Take David Hartnett, head of tax at HM Revenue & Customs until last year and the man whose \”sweetheart deals\” allowed Starbucks and Vodafone to avoid paying billions in tax.
Neither company got a \”sweetheart deal\”. And neither company avoided paying any tax either. Starbucks wasn\’t even makling a profit after you added all the royalties back in…..and more than that, there\’s no evidence that Hartnett had anything at all to do with the company at all.
Is Seumas just throwing some names together for effect here?
I doubt it matters to him. Throw enough mud, some of it will stick. And I do not doubt that like most of the Left the first person Seamus lies to is himself.
They should sue him
But it’s true in “narrative space” which is where most of these issues play out. Ask the ordinary punter & if he’s heard of the story, it’ll be the Milne version he’ll believe is accurate.
The left are very good at the narrative tactic. A lie repeated often enough, by enough liars, becomes the truth. Something their opponents never seem to realise is you can’t counter this with the truth. Engaging with the narrative merely supports it. Narratives are crafted to be simple & easy to comprehend. Black & white. The truth is usually much more complex & never that clear cut.
My only source is Private Eye, but I did think that Hartnett brokered a deal with Vodafone, who paid relatively little tax. Is that untrue?
James P
Tim has covered the Vodafone story at length here. TL:DR version – Private Eye plucked the number out of their collective arses.
PST:
“Private Eye plucked the number out of their collective arses.”
I believe it was plucked from one specific arse iirc
BIS:
The narratives are effective aren’t they? Quite right that the actually truth, even when it is black and white, seems quite powerless against them. Anyone actually pointing the truth out actually becomes part of the supporting material ‘Astro-turfers’, etc.
@James P:
The slightly longer version: Vodafone bought a business in Germany, through a Luxembourg holding company. The idea of the EU is that countries trust one another, and assume that for example Germany can tax a German company perfectly well so the UK won’t.
The UK however decided that theGerman company’s proftis shoudl be taxed in the UK, using rules which are aimed at making sure profits can’t be artificially shifted out of the UK to tax havens – this seems inappropriate, as Germany isn’t a tax haven and the profits were never in the UK in the first place.
The issue then was how much of Germany’s profits should be taxed in the UK and thus how much extra UK tax should be paid. Vodafone of course said none, HMRC presumably argued for a fairly chunky number, and Private Eye and various other observers came up with
@James P:
The slightly longer version: Vodafone bought a business in Germany, through a Luxembourg holding company. The idea of the EU is that countries trust one another, and assume that for example Germany can tax a German company perfectly well so the UK won’t.
The UK however decided that theGerman company’s proftis shoudl be taxed in the UK, using rules which are aimed at making sure profits can’t be artificially shifted out of the UK to tax havens – this seems inappropriate, as Germany isn’t a tax haven and the profits were never in the UK in the first place.
The issue then was how much of Germany’s profits should be taxed in the UK and thus how much extra UK tax should be paid. Vodafone of course said none, HMRC presumably argued for a fairly chunky number, and Private Eye and various other observers came up with GBP6-8bn – but that number didn’t seem to be based on any solid figures, it was just an estimate.
Vodafone then settled with HMRC on the basis of paying GBP1.2bn. I don’t know enough of the facts of the case to judge, but from what I know of it Vodafone could quite easily have won in the courts and paid nothing, but thought the cost, risk and uncertainty of a court case to be too much and therefore decided to settle out of court. Equally, HMRC might have been able to argue for more than 1.2bn by going through the courts but given the cost, risk and uncertainty decided that 1.2bn in the hand was worth an indeterminate amount in the bush.
So the end result is that as it never went to court, the true amount of Vodafone’s tax liability is unknown. It could be anything from nil upwards, but Vodafone and HMRC agreed betwee them that 1.2bn was a number that neither of them was too unhappy about.
It would still be possible to take the matter to court, I suppose – that way we could finally settle the argument, by spending several more years and many millions in costs, and quite possibly find that Vodafone have overpaid by 1.2bn.
I seem to remember it is more subtle than that. Vodaphone agreed to repatriate certain funds. At which point it was generally agreed that these became profit accruing to the UK entity, therefore were subject to UK taxation.
Therefore Vodaphone did not agree, at any point, that there was any tax due on the funds if they had remained in Luxembourg.
Yes, I simplified a bit 🙂
It’s one of the problems with HMRC’s Litigation and Settlement Strategy: they have to be black and white about things. Which then means that to get a compromise result you need to change the facts: in this case, Vodafone changed some of the income so that instead of being some-shade-of-grey it was clearly black, and HMRC agreed that the rest of it was a pale enough grey to be treated as white.
BiS wrote:
True dat.
But what would say on (for example) the Today programme when faced with that narrative.
My preferred answer (corporations just pass taxes through) works like a lead balloon. They don’t want to know.
Eric Schmidt-s answer (we pay all the taxes due) doesn’t fly either.
Any ideas?
‘Vodafone have overpaid by 1.2bn’
if this is indeed the case, why havent the shareholders sued the board?
My view on the corporate tax ‘discussion’:
Companies pay the tax the law says they should pay, yet politicians do not like this.
But given politicians make the law, this seems odd (ie “you are paying what I told you to pay, but I think you should pay more”).
Hence the response needs to be along the lines of “we pay all taxes due. If you think more taxes should be due, then change the law and I’ll pay it.”
I suspect this will all be somewhat less popular when increased company taxes feed through to higher consumer prices, but higher company taxation is something the electorate seems to want right now.
There is another angle to all of this in that if HMRC had gone to court and lost a hundred other multinationals who have received or paid HMRC demands in relation to similar intra-EU transactions would have come knocking.
The 1.2 billion pound deal between Vodafone and HMRC is nothing of the sort and just a face saving exercise for HMRC whose legal advisor’s saw the futility of their own position.
“But what would say on (for example) the Today programme when faced with that narrative(?)
Any ideas”
The answer is to be already running a counter narrative. “HMRC is responding to political pressure & abusing the law to harass responsible small businesses.” might be a line. Inject a little disinformation about relationships between HMRC unions, anti-tax-avoidance groups & Marxist journalists like Seamus boy. The narrative’s deep dark socialist conspiracies. The Vodaphone case then just becomes the latest example.
These is the rules of the game. There ain’t none.
This isn’t exactly true either:
This isn’t exactly true either:
Starbucks, with royalties back in, wasn’t making a profit for reporting purposes, but it was making a profit for corporation tax purposes.
@ rm #12:
“
@ rm #12:
“Vodafone have overpaid by 1.2bn
if this is indeed the case, why havent the shareholders sued the board?”
Because it’s not clear whether it is the case or not. No-one knows what the actual liability would be if a court ruled on it. Vodafone probably hope it would be smaller but fear it would be bigger; HMRC probably hope it would be bigger but fear it would be smaller; and Private Eye probably don’t know, don’t recognise the question, and/or don’t care so long as they can do a story knocking both HMRC and Big Business in one go.
PaulB, in the meantime HMRC accept the accounts as given and charge Starbucks the appropriate corporation tax on their profits.