A newly released secret recording suggests HMRC was told by the Treasury not to be “too hard” on Amazon.
The recording is from a conversation between Guy Westhead, at the time a senior member of HMRC’s VAT policy team, and Richard Allen, a VAT tax campaigner. The audio clip has been published by tax QC Jolyon Maugham on his Waiting for Tax blog.
In the clip, Allen addressed his concerns that “ministers have some kind of agenda to basically not annoy Amazon”, pointing to the retail giant’s ardent lobbying of regulators in the US as an example.
In response, Westhead seems to acknowledge there had been some pressure from the top. “I’ve heard of that,” he replied to Allen. “I’ve heard from the Treasury; the Treasury didn’t want us to be too hard on Amazon. But I think that was a brackets ‘yet’ close brackets.”
The leaked audio comes after a recent PAC report which found that the Amazon and eBay marketplaces were being used to carry out extensive online VAT fraud, enabling foreign sellers to undercut UK businesses by up to 20%. The report chastised HMRC for being “too cautious” in its approach and not doing enough.
Asked whether the recording was an accurate reflection of how the tax authority applies the law, an HMRC spokesperson told AccountingWEB: “We would never give a company or individual preferential treatment. Multinationals must pay all taxes due and we don’t settle for less. Last year alone, HMRC secured and protected over £8bn in additional tax revenue from the largest and most complex businesses.”
They added, “HMRC has a strong track record of tackling avoidance, evasion and non-compliance and the UK has one of the lowest tax gaps in the world.”
Two-tier approach to taxation
But despite the tax authority’s insistence that there’s nothing awry, the recording will only add to the suggestion that one rule exists for multinationals and another for small businesses.
Maugham has been a prominent critic of HMRC’s perceived lax enforcement. He has commented extensively in the past that something was impeding HMRC’s motivation in pursuing major multinationals.
Speaking to AccountingWEB, Maugham said the recording bears out what many have been saying for years “about the two-tier approach to taxation operated by this government”.
“This is a very senior officer at HMRC speaking in his own field, saying very clearly and explicitly that HMRC comes under pressure from Treasury as to how it applies the law in the case of US tech companies.
“I’m sure that Treasury is persuaded that the UK benefits from it being perceived by US tech companies as a place where they can do business. How they’ve come to that view is a matter of speculation.
“What troubles me is what it means for trust in the establishment and democracy more generally, if those in positions of high authority are revealed to have been inconsistently applying the law.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.