Mr Hartnett is the permanent secretary for tax at Her Majesty's Revenue and Customs in England. In an article reported on in The Independent on Thursday, 13 October 2011, it appeared that in regard to a tax avoidance scheme used by bankers to avoid paying full tax on their bonuses in England, 20 firms which had used that scheme caved in after a tax court ruling. However, Goldman Sachs, the well-known international investment bank, refused to pay its bill of GBP30,81 million, which rose to approximately GBP40 million with interest.
It appeared that Mr Hartnett had met bank executives for lunch and supper and at some point an agreement had been reached in terms of which Goldman Sachs did not need to pay the interest arising in the matter.
From the newspaper article, papers from Her Majesty's Revenue had been leaked to "Private Eye", quoting the difficulty senior figures in the Revenue had in accepting the no interest deal. This matter then came to the House of Commons Public Accounts Committee. Margaret Hodge, the chairperson, accused Mr Hartnett of lying to the Treasury Select Committee when he had told them that he did not deal with the tax affairs of Goldman Sachs. Mr Hartnett had insisted he had no daily involvement with the bank's affairs. Mrs Hodge though said that Mr Hartnett had shaken hands on a settlement he brokered with the three Goldman Sachs executives last December. Mr Hartnett said he had become involved only because the relationship between Her Majesty's Revenue and the bank representatives had broken down. However, he insisted that he had not done a deal personally to sort out Goldman's tax affairs. He did not waive the interest. Mr Hartnett did admit that a mistake was made, for which he and his colleagues were very sorry. He took responsibility for the error but said that no one had been disciplined.
Jessie Norman, a Tory MP on the Treasury Committee said Mr Hartnett should resign and added that this settlement was the last straw. Mr Hartnett had told the Treasury Committee that the Revenue never charged less than the tax owing. She said that this case had shown the statement to be false.