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UK tax officials run into trouble over ‘cozy’ ties with big firms

india Updated: Dec 21, 2011 23:02 IST
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Goldman Sachs, Vodafone and other big businesses were treated too favourably by British tax officials, potentially costing the nation billions in lost revenue, according to a government report released on Tuesday.

The report did not say how much the deals, often struck at expensive restaurants, cost the government. But the government said there were 2,700 unresolved cases with big companies, with potential taxes of £25 billion ($39 billion) as of March 31.

Partly based on information from a whistle-blower at Goldman Sachs, the report paints a cozy picture of tax officers attending lunches and dinners with company officials while negotiating tax deals. One senior tax official had as many as 107 such meals in two years, according to the report.

“The department's working practices must be seen by the taxpaying public to be absolutely impartial,” said Margaret Hodge, MP and chairwoman of the Public Accounts Committee.

The tax office rejected the conclusion of the report, saying it was “based on partial information, inaccurate opinion and some misunderstanding of facts.”

The report did not identify any companies, but Hodge mentioned two names: Goldman Sachs and the British telecommunications giant Vodafone.

Vodafone called the allegations “unjust, unwarranted and based on gross untruths.” Goldman Sachs declined to comment.

Spending cuts and tax increases are squeezing British households as part of a government austerity plan to reduce the national budget deficit. Some economists have said corporate tax revenue is already expected to shrink in the coming years as company earnings decline with the weak economy, making it harder for the government to plug the deficit hole.

Prime Minister David Cameron's government pledged earlier this year to be more aggressive in going after individuals for evading taxes.

The report also pointed to tax officers’ lack of accountability to taxpayers. It said the deals with companies were made behind closed doors and without public scrutiny.