The letter shown below has been sent to Margaret Hodge. Should a reply be received it will be published here.
Dear Mrs Hodge,
Since the recent appearance of senior HMRC representatives including Edward Troup, HMRC’s Tax Assurance Commissioner and Jim Harra, the Director-General of Business Tax, before the Public Accounts Committee, I have undertaken some reading which has resulted in me identifying two very important questions that need to be answered.
Following your recent appearance on BBC Radio 4’s PM programme where you explained that you actively seek to engage with voters, I hope you will be kind enough to answer my questions.
You were quoted as saying in Committee that:
It looks to me that you should be litigating. Why have you not chosen to litigate and test your powers? Why have you not litigated against one single internet company?
Make a few cases, a few show cases. It’s so bloody obvious.
It transpires HMRC has already pursued a case to test their powers in respect of the movement of capital within the EU, the Thin Cap Group Litigation v Commissioners of Inland Revenue. In 2007 the European Court of Justice rejected HMRC’s case. HMRC therefore clearly know the answer to your question is that they have tested their powers and know they would lose such a case.
My first question is, although Mr Troup did say, “We make sure we collect the tax due under the law,” why did neither he nor Mr Harra reference the Thin Cap Group Litigation case in their evidence to your committee in answer to your question, explaining that EU law prevents the taxation you would like to see applied to the likes of Google, Facebook, Amazon and Starbucks in the UK prior to transfer payments being made to another EU member state?
My second question is this. Given the ECJ verdict in respect of Thin Cap Group, have you not been informed by advisers or civil servants about this failed test of powers, as it is central to the UK Exchequer’s inability to tax profits made by corporations that based their EU trade in another member state?
I am sure you will agree that it is only right that people should be encouraged to understand the laws that apply and their origin, and that discussion related to this matter in Parliamentary committees should be open and transparent. It is clear that the UK does not have tax sovereignty as laws made elsewhere pertaining to taxation have primacy. Do you not think this should be made clear in your committee? Will you seek to explore this further in future PAC hearings?
I look forward to and thank you in advance for your reply.