Manoeuvring over Rubik is in full swing. The European Commission is pressuring Germany and the United Kingdom to change the bilateral fiscal agreements they have worked out with Switzerland. If they refuse to do so, it will open infringement proceedings against Berlin and London by the end of the year. The texts have already been drafted.
The UK - Swiss deal to which this refers was, of course, Dave Hartnett's work, and gives up UK tax sovereignty to the Swiss in significant areas for good. As the report continues:
The Rubik agreements make provision for the introduction in Switzerland of a withholding tax in full discharge of all tax obligations on the assets placed by German and British residents in this country and on the income they continue to collect on these assets in the future in a variety of forms (interest, dividends, capital gains, etc).
The Commission's Legal Service considers that Berlin and London have overstepped their competences by signing these agreements, which protect the anonymity of fraudsters and whose scope partly interferes with EU rules on the taxation of savings income — and the agreement between Berne and the EU in this area. There are also certain "technical problems" inherent to the Rubik system. The rate of withholding on income from these assets paid to Germans, for example, is set at 26.375%, compared with 35% under the savings taxation agreement. The tax will also constitute full discharge of tax liability. Germany and Britain have also agreed to give Swiss financial service providers easier access to their market.
The Commission's legal experts therefore recommend the opening of proceedings against Berlin and London before the EU Court of Justice for failure to fulfil obligations.
Negotiations are, of course, going on, but that this outcome was likely was predictable from the moment these hideous and rather sordid deals that trade a little cash for exonerating criminal activity in the past without penalty whilst permitting it in the future were pout on the table.
So why did Hartnett do the deal? Is he really on the side of tax evaders? It looks like it. And now we know he's even willing to break EU law to help them. Amazing.
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And now we wait for Darren’s response to his categorical repeated insisting on this blog that the EU Commission could not and would dare not intervene.
Richard, I just got a letter from HMRC. Apparently my PAYE was underpaid but £500 last year, probably because I moved jobs.
Anyway I was wondering if you had Mr Hartnett’s email address? I figured I’d drop him a line and ask to be let off. I figure if he’s letting everyone else off for millions a few hundred quid wouldn’t be a problem.
Right?
I’m perfectly willing to become a multinational company or bank if that’s required. I believe there’s some neat perks from doing that as well.
“Hartnett, Dave (HMRC Board London)” , should work
Simon, Dave’s generosity to Vodaphone and Goldman Sachs is only possible by the sacrifices of the man in the street. Pay up and shut up. Shame on you! 🙂
My understanding is that the Vodafone case went all the way to the court of appeal and was settled only after 8 years of legal wrangling. Seems hardly like ‘letting’ Vodafone off.
Goldmans case does seem like it though
The man in the executive role of running things at the top of an organisation like HMRC needs someone to oversee what he is doing – someone who can say “Sorry, Dave you can’t do that”. As it is, he seems to be out of control.
Seems a simple job. I made a quick checklist:
1. Does Dave think this is a good idea? Tell him he can’t do it.
That’s it really.
As it happens, HMRC has a General Counsel and Solicitor, a certain Anthony Inglese CB, who is supposedly “responsible for all legal services to HMRC and for corporate governance”. Here is the great man himself being slaughtered by Margaret Hodge and Richard Bacon before the Public Accounts Committee for failing to explain why he allowed Hartnett to get away with blue murder on the Vodafone and Goldman Sachs settlement.
http://www.bbc.co.uk/news/business-15631057
Richard, my take on this is that Harnett recognised a year or so ago that his time as a public servant was coming to a close and thus his actions are designed to appeal to future employers. He is, of course, in good company on that one. Indeed in some parts of government (e.g. the MoD), I’d be surprised if they don’t run short courses in ‘how to use your public office to gain private advantage after your retire’ (or something with a snappier title) as part of preparing people for early retirement. Then again, it’s clear that a fair number of public servants need no instruction in that kind of ethically dubious practice.
So just like former PMs and Cabinet Ministers as well as mid to senior civil servants. Hartnett is no different to them – all lining up to place their snouts in the trough.
So why should we trust the public sector more than the private sector?
The answer is a serious ban on people transferring from state to private sectors at this level – even if it costs money
The Comptroller and Auditor General of the National Audit Office is none other than the former boss of PWC who was promoted to head the NAO from his previous role as Finance Director of the MoD – the same dept the NAO should be calling out for being behind the biggest waste of public funds – corruption to put in bluntly – under New Labour.
@Paul F: Vodafone lost in the Court of Appeal and were refused leave to appeal to the Supreme Court by both the Court of Appeal and the Supreme Court. So there’s absolutely no basis for Hartnett to accept a settlement that was £1 billion less than Vodafone’s own provisions! Not to talk of the obvious illegality of agreeing future liabilities for 2011 and 2012 based on 2010 profits, something that was explicitly declared illegal in Al Fayed’s case.
Goldman Sachs similarly got a deal after a protracted legal wrangling that ended with an emphatic victory for HMRC in the First-Tier Tribunal which found that the subsidiary Goldman claimed employed the workers in the UK was the same subsidiary Goldman’s MD Mike Housden told HMRC did not business in the UK thus avoiding Corporation Tax.
The whole thing stinks.
The Vodafone loss is something the right always want to ignore
I wonder why?
I’m not sure about that, Richard. It was the Tory MP, Steve Barclay, that flagged up the issue of the forward tax issue and indicated that the true loss to the Exchequer as a result should be £8 billion in rough figures during the Public Accounts Committee hearing on 7 November. Similarly his colleague in the Committee Tory MP Richard Bacon has championed the Committee’s inquiry on Vodafone. Labour’s Margaret Hodge, the Committee’s Chair has been magnificent on the issue but that’s about it from Labour. The only MP to go on record to ask for Hartnett’s resignation is Tory’s Jesse Norman of the Treasury Committee.
Obviously Vodafone had won all the way up to the court of Appeal. I read that Vodafone were going to take it to the EU and that is why HMRC decided to settle, i.e. rather get some money than the possibility of getting nothing if HMRC then lost esp as it would affect many other ongoing claims against similar arrangements?
Personally I don’t like the idea that anyone can negotiate what they pay, so perhaps the best way is for all settlement transactions to be banned, i.e. all claims have to be court ordered. But maybe pragmatically the costs of doing that outweigh the benefits. Can you imagine the cost of a 9 year battle through the courts – obviously worth it when billions are at stake but not sure if £10m is at stake.
Is there no parliamentary oversight over HMRC?
In effect HMRC has refused parliamentary oversight
That has to change
You’re quite mistaken. The ECJ had already decided in the Cardbury Schwepppes case that the CFC legislation was compliant with EU law and that it is for domestic courts to decide in each individual case, which was precisely what the UK courts did and the final decision – that of the Court of Appeal which Vodafone could not apply either in the UK or in the ECJ – was that the CFC legislation applied to the profits of the Luxembourg subsidiary. All that remained was to apply the full CT rate to the published profits for 2001-2011. But Hartnett had other ideas.
You will find commentary on Cadbury Schwepps on this blog if you search
Ironically both Vodafone and Goldman Sachs were settled after expensive legal battles which HMRC won hands down, so your argument does not stand up. On Goldman they were even given a better deal than 21 scheme users that settled in 2005 without going to court.