Making big companies pay their tax, 'sweetheart' deals, and Vodafone's tax bill

…are going to be investigated. Accroding to the Financial Times: http://blogs.ft.com/westminster/2011/12/hmrcs-sweetheart-tax-deals-under-the-microscope/

Here’s an interesting extract:

The names of all six companies being investigated are not yet in the public domain. I’ve just been reading evidence presented to the PAC this month which suggests that 435 companies have struck deals of over £10m in the last three years. (They are 36 deals of over £100m; 54 deals of £50-100m; and 345 deals of £10m-£50m.)

It seems big companies don’t have to pay their tax bills in quite the same way as the rest of us.

“We don’t pay taxes. Only the little people pay taxes…”

Its bigger to go after one individual defrauding the benefit agency of £1,000 than going after a company avoiding £1 billion in tax.

It does grate ever so slightly when I get a letter from HMRC threatening to send bailiffs in to confiscate and sell items from my home to the value of three hundred and forty something quid. 😐

if only it was a simple as “not paying taxes”.

Arguably they maybe ought to pay more taxes – but no-one here or in the press is in any position to know. But what do you expect in a nation with the biggest tax code documentation in the WORLD* when the complexity leaves all sorts of uncertainties as to tax liability.

Simplify the lot, and tax and recover transparently.

* seriously its longer than the indian one!

It’s never been that simple for me. We all flipping know they should pay more tax. That much, though, is quite plain. I guess they can afford more expensive tax lawyers and accountants than HMRC. This constant obfuscation they perform, which eventually forces HMRC to do a deal is disgusting. The amounts in question are staggering.

The head of Revenue & Customs is to retire in the wake of revelations about his organisation’s decisions to waive millions of pounds owed by corporations.

Dave Hartnett, 60, will step down as the permanent secretary for tax next summer, a spokesman said . He will leave with a pension pot worth £1.7m.

The question is, is it his pension pot he’s leaving with?

the complexity leaves all sorts of uncertainties as to tax liability.

That must be what it is then.

And I’m sure that without a doubt, companies such as Vodafone and Goldman Sachs are also regularly overpaying the odd £10 million in tax, what with all the uncertainties as to tax liability.

A friend of mine called me last week saying the Inland Revenue called him
and telling him he owes them £ 4,000.00p he looked into and confused that he does but
this was over years 2002 to 2004 ?

He asked why they did not contact him then ! They replied the Government are now asking
to just now go after the people that owe TAX below the £ 50,000.00p

Inland Revenue demanded the money he simply said I don’t have it. They replied
get a loan out and he replied do you know how hard it is to get work right now !
They have now given a payment plan of One year But they constant call him to
see if he can pay the remainder.

The saga began a decade ago when Vodafone bought German engineering firm Mannesmann for 180bn euros.
Wanting to route the purchase through an offshore company to avoid paying UK taxes, it set up a subsidiary in Luxemburg where profits would be taxed at less than 1%.
But it was ruled that the deal broke anti-tax avoidance rules.

I thought this was a fairly common thing to do. Anyone know why Vodafone broke the rules?

Whats really wrong here is the revenue are attempting to prosecute the whistle-blower who put this info into the public domain

http://www.guardian.co.uk/business/2011/dec/08/goldman-sachs-whistleblower-threatened-sack?newsfeed=true

I thought that the “behind the scenes” case here was that Vodafone used some “novel” interpretation of the law, whereas HMRC used an alternative interpretation of the law.

Nobody knows for sure who is right, so HMRC settled for a payment of X, rather than a long drawn out battle for Y that there was a fairly singificant chance HMRC would lose in court.

Nobody knows for sure who is right, so HMRC settled for a payment of X, rather than a long drawn out battle for Y that there was a fairly singificant chance HMRC would lose in court.

And this being a very common thing for businesses to do in the case of disputes, nothing that surprising about it.

I’m a little surprised that people are blaming Vodafone for this and not HMRC and the Government for their byzantine tax laws.

Quick edit: A friend of mine works on disputes at a large manufacturing company. He’s seen as bringing in revenue for the company when he makes deals rather than losing them money. The chap from the HMRC seemed to be doing a similar thing, but maybe operating a little out of his remit.

Whats really wrong here is the revenue are attempting to prosecute the whistle-blower who put this info into the public domain

Poor wording TJ- ‘attempting to prosecute’?

The department are investigating, understandable since confidential documents have been leaked to the Guardian, which is a completely different kettle of fish.

He told the National Audit Office and two parliamentary committees the bank’s settlement had been agreed with a handshake by Dave Hartnett, the permanent secretary for tax at HMRC.

Mba believed the deal might be illegal and told them he was making the disclosure under whistleblowing legislation. His evidence led to Hartnett being accused of lying to parliament over his role in the Goldman Sachs deal, which he denied. But he admitted his organisation had made a mistake by approving the deal.

HMRC? I shit ’em! Bastards! At the height of the fianancial meltdown, we were having cashflow issues with the business due to a few clients folding on us. In fact we were desperately doing everything we could to keep our business afloat. We tried to discuss this with HMRC who weren’t remotely ****ing interested, to say the least!

In the end we paid our tax bill 3 days late due to this. 3 days! That’s all. HMRC immediately slapped a £1,500 ‘surcharge’ on us. Which really helped matters. It makes my ****ing dick itch when I see Goldman Sachs, Vodaphone et al entering into cosy little arrangements, all decided with handshakes over lunch!

One rule for one…..

ernie – when I say complexity leads to uncertainty, I dont mean miscalculation, I mean different interpretations of tax law. As mrblobby says, if the code is overly complex (usually trying to do too much but also avoid unintended consequences, and failing) then in one corner it’s a companies fiduciary duty to make a case for a lower tax interpretation and HMRC in the other corner trying it on from the other standpoint. Then when the handbags come out if a deal isnt done it’s off to court and gin all round for the barristers (and then a precedent set which might not necc be in HMRC’s favour).

We used to refer to clients who wanted to play that way as “aggressive with respect to taxation”. i.e. willing to dance with the tax code and settle for a settle for a better deal either in court or out of court than a strictly conservative interpretation of the tax code might come out at.

Simplify the lot, publish tax calculations and payments,leave no corners to hide in, recover more tax.

HMRC? I shit ’em! Bastards!

Got to agree with you there Binners. They are happy to mercilessly screw small companies and individuals who can’t afford to obfuscate their finances or enter into years of litigation. Yet are happy to do deals with big companies to avoid litigation and the potential for rulings against them setting precedents that may lose them more revenue. Does stink.

Doubt any government will ever be brave enough to simplify the lot.

The cleverest and best paid of my ex-colleagues in big law firms are tax lawyers. They are the geeks of the legal world.

It is, as Stoner says, hugely complex (hence the above geeks). And that makes it an ideal area for those who can afford it to take “riskier” approaches to mitigate against tax liabilities.

Heavy tax avoidance (evasion is just an interpretation of law) is a matter of morality. More so, however, is the accepted corporate culture that avoiding (or evading) taxes is the right thing to do.

Leaving aside the rest of his polemics, George Monbiot recently said this:

Though benefit fraud deprives the Exchequer of £1.1bn a year(1) while tax avoidance and evasion deprive it of between £40bn and £120bn(2,3), the tabloids relentlessly pursue the petty crooks, while leaving the capos alone.[/url]

Though benefit fraud deprives the Exchequer of £1.1bn a year(1) while tax avoidance and evasion deprive it of between £40bn and £120bn(2,3), the tabloids relentlessly pursue the petty crooks, while leaving the capos alone.

nice bit of shitstirring rhetoric there by the Monbiot 🙂

Its not hard to accept that prosecuting illegality is going to be far more productive than pursuing immorality regardless of the different scales of the offences!

Bring the immoral into the illegal and THEN get shirty with evasion, rather than whining about avoidance.

then in one corner it’s a companies fiduciary duty to make a case for a lower tax interpretation and HMRC in the other corner trying it on from the other standpoint.

so the tax office are trying it on then but the companies attempt to avoid the tax burden is legitimate then and in no way “trying it on”? Why not use either the same neutral language for both or the same colourful language, it gives away too much of your own view.

I dont know the complexities of tax law [nor have I any reason to doubt Stoners view] but i would have to agree with DD

This constant obfuscation they perform, which eventually forces HMRC to do a deal is disgusting. The amounts in question are staggering.

Stoner even your own posts make it clear it may be evasion rather than avoidance so the legality is in question.

mleh.
I shall dust off my copy of My First Thesaurus and work on the neutrality of my delivery.
Im genuinely indifferent to levels of corporate taxation. I just get annoyed by idiots like Monbiot conflating avoidance and evasion, immorality and illegality. Its lazy and appeals to the same dog-whistling as Daily Mail style journalism on the other side.

Id really be quite happy to see a higher total corporate tax take, if it was done by making things simpler and more transparent and reducing the cost to the economy of tha mechanism of raising and paying taxes. Complex tax law wastes everybody’s money, corporates and the governments.

I shall dust off my copy of My First Thesaurus and work on the neutrality of my delivery.

no need we all know you are right wing 😉 but it was a bit tabloidy tbh.

Monbiot conflating avoidance and evasion, immorality and illegality. Its lazy and appeals to the same dog-whistling as Daily Mail style journalism on the other side.

I think most people probably view them [avoidance/evasion] as just as bad even though one is legal and immoral and the other illegal and immoral. Might also be because little people pay PAYE and have no input or opportunity to avoid our burden. Those most able to pay it get the chance to avoid it …you think this wont grate with most folk?
Your second paragraph makes sense and yes you are correct…..I am sure my approval means a lot 😀

I think most people probably view them [avoidance/evasion] as just as bad

and they would be wrong and should be disabused of the idea.

It’s akin to feeling the same about someone driving a gas-guzzling, earth-raping, but legal Humvee as someone driving a Prius with an out-of-date VED disc. If the nation find the immoral sufficiently abhorrent then have it made illegal. But dont treat it as illegal until then.

Hey, I never said Monbiot was a neutral on these things!

then in one corner it’s a companies fiduciary duty to make a case for a lower tax interpretation and HMRC in the other corner trying it on from the other standpoint.

Technically, no company has a fiduciary duty. However, its directors do. And while they may claim their primary duty is to the shareholders (and so minimising cost). But, one of their duties is a wider one – to consider stakeholders and beyond. And that’s where the moral dimension comes in.

And, yes, making the immorality evasion would do the trick nicely. But can you imagine HMRC agreeing to a wholesale reform of the system they have spent so long building up..?!

Technically, no company has a fiduciary duty. However, its directors do

pedant. 😉 but yes, I stand corrected.

And Id emphasise that their “primary duty” is to their shareholders as you say. As for the “wider duty” you invoke, it’s more usually framed as a “do no harm” duty rather than a positive “do good to all” duty isnt it? Afterall it cant be a company’s (or it’s directors) duty to do good to those it doesnt come into contact with, but it’s perfectly acceptable to expect them not to harm anyone.

So as long as they don’t kill anyone, they have discharged their duty to the society they operate in and profit from?

Brilliant! How could a society possibly request more than that?

usually framed as a “do no harm” duty rather than a positive “do good to all”

to

So as long as they don’t kill anyone

you’d make TJ proud young padawan 😉

I’m gradually learning from the master. Would you like me to repeat it a few times? More stridently maybe? Some links perhaps?

😀

What a coincidence – I got my tax bill this morning. I’m self employed and I don’t have an issue with paying tax. However, the tax dodging activities of some of these corporations and individuals really gets my goat.

Given that Sir Philip Green is a supporter of, and advisor to, the current Govt., I don’t expect them to start retrieving what’s owed (well, maybe not by companies that supported their election campaign anyway!)

and they would be wrong and should be disabused of the idea.

It’s akin to feeling the same about someone driving a gas-guzzling, earth-raping, but legal Humvee as someone driving a Prius with an out-of-date VED disc. If the nation find the immoral sufficiently abhorrent then have it made illegal. But dont treat it as illegal until then.
hyperbole we are talking about wilfully avoiding your tax burden by either legal or illegal means [ or in this case means which may or may not be illegal]. What you achieve is identical only the methods differ.
They are the same thing [ avoiding tax] if this is ok then whether avoidance or evasion it should not matter – i speak morally obviously as clearly the law differentiates. Most folk just think the law is wrong here and we should close loopholes for the wealthy
I will petition dave right away what do you reckon of my chances of him getting tough on business??
Should I try George first?

no wiki: no fact.
them’s the rulz.

avoiding your tax burden by either legal or illegal means

If you define “burden” as tax due, then its a legal obligation. You cant “legally” avoid a tax obligation.

If you want to widen the definition of “burden” to be “as much tax as possible give or take whatever George Monbiot thinks is right, and maybe the odd allowance for interest charges but that is it, and definitely no offshore stuff unless its really a factory over there and stuff but anyway, well make it up to a round number and then say that’s the moral obligations and its exactly the same as the legal obligation but we dont know how to write it down like that without getting a in a muddle oh well…. “…then you can keep on moving the goal posts as much as you like as long as the write kind of people are acting illegally for your purposes then?

EDIT superfluous after your edit 🙂

Try George Monbiot first, at least he’d make like he cared what you were saying 🙂

Complex tax law wastes everybody’s money, corporates and the governments.

… though it does keep a lot of taxation lawyers employed both at HMRC and big corporates!

I do not know the details of the Vodafone case and haven’t got time to find it out. I am also not in favour of a tax system that focuses more on collection from individuals than corporates. However, I am a little bemused by the concept that any company has a obligation, moral or otherswise, to pay anything other than the minimum legal amount of tax. What company has, as part of its strategy, an objective to maximise its tax rate?

Companies have their customers, their employees and their shareholders to satisfy? If any of those parties feels that the company is paying insufficient tax then they can protest – boycott products, leave, sell the shares/vote at AGM etc. Beyond that, I am not sure what else can be done.

Of course, if the legislation is wrong and/or Vodafone is deliberately evading tax, then that is another stroy.

Actually when it comes to corporate responsibility – as has been proved this week, you can quiet happily kill absolutely shit-loads of people, maim loads more, and still be taken on board as a main Olympic Sponsor

mrblobby – Member
Complex tax law wastes everybody’s money, corporates and the governments.
… though it does keep a lot of taxation lawyers employed both at HMRC and big corporates!

And made Barc and some of its senior personnel an awful lot of money 🙁

you can quiet happily kill absolutely shit-loads of people, maim loads more, and still be taken on board as a main Olympic Sponsor

What have those bastards at Thomas Cook done now?

I was thinking Budweiser. Have you ever tried it? GAAAAAAAAAAAAAH!!!!