Was HMRC-Vodafone deal illegal?

An HM Revenue and Customs (HMRC) and Vodafone deal that cost the public purse several billions may be illegal.

An influential parliament committee is currently poring over the innards of the deal which may have been struck without external HMRC consent.

Projected profits key

The UK Public Accounts Committee has been supplied information from a whistle blower that indicates HMRC officials may have acted beyond their powers, according to Margaret Hodge who chairs the committee. What is critical is that the HMRC settlement included projected 2012 profit levels, despite the deal being made back in 2010.

But it's thought HMRC has no authority to accept future earnings into tax earnings estimates. So the HMRC is keeping its answers to the committee tight, claiming legal privilege, i.e. the right to withhold information in case it prejudices the outcome of the investigation.

Bigger gap than thought

Separately, although chief secretary to the Treasury, Danny Alexander, recently announced an additional 2,250 HMRC staff would be assigned to new tax-evasion scrutiny roles, the amount of tax lost to public finances is now more than three times the government's estimate, the Public and Commercial Services Union claims.

HM Revenue and Customs claims a £35bn tax dodge – tax evasion, avoidance etc - overall for the UK. But the Public and Commercial Services union puts this number at £120bn. HMRC's calculation methodology should be made public, says the union - and rightly so, given the pressure on the overall UK tax base substantial cuts in public spending and the lowest effective rates of corporation tax in UK history.

More dissent

Can we expect more transparency from the top? Unlikely. Meanwhile, some HMRC staff are so appalled at the standards from management within their organisation, they've set up their own whistle-blowing network - tagged Dissent.

Dissent will "speak out against the bad practice and double standards that operate in HMRC. We wish for a fair tax system that does not reward the wealthy elite and big business," a spokesman told the Daily Mail. Wonderful news.
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