I have discussed this morning the Judicial Review of Ingenious Media - in which it has been found that HMRC do have the right to discuss a taxpayer's affairs with a journalist.
Now look at what HMRC told the Public Accounts Committee at the time they were briefing The Times:
Q1Chair: Thank you very much for coming to give evidence to us this afternoon. A lot of members of the Committee want to ask questions, so in the usual way, Lin, I would be very grateful for direct and as brief answers as possible, so that we can get through the business in good time.
Have you seen the report by the judge that was submitted to the National Audit Office?
Lin Homer: No, Chair. We have seen the public Report and I was grateful to be able to sit in on your private hearing yesterday, but we have not been able to see the longer report.
Q2 Chair: Our view is that you do have the discretion-I know that this is contested-and it is also in the public interest, to enable us to have at least the background documents that you gave to the NAO, so that we can understand better the systemic issues that have been of concern to the Committee by looking at the details of the particular cases. The Committee has discussed this, and of course we would be happy to look at the documents in confidence if that is your wish, but we feel that we need access to those papers to do our job properly. Are you willing to use your discretion to enable us to hold you to what I consider to be proper public account?
Lin Homer: Chair, I'm afraid that I don't agree that I have discretion in this area. I anticipated that we might well have this debate, and I have looked carefully at both our statutory base and your previous conversations. Our duty to taxpayer confidentiality prohibits me from sharing, unless either I do so in pursuit of my function as a commissioner, or there is specific statutory gateway.
One of the interesting things that I have discovered since I moved into the Department is that it has no common law powers over and above those given to us by the Commissioners for Revenue and Customs Act 2005. That is quite unusual. I have looked very carefully at the Act and the obligations on me as an accounting officer, which are different, and I think that we are keen to go as far as we can in sharing as much of the general information as we can so that I can fulfil my duty to you as accounting officer, but I think that the prohibition stands.
So they had no discretion when talking to Parliament but did when briefing a journalist.
How very odd.
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A blatant case of contempt of Parliament … worse than anything the three Plebgate police officers might have done before the Home Affairs Select Committee.
It is very odd indeed that they decided they could brief the Times journalists and seems totally at odds with their general stance on disclosure. My gut reaction is that Hartnett was wrong to brief the journalists in the way he did.
But even on the basis taxpayers affairs should be private, I see no reason why the PAC shouldn’t be briefed in private about particular tax payer issues, since it seems to me to be important that they know for example the detail about Google, amazon, starbucks etc.. How they then include something in their report without disclosing is another matter but surely not beyond the wit of man.
But, the very same judgment quoted says:
“Thus, for example, it would have been a matter for grave concern and close scrutiny by the court if Mr Hartnett had given the journalists (even in an “off the record” briefing) access to the full tax files of Mr McKenna and Ingenious Media , with all the private information which they had supplied to HMRC about themselves, even if he did think that such a course might help in some way with the collection of tax.
Mr Hartnett did not do that. HMRC had been approached by apparently responsible journalists from a reputable newspaper, who made clear their interest in discussing tax avoidance schemes (including in particular film investment schemes) and HMRC’s attitude to such schemes, and also made clear that they had a good background knowledge of their own about the subject. It was agreed that the briefing was to be “off the record.” The discussion of Ingenious Media and Mr McKenna proceeded only after it was clear that the journalists were aware of Mr McKenna’s identity and involvement in film investment schemes. Mr Hartnett did not pass to the journalists any information which Ingenious Media and Mr McKenna had provided to HMRC about their affairs.”
Yes – I noted that
But the same approach was not taken on other well known arrangements that required no more information to be disclosed and where HMRC’s opinion was not stated
That is what I am highlighting
HMRC could have stated they did not approve of Google’s arrangements in broad terms – but never came close to doing so
That would not have come near breaching the detail of their tax affairs
If yoy cannot see the point I am sorry – the decision clearly makes the point
Does HMRC disapprove of Google’s tax arrangements (as we all agree, completely legal tax arrangements)?
If HMRC does not disapprove of Google’s completely legal tax arrangements, why would they say they did/do?
They can say it is an abuse they wish to close without any problem at all
But that is not what they did
And yet they have been unambiguous in film partnership abuse – a specific UK issue
Why?
One reason might be that the film partnership abuse has already been challenged by HMRC; they don’t think it works technically and are offering settlement opportunities to taxpayers who used the schemes. Whereas Google’s (et al) arrangements work as a matter of law (whether they are successful in each individual case is a matter of fact that applies to each case differently) and HMRC wants to see cross-border cooperation on changes to the law.
But if they want change they could say so and explain why
But they don’t
And they refuse to use well known examples discussed in the press
Which is my point
Possibly they do not see it as following the law, not ‘abuse’?
Which is why I am at the OECD tomorrow to discuss what to do about it, is it?
Hmm, I obviously commented on the wrong blog entry, really…
I do agree with you on what you say in this comment, yes, but it would need to be pretty broad terms, and only to rely on information about what Google actually do that is publicly available. So they could legitimately be asked to comment on what Google had explained to the PAC in open session, for example.
However, since we don’t know what is in the documents that the PAC were asking for, we can’t say whether they fitted those criteria.
What also gets missed from the discussion on this is that the NAO is there precisely so such disclosures CAN be made – to the NAO. They can then arrange for reports to be done such as the one into the so-called “sweetheart” deals, which found that they were nothing of the kind.
Mike
I do think HMRC could be substantially clearer – for example, on whether or not they approved the approach or not
That is not a particular issue – it’s a discussion of an Article 5 position
So I think a lot was not said that could have been
Richard
“HMRC could have stated they did not approve of Google’s arrangements in broad terms — but never came close to doing so”
Perhaps HMRC accept that what Google is doing is perfectly acceptable tax planning under the current rules.
Perhaps HMRC recognise the difference between a company genuinely organising its tax affairs in the most tax efficient manner and people selling wholly artificial tax schemes.
Most people do recognise such a difference.
This talk about Google is a distraction. The PAC’s session Richard referred to above was about Goldman Sachs, Vodafone and other sweetheat deals that continue to cause immense public concern. They cost Hartnett his job. The NAO ‘investigated’ them twice and even the PAC were not convinced. UK Uncut litigated Goldman Sachs and exposed a lot of dodgy dealings. So, the PAC were right to say that there was a need to allay Parliamentary and public concerns by sharing the relevant taxpayers’ information with them. HMRC refused to do so, even in a private session, on the grounds that they would break the law if they did so. Yet, two weeks earlier, Hartnett was singing like a canary in front of journalists!
1. It didn’t cost Hartnett his job, he was already over normal civil service retirement age. He chose the time when he left, in fact I suspect he stayed a little longer than he might have done just to show that he wasn’t going because of these attacks. The precise timing had far more to do with the sad death of Lesley Strathie.
2. The NAO, which did have access to all the confidential information, asked Sir Andrew Park, a judge who really knows his way around the tax system, to investigate the so-called “sweetheart” deals, also giving him access to all the information he thought he needed. His report said that all the deals were within the bounds of reasonable settlements, and one was more advantageous than he would have expected for HMRC. There were, however, problems with the processes which were used to reach the settlements, and on one of them (which was allegedly Goldman Sachs) there was a catalogue of poor handling. Even so, he still thought the final outcome was reasonable.
3. None of the detail that Sir Andrew Park saw is remotely covered by the decision in Ingenious Media, and I don’t believe even Richard is arguing that it is.
4. Dave Hartnett fell into a trap which I often warn people about (because I’m far too soft as a journalist…) that “off the record” does not mean I won’t quote what you said, it means I won’t attribute it to you. I will instead, in a situation like that, attribute it to “senior sources within HMRC”, unless I have specifically agreed something else. What you need to specify is that it is for “deep background only”, or “not for publication, even unattributed”.
@ Mike Truman, I note that you did not address the ratio of the judgment, which is that HMRC have the discretion to talk to journalists, off and on the record, about a taxpayer’s affairs without breaching the confidentiality provision of s 18 CRCA (and a fortiori had the discretion to do so before the PAC all the time they were denying it). This is something you had consistently argued was not the case. See for example, ‘Westminster Confidential’ Taxation, 27 October 2011 and ‘Tax Prat of the Year’, Taxation, 7 February 2013.
You used your position as the editor of Taxation to push your erroneous views on the purported absolute confidentiality of taxpayers’ affairs. This judgment shows you are wrong. Are you going to apologise to your readers? Furthermore, are you going to apologise to Margaret Hodge for calling her a ‘prat’ for, amongst other things, insisting that HMRC had the discretion to discuss the affairs of the companies involved in the ‘sweetheart tax deals’ with her Committee, given that this judgment has vindicated her?
My reading of the decision is that HMRC would be OK talking to journalists about what the journalists already know, but it would not be acceptable for HMRC to provide the journalists with any new information and especially not anything provided to HMRC by the taxpayer in question. So they can discuss in general terms how they would, say, approach a transfer pricing enquiry into a royalty stream that is known to exist, but they can’t start illustrating it with actual numbers.
At the PAC, Hodge has been very insistent about getting HMRC to provide details of the tax affairs of various taxpayers which are not already public. That is clearly an entirely different matter.
To say that HMRC should provide detailed figures for Starbucks because the public know that they buy coffee from Switzerland is like saying Prince Philip’s entire medical history should be published because we know he went to hospital a few months ago. Completely different in kind and in degree.
Chris, what do you know of Ingenious? Whether or not I approve of film schemes, my understanding is that Ingenious were the best of the bunch as far as raising finance of the film industry using tax reliefs written into the legislation. However according to you they sell wholly artificial tax schemes? Yet at the same time Google is indulging in perfectly acceptable tax planning despite the fact that their set up is highly contrived and done deliberately to avoid taxes in countries in which they do most business?
As I said in an earlier comment all of this smacks of a two tier tax system. Where “Royalty” such as Google, Apple, Amazon etc etc are above the law in much the same way as “too big to fail too big to jail” Big Banks.
I’m absolutely fed up “corporate socialism” as I hope most ordinary and working people will be when they wake up and realise how they have been conned for the past thirty years. My only hope is that more like Russell Brand will come forward to help in the awakening process and we will at last get real change where people come first before businesses.
If you’re relying on Russell Brand to bring about a social revolution, good luck to you.
I am not
I am relying on millions of people to do that
Mike Truman, ‘Westminster confidential’, Taxation, 27 October 2011, 6
Duty of confidentiality
So a key section in the Commissioners for Revenue and Customs Act (CRCA) 2005, s 18, which governs the operation of the merged HMRC, sets out a duty for their officers to ensure that tax information is kept private:
‘(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.’
Laudable, but of course it cannot be an absolute duty. There are times when HMRC has to give information, even information about individual taxpayers, to others. If a bailiff is being instructed to seize goods, clearly they need to know who they are seizing them from, and where they live. If there is to be a criminal investigation, then other people such as prosecutors are going to have to be told the details. So there are exceptions to the prime duty not to disclose, of which the first is:
‘(2) But subsection (1) does not apply to a disclosure … which:
(i) is made for the purposes of a function of the Revenue and Customs; and
(ii) does not contravene any restriction imposed by the Commissioners.’
PAC spat
Which brings us to the Public Accounts Committee (PAC), their Chair Margaret Hodge, and the spat which they, and in particular she, is having with Dave Hartnett.
Someone in HMRC, entirely in contravention of that duty in s 18, has leaked documents about the tax affairs of Goldman Sachs. To me, the real story is that this person, whoever he or she is, has not just breached the trust put in them by HMRC as their employer, but has committed a criminal offence — the duty in s 18 is backed up by a criminal sanction in s 19. While sources should always be protected by journalists, they also have a duty to consider why they are being leaked to, and to examine that material critically.
However, the committee seemed unconcerned about this criminality. They wanted to concentrate on the involvement of Hartnett in settling a tax avoidance case with Goldman Sachs. Time and again at its most recent hearing on the issue, members of the committee, particularly Hodge, questioned Hartnett about the case; time and again he responded that he could not answer because of taxpayer confidentiality.
This did not satisfy Hodge, because there was also a leak of advice given to Hartnett about what he could and could not disclose. In printing this, The Guardian seemed to accept without question that the spin given on the document, apparently by the leaker (helpfully highlighted by crosses against a couple of items), was correct — Hartnett could disclose if he wanted to. In fact, (as I explained last week on our blog) it has much the same message as the explanation subsequently given in writing to Hodge by Hartnett. Extracts from the latter are in our news item about this on page 3.
Functions and permissions
One of the functions of HMRC is to help the PAC in its role of holding government to account for its efficiency. HMRC therefore accept that the PAC should be given details which do not allow taxpayers to be identified.
However, HMRC believe it is far less clear that information which identifies taxpayers can be submitted to the PAC. Partly this is because such information is clearly much more sensitive, but it is also because HMRC believe taxpayers would be far less ready to fulfil their duties if their information might be disclosed. So there is some real doubt (and remember this is a criminal offence) whether the information can be disclosed at all.
Second, even if it can be disclosed, should it be? The absence of a prohibition does not mean a permission. It only means that the ‘decision maker’ (in this case Hartnett himself) has to consider whether or not it should be released. For broader but similar reasons, HMRC have always concluded that, even if they do have the right to make such disclosures, they should not. That is part of the guidance given to officers, and made public for taxpayers in the internal manuals on HMRC’s website.
Guarding guards
But what about oversight? One of the key questions in this affair is quis custodiet ipsos custodes — who guards the guards? To which HMRC give a straightforward answer: the National Audit Office. The NAO has similar responsibilities for confidentiality as HMRC. As a result, HMRC are allowed to give, indeed are bound to give, the NAO any information it requires to do its job, including confidential information about individual taxpayers and their affairs, knowing that it will not be disclosed further.
That, however, is not enough for some on the PAC, and in particular its Chair, who made no attempt to hide her disgust at the answers given by Hartnett during the last committee hearing. She clearly believes that the PAC should be the final guardians; they should be the quis who custodiet.
If that is what Hodge believes, then I have a suggestion, indeed a challenge, for her. Put HMRC under a duty to provide the information if certified as necessary by the PAC itself. In fact let me be even more helpful and draft the necessary clause to amend CRCA 2005, so she can move it as an amendment to the Finance Bill 2012:
‘At the end of CRCA 2005, s 18(2) add:
‘(iii) which is made in response to a request from the Public Accounts Committee, including a request for information about identifiable taxpayers …’
But, of course, this puts the PAC in the position of being able to ask for the tax affairs of others to be disclosed while their own can be kept private. It is hard to see how that could be justified — we are back again to quis custodiet, I think. So let’s take a lead from the US presidential rules and add a bit more to that draft clause.
‘… provided that, at the same time, the PAC requests that the last three tax returns submitted by each member of the PAC are disclosed, to the extent that they have not already been, and are made available to the public on the House of Commons website.’
I think that’s fair, don’t you? Sauce for the goose, and so on? I’m sure if I have made any errors in the drafting HMRC will be happy to help correct it. So if she is serious about the PAC having the power to hear about the tax affairs of named individuals or businesses, I look forward to seeing that amendment in the name of Margaret Hodge next April. I will follow the progress of the amendment with interest, and I wish her the very best of luck in trying to persuade her fellow MPs to vote for it. I think she might find that she needs it…
I wouldn’t have imposed on the readers of this blog by posting so much of what I had previously written, but thank you for doing so. As far as I can seem that is complete;y consistent with the Ingenious Media judgment, given that (from memory) the details she wanted to discuss were specifics about the liabilities and the negotiations about them. As I said on the previous blog post, I think it gets us away from HMRC not even being able to utter the name of G””d””n S”””s, but it doesn’t allow any significant discussion about their affairs.
If the argument is that the information has already been leaked and therefore falls within the definition of what the journalists already know, I doubt very much that the judge would want to equate a knowledge that someone entered into film schemes with possession of some detailed, confidential, leaked, HMRC papers.
For the rest, Andrew Jackson above has said what I would say perfectly.
… and let’s not forget that HMRC’s top lawyer, Anthony Inglese, was forced by the PAC to swear an oath to tell the truth, when he claimed repeatedly that he couldn’t explain his role on the Goldman Sachs and Vodafone deals on the grounds of taxpayer confidentiality:
http://www.bbc.co.uk/news/business-15630606
He was made to take an oath because the PAC did not accept his account of how he, as a lawyer with obligations of client confidentiality, operated. The PAC seemed to think lawyers acted as decision makers and told their clients what to do. And the evidence he gave under oath was no different to the other evidence he gave. Nor did the PAC discern any contradictions or take the matter further.