LONDON – A British pressure group on Thursday challenged what it described as a sweetheart tax deal between U.K. authorities and Goldman Sachs, arguing that corporations are forgiven millions while the poor face the brunt of austerity measures.
UK Uncut Legal Action, which campaigns against tax avoidance, argued before Britain’s High Court that it was unlawful for the investment bank to avoid a multimillion pound interest bill for unpaid tax on bonuses. The group said taxpayers are out 20 million pounds ($31 million), though the potential cost was estimated by the auditor general as being between 5 million pounds and 8 million pounds.
The group says the deal, struck between Goldman Sachs and British tax authorities, was unlawful because it breached the rule that taxpayers should be treated equally.
“Goldman Sachs is one of the richest banks in the world,” said Rosa Curling, a lawyer from law firm Leigh Day, who is representing UK Uncut. “The coalition government has stated on several occasions that it is committed to ensuring companies cannot avoid paying the taxes they owe. Despite this, the government has chosen to oppose our client’s claim.”
Tax officials contest the case vigorously, arguing that such tax deals with corporations are on the whole beneficial to public finances. HM Revenue & Customs argues that a National Audit Office report last year has bolstered its position.
The report concluded that five settlements, including the Goldman deal, were reasonable, in part because disputes often lead to protracted litigation.
“These large tax settlements are complex and there is no clear answer as to what represents the ‘right’ tax liability,” the audit office said in its report.
The lawyer for the tax authorities, James Eadie, accused Uncut of using the courts “to pursue politics by other means.”
Eadie said the backdrop of reports about “cozy backroom deals” and “sacrificial lambs and favourites” were untenable in light of the audit office’s finding.
Uncut attorney Ingrid Simler said normally such settlements were kept private and that the public wouldn’t know how tax authorities were applying public policy.
“In these proceedings, that position is reversed and the facts have emerged and grave disquiet has been caused,” she said.
It is not the first case in which UK Uncut has taken a major corporation to task. The group campaigned against Seattle-based Starbucks and demanded it pay more in corporation tax. The campaign of sit-ins and other protests resulted in the company making a 20 million pound contribution to the nation’s coffers over two years.
The coffee company has 700 British outlets, but has paid only 8.6 million pounds ($13.8 million) in corporation tax in 14 years. The reason behind this has to do with the payment of royalties to its European headquarters in the Netherlands.
Companies operating in Europe can base themselves in any of the 27 European Union countries, choosing which country has the best tax rate. But that has not been popular with the British public.
Parliament’s Public Accounts Committee has criticized multinationals such as Starbucks — together with Amazon and Google — for “using the letter of tax laws both nationally and internationally to immorally minimize their tax obligations.”