Goldman Sachs Tax Deal Saving $31 Million Reviewed by Court
By Jeremy Hodges – May 2, 2013 7:11 AM ET
Goldman Sachs Group Inc. (GS)’s deal with U.K. officials that saved the bank as much as 20 million pounds ($31 million) in taxes, according to an advocacy group, will be reviewed by a U.K. court at a two-day hearing starting today.
The group, UK Uncut, is challenging the deal at a so-called judicial review. It criticizes the decision by the tax agency, Her Majesty’s Revenue & Customs, to forgive what lawmakers said last year was as much as 10 million pounds of interest on unpaid tax. UK Uncut argues the amount is closer to 20 million pounds.
Employees walks across the interconnecting walkway linking the Goldman Sachs offices in London. Photographer: Jason Alden/Bloomberg
The U.K. government has pledged to clamp down on tax avoidance schemes following widespread media and public anger caused by the amount of corporation tax the likes ofGoogle Inc. (GOOG), Starbucks Corp. (SBUX) andAmazon.com Inc. (AMZN) pay in the country. Lawmakers said in a report last week that increased transparency about companies’ tax affairs would build pressure on multinational businesses to “pay a fair share.”
If the HMRC was faced with the same decision today it “could and would have made exactly the same decision,” Ingrid Simler, a lawyer representing the advocacy group, told the court in London.
Goldman Sachs isn’t involved in the lawsuit and declined to comment, a spokesman in London for the New York-based bank said.
“We welcome the opportunity to demonstrate that we acted legally,” Jan Marszewski, a spokesman for HMRC, said in an e- mailed statement.
UK Uncut, which lobbies for alternatives to government spending cuts, says the deal between HMRC and Goldman revolves around a 2010 meeting between former tax secretary Dave Hartnett and Goldman Sachs’s then tax director, Mike Housden. The deal resulted in the company paying back taxes it owed on National Insurance payments for bankers’ bonuses, while forgoing interest payments.
Lawyers for UK Uncut today said that Hartnett overruled legal advice and an internal HMRC review to proceed with the deal. UK Uncut argued that Hartnett was more concerned with getting Goldman Sachs to sign up for a code of practice on tax that had been proposed by Chancellor of the Exchequer George Osborne.
“George Osborne announced the bankers code for tax avoidance with great fanfare, claiming that he was forcing banks to pay their fair share,” Murray Worthy, Director of UK Uncut, said in a statement. “Yet on the same day, Goldman Sachs were threatening to withdraw from the Code if HMRC forced them to pay the tax they owed.”
Hartnett was summoned last year to appear before British lawmakers after admitting mistakes were made in the negotiations.
Judicial review is a legal mechanism that examines the decision-making process of public bodies. While an authority may be ordered to reconsider an action, it may be allowed to draw the same conclusion provided all procedures are correctly followed.
“The whole debate has become far too black and white,” Judith Freedman, a professor of taxation law at Oxford University, said in a phone interview. “Tax is complex and the tax authority has to be able to come to sensible agreements in order for the system to work.”
Freedman said the process looks more at government procedures than substantive issues.
The case is: The Queen on the application of UK Uncut Legal Action Ltd. v. Commissioners Of Her Majesty’s Revenue And Customs, High Court of Justice, Queen’s Bench Division Administrative Court, No. CO/12618/2011
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