian article by Rajeev Syal which reveals the scale of the government’s “sweetheart” tax deals – individual secret agreements drawn up between tax officials and corporations to settle disputes.

Another whistleblower revelation

A leaked document sent by Dave Hartnett, the former head of tax at HM Revenue and Customs (HMRC), to David Gauke, the exchequer secretary at the Treasury, discloses a figure of £4.5bn for four settlements.

Conflict of interest: the government’s civil servant too close to the corporate world

dave hartnettTwo years ago the Telegraph and others reported that Dave Hartnett, during his service as ‘permanent secretary for tax’ at HM Revenue & Customs, was entertained 107 times by some of the UK’s biggest banks.

These included law firms and accountancy firms and other corporates, amongst them, Goldman Sachs, JP Morgan, Ernst & Young, KPMG, PriceWaterhouse Coopers and Deloitte.

Revolving door

In January he was hired by HSBC to help to enforce the highest standards in dealing with international money transfers.

The leaked document describes deals in excess of £1bn as “not uncommon”.

The disclosures about the multibillion-pound scale of the government’s deals come from a seven-page memo sent by Hartnett in December 2011 as he asked for public support from Gauke in the face of growing criticism in the media and parliament.

Margaret Hodge, the chair of the Commons public accounts committee, said: “If we got £4.5bn in, how much did we not get? That is what taxpayers will want to know, and I’ll be raising this with HMRC through the committee.

Whistleblower protected? No: treated like serious criminal

Separate documents disclosed in the Guardian show that tax officials used intrusive investigative powers designed to help them catch serious criminals to try to prove that the whistleblower who uncovered one of the first sweetheart deals, involving Goldman Sachs, had spoken to the Guardian.

Read more about HMRC’s draconian action against its whistleblower and deals with Vodafone and Goldman Sachs here: http://www.guardian.co.uk/politics/2013/apr/29/sweetheart-tax-deals