Tax in the dock

"Austerity economics is the policy of the powerful" writes UK Uncut on its website.  The not-for-profit campaign group, made up of volunteers, has been working to highlight, since its inception in 2010, both the UK coalition government's cuts to public services, and the "unfair" tax regime where many big companies and multinationals are legally able to avoid or reduce their tax bills considerably.

Their latest campaign has been to uncover so-called "sweetheart" tax deals where UK tax collector HMRC (Her Majesty's Revenue and Customs) has agreed to deals with several big unnamed companies writing off billions of pounds in tax and interest on tax owed; one of the companies named is the investment bank Goldman Sachs.

'Sweetheart' tax deals

"What we discovered yesterday was that Goldman Sachs was let off paying 20 million pounds in tax," says Murray Worthy, director of the UK Uncut legal action team. Worthy is part of the group that mounted a high court challenge against HMRC, asking the judge to declare HMRC's deal for Goldman "illegal."

And it's not just Goldman Sachs that has potentially gotten away with a reduced tax bill. Worthy told DW that Goldman Sachs is just the tip of the iceberg. "The Public Accounts Committee [in the UK parliament] has looked into this subject, and there could be tens of companies or more who have gotten away with even bigger sums."

Worthy references the British newspaper, The Guardian, which at the end of April published leaks estimating that four other big beneficiaries of sweetheart tax deals had brought in 4.5 billion pounds to the British Treasury.

But Margaret Hodge, chairperson of the Public Accounts Committee, herself said, "If we got 4.5 billion pounds, then 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."

The 'tax gap'

The British government itself estimates that its tax gap (the money that should have arrived in revenue but didn't) for the financial year which running from April 2010 to April 2011 was 32 billion pounds - which is 6.7 percent of the total tax HMRC estimates is due.

British chancellor George Osborne pledged in the 2012 budget to continue adding millions to help reduce tax evasion and avoidance, and said that HMRC has already raised 547 million pounds through voluntary disclosures and 140 million through follow-up and investigations. HMRC also said that it is stepping up work in "making sure multinationals fully declare their UK profits and pay the tax due in the UK."

'Cabinet of millionaires'

But groups like UK Uncut say that these are just empty words. It calls the government "a cabinet of millionaires" who have decided that the poor must pay the price "for the recklessness of the rich."

And the group wants to highlight the unfairness of one deal for the big companies, and another for the common man on the street. This is why they want the high court to declare secret and private "sweetheart" tax deals illegal.

Worthy explained that the 20 million pounds in question with Goldman Sachs should have been interest on tax owed for bonuses paid to bankers in London via accounts in the British Virgin Islands. He claims the sweetheart deal came about because Goldman Sachs in 2010 was threatening to pull out of a bankers code initiative introduced by George Osborne, which was intended to make bankers pay their fare share of tax.

Pulling out would have damaged the credibility of the new policy, and so the allegation is that HMRC let Goldman Sachs off on tax interest to keep it in the deal, thus avoiding embarrassing the chancellor.

UK Uncut had originally demanded that Goldman Sachs pay the 20 million pounds immediately to the British Treasury, but as the legal case progressed and UK Uncut was advised that it couldn't reverse the deal made by HMRC, it sought to have it declared illegal instead.

'Strongly contest' judicial review

HMRC itself said in a written statement sent to DW: "We strongly contested the judicial review brought by UK Uncut and demonstrated that we acted legally." In court it believes that the barrister "made it very clear that questions of personal embarrassment were completely irrelevant to the decision to stand by the settlement." It concluded that "decisions concerning tax settlements are made by HMRC, and ministers play no part."

The high court decision, said Worthy, is still a couple of weeks off. He added that the group just wants to make sure that the British tax payer doesn't lose out on money believed "rightfully" owed by companies like Goldman Sachs.

Angry citizens

Anger among regular citizens in the UK is huge. Worthy at UK Uncut added that while it is understandable that the tax authorities make settlements with large companies, they should be forced "to follow certain rules," and there should be no "package deals, so that there are no favorites, no sweetheart deals, and no one gets preferential treatment."

Worthy summed up what many in the UK feel by saying it's incredible that "in a time of austerity, and public spending cuts, an enormous financial institution like Goldman Sachs should be allowed to get away not paying 20 million for no apparent reason."

'Backroom' and 'secret' deals

He concluded saying that the biggest problem is that these deals are "backroom" and "secret"; because of client confidentiality, HMRC refuses to discuss the details of its clients' settlements, which makes it difficult to find out how much HMRC is really losing out on.

Worthy explained, "there is no oversight, and no one is checking to make sure that [HMRC] is doing its job properly." He feels there is "complacent acceptance by HMRC where companies are just able to dodge enormous amounts of tax and that is seen as something acceptable; we want to make it clear that it is not morally, politically, or [if the challenge prevails] legally acceptable."

Beyond tax collectors

Worthy said this is really about government policies, including the worrying aspect of a link between many of these big companies and the government. "There's a real sense here that ministers are much more interested in keeping big business onside, rather than ensuring they get a good deal for people in Britain," he concluded.

As UK Uncut awaits the court decision, it remains confident that it has a strong legal argument, and despite HMRC's protestations, can prove that the latest deal with Goldman Sachs should be declared illegal.