LONDON, June 14 (Reuters) - The UK's public spending watchdog has criticized the tax authorities for a series of settlements that may have allowed companies including investment bank Goldman Sachs and mobile phone operator Vodafone to avoid paying millions of pounds in taxes.
A National Audit Office (NAO) report released on Thursday highlighted procedural errors in five large tax settlements, echoing earlier criticism of the deal from a parliamentary committee which accused tax authority HMRC of being "too cosy" with large companies.
Amid a government policy of austerity, public discontent is rising at rich individuals and big corporations incurring tax rates well below those of average taxpayers' or the headline corporation tax rate.
On Wednesday, British activists against tax avoidance won court backing to challenge the Goldman settlement, which cut its 2010 British tax bill by an estimated 10 million pounds ($15.6 million).
Activists protested outside Vodafone's main Oxford Street store in London in 2010 when its tax deal became public.
While the NAO said the settlements were reasonable, insofar as HMRC may have received less if it litigated and lost, the watchdog found procedural errors in how the tax collector cut the deals.
HMRC did not always seek legal advice before agreeing settlements, refer settlements for independent review, as was standard procedure, while staff did not keep notes of all meetings at which settlement terms were agreed.
"The findings from the review of these five settlements confirm our concerns over the governance arrangements operated in these cases," the NAO said.
Member of Parliament Margaret Hodge, head of the Public Accounts Committee, which probed the deals last year said the report showed how HMRC needed to clean up its relations with big business.
"This report confirms my Committee's concerns about the uncontrolled way that HMRC has been doing secret deals with large companies ....These deals have sent a message that it's one rule for big business and another rule for everyone else," she said.
The tax authority has "acknowledged that its governance processes need strengthening and is introducing new arrangements," the NAO added.
Previously, HMRC denied systemic failures in the management of tax disputes.
The NAO report did not name the companies involved in the cases which it assessed but sources close to the process said one involved Goldman and another involved Vodafone .