The Revenue’s Offshore Tax Blunder

(Guardian) – IF YOU HAVE JUST HAD A NEW TAX CODE or VAT demand, it is likely that the Revenue & Customs office that issued it is managed in a tax haven.

And if you have recently visited an old Abbey National office of Santander Bank you are on the premises of an offshore managed office.

You probably didn’t know either. Today an analysis by parliament’s watchdog, the National Audit Office (NAO), reveals the offshore company that managed both deals is legally set to avoid paying hundreds of millions of pounds of tax to the very offices making tax demands on you.

The findings by the Commons public accounts committee is the latest revelation on signing an outsourcing contract eight years ago, which MPs describe today as “highly damaging to the department’s reputation”.

In effect, to save an estimated £1.2bn, HM Revenue & Customs signed a £3.3bn contract with a firm now called Mapeley to hand over for 20 years the ownership and management of 591 tax offices, including the freehold of 132 offices to an offshore company then based in the Cayman Islands.

Today, the cost of contract has risen to £3.87bn, the maximum potential savings have dropped by £300m, and the department has found that it cannot recover its own VAT from the rent. It will have to draw up contingency plans costing over £100m should the company walk away following a decision to close 130 tax offices as part of the first wave of efficiency savings.

But the most extraordinary revelation is the rare glimpse given into tax avoidance by auditors from the NAO. After a stormy hearing at the Commons public accounts committee, the company allowed the NAO access to its offshore books to see the effect of the loss of tax revenue to the government. The figures, hidden at the back of the report, are staggering.

If Mapeley, now part of the US offshore Fortress group, was based in Britain rather than Bermuda, the tax coffers would be swelled by £184m. Easily enough to build a teaching hospital or renovate a lot of schools. In fact, the company is expected to pay £14m – saving £170m. That is hardly enough to renovate a big secondary school. Furthermore, Gordon Brown’s efficiency savings by closing tax offices is going to give the offshore company a tax bonanza if it can get a good price for them. Only the recession is stopping them.

These tax savings are only on the Revenue & Customs contract. The company has a similar deal with the old Abbey National, and if branch closures follow bank mergers under Santander, logic dictates even more tax savings.

No wonder the NAO concludes, in its prosaic way: “There is unlikely to be any overall benefit to the exchequer from such arrangements as any apparent savings for the department are accompanied by reduced tax revenues.”

With everybody living in this country having to pay more tax and face cuts in services to pay for the bailout of the banks, the prospect of the Treasury being deprived by the Revenue of extra tax is obscene.

The people who negotiated this deal should hang their heads in shame, and the politicians – and that includes Gordon Brown, chancellor at the time – should be brought to account for such an inept negotiation.

For while we debate the scale of tax rises and spending cuts in the general election campaign, the directors of the company involved must be laughing all the way to their offshore bank.


Intercepting Mail Is Worthy Of The Stasi

(Henry Porter) – The last days of this dreadful government are being accompanied by an attack on rights and privacy that seems unprecedented during Labour’s 13-year rule.

The government is now drawing up plans to amend the Postal Services Act to allow tax inspectors to intercept and open people’s mail before it is delivered. Given the state’s ambitions to collect all communications data this is hardly surprising, but we must ask ourselves how many more rights are seized by government and its agencies before Britain becomes the GDR‘s most obvious European imitator.

Currently postal workers have the right to intercept suspicious letters and packages and pass them to HM Revenue & Customs (HMRC) and then at an agreed moment the item is opened in front of the addressee. The change in the law will mean that HMRC will be able to open whatever it likes without the addressee being present or being made aware of the interception.

As usual, the government and HMRC public relations people underplay the wide-ranging and dangerous nature of this proposal by insisting that the new measure is simply designed to deal with the problem of tobacco smuggling. But the change, disclosed in a document published with the budget, means that HMRC will be able to trawl through private mail pretty much at will.

Quoted in the Daily Telegraph, Heather Taylor, a senior tax partner at Grant Thornton, said: “This seems like a very small and limited change, but it could be a very big step for increased powers HMRC. Once new powers are in the hands of HMRC they tend to be extended.”

This is a very alarming development, and it is worth remembering who the HMRC employees work for and who is paying the bills for the enormous waste of money by government that, together with the attack on democratic rights, is one of the dominant features of the last 13 years. They work for us, the taxpayers – British citizens who are now to be relegated to the units of control familiar to the East German authorities.

Years ago I found myself in a dismal room at the Stasi headquarters in the East German town of Leipzig and saw the piles of opened mail left by Stasi officers when the Berlin Wall came down. There was a pulping machine, adapted from a piece of agricultural machinery, which had been hastily used to destroy the evidence of the massive programme of interception. It was an impressive sight and to me a lasting symbol of the East German dictatorship.

It seems extraordinary that we are about to allow the exact same type of interception to be established in Britain with such little complaint. How long will it be before we protest? Where is the political leadership needed to assert that these sorts of laws are unacceptable in a democracy? And for Pete’s sake, how does the government square the measure with the rights to privacy “guaranteed” by its own Human Rights Act?