Osborne’s grandstanding on Google tax deal showed need for greater HMRC autonomy, report finds

Written by Jim Dunton on 25 August 2021 in News
News

MPs want greater transparency and scrutiny – and less interference from the Treasury – on bespoke taxation deals with large firms

Credit: PA

A group of MPs has called for HM Revenue and Customs to be given greater powers to ignore directions from the Treasury when those instructions would result in less tax being collected, potentially through bespoke deals with tech giants and other global firms.

The call from the All-Party Parliamentary Group on Responsible Tax and Anti-Corruption, which is led by former Public Accounts Committee chair Dame Margaret Hodge, came in response to a government consultation on reforming the UK’s tax administration framework.

MPs said that while HMRC is officially a non-ministerial government department – meaning that in principle it is independent from government in terms of decision-making, it is also obliged do what it is told by the Treasury under section 11 of the Commissioners for Revenue and Customs Act 2005.

The group said the practical functioning of HMRC’s relationship with the Treasury is “almost entirely opaque” and it possible that operational choices it has made on tax – such as settlements reached with huge global firms – are actually the result of Treasury instructions.

It pointed to the controversial tax deal reached with Google in 2016 as an example. MPs said the settlement “seemed to have been stage-managed so as to be announced by [then chancellor] George Osborne at Davos”.


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The report, which the APPG said is an expansion of its response to the government consultation, said it is possible that HMRC’s credibility on tax-collection is being undermined by decisions that have actually been made in the Treasury.

“HMRC may in the past have been directed by the Treasury to go easy on large corporates generally, or to make no disclosures to the Public Accounts Committee about individual settlements with large corporate taxpayers,” MPs said.

“HMRC’s status as a non-ministerial department appears to have a double function,” MPs said. “In addition to shielding individual taxpayers’ tax affairs from ministers, it serves to shield the Treasury from accountability on a policy level for decisions in individual cases ostensibly taken independently by HMRC.

“It follows that any policy intervention with the purpose of improving scrutiny of HMRC’s settlements with large corporate taxpayers needs to address the possibility that HMRC is being held accountable for decisions effectively taken by the Treasury.”

Reining in Treasury powers
The APPG proposed amending the Commissioners for Revenue and Customs Act 2005 to prioritise HMRC’s revenue-collection objectives over complying with “directions of a general nature given to them by the Treasury”.

MPs suggested a specific form of words – emphasising that HMRC should have the goal of obtaining the highest net return directly from taxpayers that is practicable” – to head off arguments from ministers about light-touch approaches to tax leading to increased total revenue.

The group also wants to see the creation of a new parliamentary committee empowered to publicly scrutinise HMRC settlements with large corporate taxpayers.

“Neither the principle of taxpayer confidentiality, nor the rules which give effect to that confidentiality, are absolute,” MPs said. “With appropriate procedural safeguards, confidential information about large corporate taxpayers could be made public for the purposes of scrutiny by a parliamentary committee convened for that purpose.”

The APPG said legislating for MPs to get the information that the committee would scrutinise could follow similar lines to section eight of the National Audit Act 1983. They noted that an administrative route for selecting which cases would be scrutinised would also have to be created.

MPs said one possibility would be for parliamentary scrutiny of tax settlements reached with large corporations to take place behind closed doors, in the way that parliament’s Intelligence and Security Committee conducts its business.

However, they noted that there would be a public-assurance “shortfall” with that approach.

 

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