Tax Man Fouls Up

As IF a National Audit Office report last month detailing 44m missed telephone calls last year (47 percent of those made) didn't pose enough questions over HM Revenue & Customs' "contact centres", the Eye has discovered some very unusual arrangements for choosing the people to run them.

HMRC's first call centre, and still one of its largest, is in East Kilbride, just outside Glasgow. Since June last year it has been managed by a certain Robert Bowering, a call centre veteran with firms including HSBC and call centre outsourcing firm beCogent Ltd. But his appointment at HMRC was far from his first encounter with the taxman. At Linlithgow sheriff court in March, just three months before he started working at HMRC, Bowering had been made bankrupt by ... HMRC!

Bowering's debt, the origins of which are not known, stands at £75,545, of which the Accountant in Bankruptcy (Scotland's insolvency service) officially estimates it will recover, er, £0.

So how did a man made bankrupt over unpaid tax land a job advising everybody else on their tax bills? He was brought in - on higher pay than the normal level for his grade - by a personal friend of his: the department's director of contact centres, Linda Maslen. Until the Eye became interested the two could be found as each other's "friend" on their Facebook pages and worked at HSBC's firstdirect telephone banking business at the same time in the 1990s.

HMRC insists that, although Maslen had 'I "advocated" her chum's appointment, the correct procedures had then been followed taking into account "the risks posed by appointing someone who is insolvent, and the organisation's ability to manage those risks". So that's all right, then.

MEANWHILE HMRC's new IT systems provided by the Aspire consortium of Fujitsu and CapGemini are proving every bit as useless as the ones they took over from previous supplier EDS under an £8bn contract running until 2017.

Problems reported to the Eye since Christmas include employees being sent the wrong tax code and the computer system being unable to perform the simple task of processing the repayment of overpaid tax. The current routine involves waiting for a "manual" repayment that should have been consigned to history in the 1980s, but with the modem twist of umpteen calls, often unanswered, to various "contact centres" before any action is taken.

Others report that, having stopped taking cheques this year, HMRC's computers don't recognise direct debit VAT payments properly, so many who have paid are shown as being late and face penalties and a greater chance of a full investigation.

Just as well the government is rolling in money and efficient tax collection isn't a priority at the moment!

CARBON TARGETS

"THE recession will not deflect the government's efforts to cut emissions and move to a low carbon economy," announced climate secretary Ed Miliband defiantly last month. But since he was responding to a report from Lord (Adair) Turner's committee on climate change which reveals that Britain is meeting its carbon emission targets only because of the recession, this was so much hot air.

A couple of weeks before Miliband's statement, parliament's environmental audit committee pointed out that current government policies and investment plans were nowhere near adequate to produce the emissions cuts required by 2022, never mind the higher ones the government should be aiming for based on its scientific advice. It also criticised the reliance on the carbon emissions market - under which the right to generate C02 is traded among power suppliers - since the price of carbon is far too low and merely encourages investment in infrastructure such as gas-fired power stations that still generate too much carbon to enable the targets to be hit.

Not only does carbon trading hamper investment in lower carbon power generation, it also flatters even the current poor record on emissions control. Under the "clean development mechanism", extra credits are handed out for what are judged low carbon investments overseas. Yet the value of these investments is highly questionable: often they are not all that green or they would have gone ahead anyway.

Thus the environmental audit committee recommended that these offsets "should not score ... as having reduced emissions in the UK by an equivalent amount". But since they are deemed to account for roughly a 3 percent reduction in emissions - even more important in meeting current targets than the helpful recession - that's unlikely.

REVOLVING DOORS
WHILE the heads of the army and navy, General Sir David Richards and Admiral Sir Mark Stanhope, argue about their share of military spending ahead of a strategic defence review, one supplier to the RAF is trying to maintain good relations with the Ministry of Defence by hiring one of the MoD's top staff.

Last month Paul Stein, the MoD director general of science and technology, became chief scientific officer for Rolls Royce whose extensive defence business is concentrated in the air. The company helps build and run jets like the Eurofighter Typhoon; it wants its higher spec, more expensive engine in the already hugely expensive F-35 Joint Strike Fighter; and it is also helping to build the very much delayed air-to-air refuelling planes as part of the "Airtanker" PFI.

The advisory committee on business appointments was clearly concerned about this latest turn of the revolving door between the MoD and the arms industry. For not only did it ban Stein from being "personally involved in lobbying MoD ministers or crown servants" for 12 months, but it also insisted that "he should not play any part in assisting his new employer bid for any new MoD contracts".

In an unusual move the committee also announced: "As an additional safeguard the committee asked for, and received, written confirmation from the company that they understood the conditions recommended by the committee and would abide by them if imposed."

 

Vodafone tax dodge latest... "I’m not a tax specialist,” admits HMRC chief exec. One law for the taxman's mate; another for honest men.

VODAFONE-A-FRIEND AT HMRC

SHE SAID IT: ‘I’m sorry, I’m not a tax specialist,’ admits HMRC chief exec Dame Lesley Strathie   If HM Revenue & Customs chief executive Dame Lesley Strathie is to be believed, Vodafone’s sweetheart tax deal (see Eyes 1270 and 1275) relieving it of several billion pounds of potential liability, was all above board: “I am satisfied as the accounting officer that the proper process took place here.” So she said to parliament’s public accounts committee last week in what, for a Sir Humphrey-grade mandarin, is a neck-on-the-line statement. When Tory MP Richard Bacon pressed her on specifics, however, she affected to know nothing, prompting the obvious question – which alas nobody asked – of how she had satisfied herself the deal cut the mustard. Questioned on the way HMRC tax boss Dave Hartnett had brought in his favourite tax consultant, David Cruickshank from Deloitte, to advise Vodafone, Strathie replied: “I don’t know that he was brought in”. This was either a fib or an admission that she has not actually looked into the deal with which she professes satisfaction. It was, she blustered, “absolutely wrong to suggest the permanent secretary for tax did some deal in private” (er, which is precisely what happened), before stonewalling awkward questions on the detail in order to protect “taxpayer confidentiality”. ‘Urban myth’ This selectively deployed principle did allow Strathie, however, to refer to HMRC’s press statement dismissing the Eye’s reports as “urban myth”, since Vodafone had cleared the comment (even though the law that HMRC cites when it wants to keep schtum makes no allowance for a taxpayer’s consent for disclosing information). Committee chairman Margaret Hodge had clearly discussed the prospect of a National Audit Office examination of the case, pointing out to Strathie that HMRC’s accounts could be qualified over the deal. But the head of the NAO, former PricewaterhouseCoopers partner Amyas Morse, sitting smiling a few feet from Strathie, soon provided the squirming HMRC boss with some comfort. “What I said was that there might be a case for qualifying on the grounds of irregularity if it was seen that the decision had been made unreasonably. I did warn that I thought that wasn’t very likely.” As Morse knows nothing of the case itself, this sounded suspiciously like the paving of the way for the next phase of the scandal: the whitewash. Clearest breach imaginable Moments later, Bacon explained exactly why the deal was unreasonable, since it conflicted with HMRC’s own published promise that in large tax avoidance cases (and Vodafone is probably the largest ever), where the taxman has a reasonable legal argument, he will never settle for less than the full amount of tax. But Hartnett had done exactly that, despite HMRC’s strong legal position and without consulting his own specialists – on hand for precisely this reason – who would have informed him of the strength of their case. Since Vodafone coughed up just £800m, with time to pay on a further £450m, when its own accounts showed that by March 2006 it had set aside £2.1bn for the tax and interest at that stage, and the settlement covered a further four years worth billions more in lost tax, this was the clearest breach of the policy imaginable. But even this, as Eye readers know, wasn’t the end of the deal. Vodafone was also given a “forward agreement” that profits stashed in Luxembourg won’t be taxed in future, either. Asked about the lawfulness of such agreements (they were ruled unlawful several years ago when a similar arrangement with Mohamed Fayed was struck out by the courts) the woman in charge of Britain’s tax authority again proved that she can’t have looked into Vodafone’s dodgy deal properly – which would have involved questioning the lawfulness of the deal – by blurting: “I’m sorry, I’m not a tax specialist.”

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