It's not just huge multi-nationals getting away with paying very little corporation tax. It has emerged that the Ritz hotel, owned by the Barclay brothers, has not paid corporation tax for more than 15 years.
Skillful - and legal - tax relief measures play their part. But now the Barclay Brothers want more cash from the British taxpayer.
That's because the Barclays are gunning for a VAT refund that could be worth as much as £1bn. The Barclays claim this money represents the total compounded interest on a tax rebate relating to the Littlewoods catalogue group which they bought in 2002. This rebate dates back 30 years.
However the Barclay brothers have already been paid a VAT rebate plus interest worth £472m from the British taxpayer for payments dating back to the 1970s. If they win their demand for a further £1bn in compound interest, this test case could open the floodgates for other claimants.
Meanwhile Sir David and Frederick Barclay claim they have had very little to do with the running of the companies like the Ritz - whose room rates can top more than £3,000 per night - since leaving the UK, living in the Channel Islands and Monaco.
"We have not attended office, management or board meetings in the UK since leaving the country," Sir David said in a statement, responding to the allegations. "My brother and I have no editorial, political or economic power in the UK."
Sir David Barclay's son Aidan Barclay told the BBC Panorama programme the extra VAT claim by Littlewoods was put into action before the company was bought by his father and Uncle. Ritz profits, he added, have been reinvested with few dividends paid.
The problem with tax avoidance is that such measures may not be illegal in themselves. Yet getting around the law is generally seen by most as cheating. This is the gap that many accountancy firms and lawyers ruthlessly exploit.
Though the Government claims it is giving HMRC the funds to tackle tax avoidance, there remain mixed messages. Such as the appointment of Google exec chairman Eric Schmidt - he claims he's proud of Google's complex tax structures - on David Cameron's business adviser panel.
More detail will be revealed tonight on Panorama, a programme delayed by the ex BBC Director-General, George Entwistle.
- 1. HMRC vs Vodafone
Most recently HM Revenue & Customs let Vodafone off the hook - for quite a sum. Vodafone paid out just £1.25 billion despite an original tax bill being closer to £8 billion (HMRC has always refused to reveal how much it thought the Vodafone final bill was). The episode was made even more shaming and painful because Vodafone was given several years to come good with the cash owed - even though it was sitting on a substantial cash pile at the time.</p>
- 2. HMRC vs Goldman Sachs
The Exchequer is estimated to have lost around £10 million to Goldman Sachs recently through an 'error' made by HMRC. The episode relates to an employee benefit trust run by Goldman allowing employees to take non-repayable loans that had no National Insurance contributions tied to them. HMRC <em>did</em> claw back the full amount from more than 20 businesses - but not Goldman. HMRC remains cagey about the details of the deal. Little HMRC accountability or transparency.</p>
- 3. Taxpayer vs Carlyle Group - QinetiQ
Huge problems with QinetiQ, the former Defence Evaluation and Research Agency, or DERA. A lack of clarity on contractual arrangements at the outset didn't help, allowing private equity company Carlyle to hammer the price down (why would you start negotiations when you didn't know the company's true value?). The Ministry of Defence behaved, it was said, like "an innocent at a table of card-sharps". Estimated cost to the taxpayer - £90 million. Huge sums were later made by QinetiQ management when the company listed.</p>
- 4. Taxpayer vs NHS Management
The TaxPayers' Alliances estimates £2.7bn worth of taxpayer cash was wasted with a super-expensive 'National Programme for IT in the NHS'. The Department of Health, in the end, had very little to show for it as a consequence. Another example of poor management and a seemingly ingrained inability to provide taxpayers' with value for money.</p>
"BT is paid £9 million to implement systems at each NHS site, even though the same systems have been purchased for under £2 million by NHS organisations outside the Programme", the Commons Public Accounts Committee noted.</p>
- 5. Taxpayer vs public sector productivity
Contentious. The Office for National Statistics estimated this has declined 3.4% since 1997, "with inputs increasing by 38%." The Centre for Economics and Business Research estimate that this inefficiency costs the taxpayer £58.4 billion a year.</p>
Given the above record, are there any deals that the taxpayer has actually won out on? Not many, but the one successful project was the roll out of new Jobcentre Plus offices. It came in £314 million under budget, claims the Taxpayers' Alliance. A small cheer.</p>