From a particularly idiotic online petition:

Our tax chief had secret lunches with Vodafone and Goldman Sachs and then handed them billions in tax breaks – while keeping Parliament in the dark!

No. HMRC hasn't handed out tax breaks. It has taken a view on how the tax law should be applied and, in both cases, decided that it the benefit of settling now outweighed the cost of enforcement, taking into account the likelihood of success and potential impact on future cases.

The tax under dispute in the Goldman Sachs case is measured in the tens of millions, not billions. It's by no means a trivial sum, but it's a country mile from UKuncut's hyperbole.

The idea that HMRC kept Parliament in the dark is particularly lunatic. Parliament is an oversight body, not a managerial function. All sorts of activity takes place in government departments of which Parliament is unaware. That's why we put each department under the watchful eye of ministers. Ministers are then accountable to Parliament for what happens in their departments on their watch. 

MPs are outraged, claiming we are owed over 25 billion pounds in back taxes from these and similar dodgy deals. But the tax agency has blocked an inquiry into the scandal and refuses to release documents to shed light on why these tax breaks were ordered in the first place.

MPs didn't claim we are owed over 25 billion pounds of back taxes. The PAC report noted that there is some £25 billion currently under dispute. But that's not the same thing at all. HMRC thinks it is owed £25 billion but the taxpayer disagrees. Therefore there will need to be some form of dispute resolution, potentially involving the courts, to decide who is right. Do UKuncut really believe that the tax due is the amount HMRC asks for first time? Do they really believe HMRC never gets it wrong?

Tim Worstall covers this issue in more depth here.

By acting together now we can ensure full transparency on the Goldman Sachs and Vodafone deals, and get them to pay the tax they owe. Let’s turn up the heat -- sign the petition to David Cameron for tax justice -- we’ll deliver it with a splash next week.

I think you'll find that the Vodafone case is settled and that due process will make it impossible to reopen.

And let's all be thankful that we do actually have a process for determining the tax due in this country instead of the stupid Humpty Dumpty process that UKuncut seem to think they want. 

Filed under: Taxation with tags goldman sachs, hmrc, idiots, paye, tim worstall, ukuncut, vodafone
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Owen and Ritchie fall over themselves in their determination to prove who is the more ignorant about business taxation.

Owen:

Then Ritchie:

And finally Ritchie (remember, "you're wrong" is not debate):

Sean Sullivan has got it right and our chief cheerleaders for the left have got it wrong. Even small changes in taxation can cause phenomenal difficulties for businesses. Here are some illustrations:

1. On 24 November 2008, the then Chancellor, Alistair Darling, announced that he would be reducing the rate of VAT from 17.5% to 15% with effect from 1 December 2008. He gave businesses one week's notice of this profound change. Many businesses had already printed their 2009 brochures and price lists. Thanks to Darling's change they had to either pulp them or put stickers over every price. Website-based businesses also had to scramble to generate the correct pricing. This generated a phenomenal amount of admin and, thanks to Darling's desire to create political capital out of the increase, business had virtually no time to react to it.
2. When the corporation tax rate changes, businesses have to do more than just pay tax at the new rate. They also have to revalue their deferred tax balances and fix the reconciliation between the actual and effective tax rate. But that's not all. Typically they'll need to explain to critics (such as Ritchie) why changes in their accounts are legitimate transactions and not just the fruits of tax avoidance. This isn't just a simple change, it's much more complex than that.
3. Small changes in income tax can also create problems. Businesses have got to get every last change to income tax right, otherwise they'll produce the wrong numbers in their employees' PAYE figures. And that's serious business, because employees typically hate it when they have more tax to pay in one year because their employee reported the wrong figures to the tax office in the previous year. It glosses over the phenomenal amount of work businesses do to ensure that personal income tax paid by employees under Schedule E is right.
4. And today we have a new example, courtesy of Wales. Wales has decided that retailers must charge a minimum of 5p for single-use carrier bags. But the price is still 5p regardless of the VAT status of the business. So unregistered businesses must charge 5p and VAT-registered businesses charge 4.17p + VAT. But that's not all. "For the purposes of Corporation Tax and Income Tax, receipts from the compulsory charge on single-use carrier bags should be brought into account in calculating trading profits. The Welsh Assembly Government expects the proceeds to be used to fund good causes in Wales and relief may be available where the normal charitable donations/gift aid rules are met." Sure, it's only a 5p charge, but it means profound changes to businesses who, if they get it wrong, will face fines and penalties from HMRC.

We know Ritchie was once the brave entrepreneur that sold Trivial Pursuit in Ireland. And it's obvious that Owen has never had a real job in his life. Neither has any idea of what it means for a business owner to react to the torrent of petty tax changes that has plagued this country over the last 15 years.

Filed under: Regulation, Taxation with tags corporation tax, idiots, income tax, owen jones, paye, red tape, richard murphy, vat
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Richard Murphy says says over at his place that people who have underpaid tax know about it:

And let me be candid – almost all those who now have tax liability will know, or should know, they have such liability. That is because the vast majority will relate to the non-processing of company car data. If a person got their notice of coding from HMRC, had a company car, and saw they were not being taxed on it. Of course it may have been another benefit. And they’d have known they got it, because their employer has to give them a copy of form P11D sent to HM Revenue & Customs. And despite seeing that their code was not being adjusted for the benefit they got they took no action to correct the situation by submitting a tax return, which they could have done. candidly, I suspect a great many hoped they’d get away without paying the tax. And now they won’t.

This makes a number of rather heroic assumptions.

It assumes that the notice of coding actually arrives.  Mine didn't this year.  I put that down to HMRC being generally incompetent.  I have to now take it on faith that my tax code is about what I expected it to be, because HMRC certainly aren't telling me how hey calculated it.

It assumes that if the coding notice does arrive that people actually have the capacity to understand it.  Not everyone is as intelligent and knowledgeable about tax as, say, Ritchie.  And, I'm sorry, coding notices might as well be written in Sanskrit for the amount of information most people can get from them.  They are often complete gobbledygook.

It then assumes that people do in fact know that many items are taxable benefits.  Ritchie knows because he's a tax expert.  I vaguely know because I had to study them for my exams.  But most people, I suspect, don't really know.  They trust HMRC to get it right.  The rules are fiendishly complex.  Cars have a different set of rules to vans.  Cars now have a different set of rules depending on their carbon emissions (I think). Bikes are totally different (er, I think, anyway).  Other types of benefit have similarly arcane inclusions and exclusions.

The fact is - HMRC should be required to close its prior year assessments after a reasonable period of time.  From memory, they get 12 years, perhaps more if it's deliberate fraud, but that's far too long for an ordinary individual who thought that the tax year was closed.  Let's give them three years to go back and ask for more money from a taxpayer, and let's make them look back indefinitely to repay overpayments.

If HMRC can't get its house in order within three years, it doesn't deserve the money.

Filed under: Other blogs, Taxation with tags hmrc, paye, richard murphy
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The Times carries some useful tips today on how to check your tax code, the simply brilliant British invention that ensures that income from salaried employment is (usually) taxed at precisely the right amount. So I'm astonished to learn in the Telegraph via Guido that the Tories plan to axe the Pay-As-You-Earn system (PAYE) if they gain power.

Amazingly, PAYE dates from 1944, decades before computers. While it may be an imposition on employers, which probably explains why countries like the US don't have it, its huge benefit is that it liberates ordinary people with simple tax affairs from the need to file a tax return.

I don't see how a cashflow based taxation system will work.

Firstly, Britain is obsessed with having a progressive tax system; 'progressive' in this context means tax rates that go up as you earn more money. PAYE handles this by forcing the employer to do all the hard sums. If you get income from another source, they tell HMRC which then fixes it through either this year's or next year's tax code. How will the next pound you earn be taxed under the Conservative proposals?

Secondly, it's far from trivial to work out what a particular piece of income might be. Let's say I receive a Paypal payment from someone. Is it because I sold them something on eBay (possibly taxable at the marginal rate if it's a business, but not otherwise)? Is it a gift (not taxable)? While clever computing might help in some situations, it looks like another NHS supercomputer problem in the making. Times a million.

Thirdly, as Guido points out, there are serious privacy issues here. The State has the right to take you to court to force you to hand over money to it. That's not quite the same as allowing it instant access to your PIN so it can take your money when it likes.

Fourthly, this is simply bad politics. The Tories will be lifting a burden from companies, which cannot vote, and placing a heavy administrative burden on people, who more or less do. Lessons can be learned from the US. There, a quarter of a billion people have to navigate the fiendishly complex IRS rules and regulations to file their own personal tax return. Then they have to do exactly the same again in respect of their state taxes for every state they have worked in. It's insane.

Yes, there are faults in the system. But let's not underestimate how much PAYE has freed millions of ordinary people from tax filing drudgery. It doesn't deserve to be binned just yet.

Update: Clever Tim Worstall sees the upside - pressure for lower taxation.

Filed under: Current issues, Other blogs, Taxation with tags conservatives, guido fawkes, hmrc, nhs supercomputer, paye, privacy, tax returns, telegraph, tim worstall, times
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