Taxing Questions

Why on earth is Her Majesty’s Revenue & Customs (HMRC) giving Vodafone so much leeway on their tax bill?

For ten years HMRC and Vodafone have been wrangling over Vodafone’s contribution. Private Eye estimate the money owed is £6bn. HMRC Chief Dave Hartnett has agreed on £1.25bn: £800m up front and time to pay the rest.

Private Eye’s story lead to protests outside several Vodafone stores last week. Therefore the mobile phone giant and HMRC got their PR people to bat off the “£6bn owed” as an “urban myth”.

HMRC’s press wrangler Paul Franklin was quoted on the Daily Mail website thus: “following a rigorous examination of the facts and an intensive process of negotiation that tested the arguments of both was agreed that Vodafone’s liability was £1.25bn and at no point was a liability greater than that established.”

BUT tax self-assessment laws in the UK are very clear about this: no liability is established until a negotiation is complete. AND the original tax inspectors on this case were after much more than £1.25bn (the final set of negotiations this year involved HMRC representatives who were nothing to do with the original case).

Vodafone’s own accounts from 2006 show they’d put aside £2.1bn. This cash was paid into their Luxembourg company (VIL) which has been building up plenty of interest. In court HMRC’s counsel considered there was a good chance of getting the lot; but these lawyers weren’t consulted in the last round of talks. Incredibly the new deal includes an agreement not to tax any future income diverted to Vodafone’s Luxembourg operation.

Thee Faction believe that this outside-of-the-courts resolution that Dave Hartnett/HMRC have concocted with Vodafone sets a dangerous precedent – i.e. keeping these disputes out of the public eye.

Thee Faction believe the UK Government has not so much a spending crisis, but a tax avoidance crisis. Richard Murphy of Tax Research believes this to be £25bn a year, tax evasion is at £70bn, and outstanding debts to the tax service to £28bn: a total of more than £120bn, about 75% of what the government is saying is the “deficit”, and over 80% of what HMRC are supposed to collect. Let’s compare this £120bn with the benefit fraud figures the right-wing press get in such a lather about and the Con-Libs are using as justification for the “squeeze”: £1.1bn.

As we’ve explained in this blog in the past, and it is worth repeating here, HMRC is, astonishingly, being hit by the spending revue. Staff will be cut from 68,000 to 56,000 by 2015. According to the Association of Reveue and Customs ; money invested in HMRC to deal with tax avoidance and evasion brings in £60 for every £1 spent.
Thee Faction say if HMRC could even get 20% of what HMRC are owed the most damaging cuts could be reversed. The right-wing press are attacking the poor, to keep us divided by blaming scroungers and scrutters for waste.

It’s clear the Tories have freed corporations from their obligations to society, and, as usual are protecting the rich.


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