Louis XIV's finance minister defined taxation as plucking the goose so as to obtain the most feathers with the least hissing
A few days ago, David Cameron warned that 2012 would be the harshest year yet, with deep public expenditure cuts and a squeeze on private pay. Ministerial rhetoric about the burden being borne by the broadest shoulders invite wry smiles these days, but any government facing these circumstances should surely be doing all it can to collect every last penny of tax due – even if only to sweeten the bitter choices that they confront. And yet a report from the public accounts committee this morning paints Her Majesty's Revenue and Customs as being more inclined to cut discreet deals with big corporations than to enforce the letter of the law.
Two recent scandals drew the spotlight the revenue's way, a blunder which allowed Goldman Sachs too much time to pay too little, and a more involved tale which allegedly resulted in Vodafone escaping more than a billion pounds in charges. The wider context has too often seen the exchequer being reduced to a supplicant of the rich: the UK recently agreed rules with the Swiss that allow holders of Alpine bank accounts favourable treatment in return for them finally paying some tax. Now the PAC identifies a couple of other negotiations where the standard rule-book was set aside in favour of "bespoke arrangements", which allowed top officials to come to a mutually agreeable understanding about which debts get written off and which get paid, and then sign-off on their own arrangements.
There have always been delicate balances in the tax-collecting art, which Louis XIV's finance minister defined as plucking the goose so as to obtain the most feathers with the least possible hissing. In a world of free-flowing capital, the geese can fly off as well as hiss, so the problems multiply. Vulgar as it is for big companies to demand special treatment, it may be too haughty to insist that the revenue should never engage if the alternative is corporate emigration. The essential point is that grubby compromises should be made in ways which respect at least the spirit of the law. That is not going to happen where, as the PAC attests, top taxmen are schmoozing their way through dinners with corporate clients without taking notes. The instinct should be to explain that the haggling is nasty but necessary. Instead it is to swipe awkward questions away with a notion of taxpayer confidentiality that is valid for private individuals, not public corporations.
The permanent secretary has already said he will retire, but the rot at the top reaches beyond one individual. The priority must be to bring in non-executive directors who can speak for taxpayers, workers and civil society and challenge those of the over-represented voice of the business world – and make sure it pays its dues.