- Tories claim to be on the offensive over tax avoidance
- But #1 donor running secretive Bermuda hedge funds
- Territory snubbed David Cameron over tax deal last week
In the wake of the G8 summit (and a controversial donation to the Labour Party in company shares) the Tories have become complacently smug when it comes to tax avoidance.
Indeed, Tory whips are even handing out lame patsy questions for PMQs:
Mr Marcus Jones: I welcome the prime minister’s leadership on getting the G8 to agree a deal on tackling aggressive corporate tax avoidance. Will my right honourable friend confirm that we won’t be offering a corporate tax avoidance service as does the party opposite?
In the spirit of leadership so admired by obliging backbenchers, perhaps the prime minister can ask Michael Farmer, the Tories #1 donor, former party co-treasurer and now board member, why he is linked to at least six hedge funds operating out of Pembroke?
That’s not Pembroke, West Wales but Pembroke, Bermuda – a country which snubbed David Cameron’s entreaties over tax avoidance just last week.
When not giving the Tories £4.9 million or paying for his son to join the Bullingdon Club, ”Mr Copper” runs the extractive commodities-focused hedge fund RK Capital Management.
While ostensibly being managed from New York and London, filings with US regulators indicate that portions of the company’s leading offering, the Red Kite hedge funds, are operating out of the tax haven (click links below for SEC filings):
With his new found enthusiasm for stamping out tax avoidance, doubtless David Cameron will be enquiring as to the purpose of these arrangements shortly.
Just when you thought the Lib Dem’s priorities couldn’t get any more skewed, Danny Alexander has told his constituents he backs naming and shaming of supermarkets who give dairy farmers a bad deal — whilst telling the country he won’t do the same for companies who avoid millions in tax.
In a local press release, Beaker backed the introduction of a watchdog with the power to name and shame supermarkets who pass on unexpected risk and costs to dairy farmers. Unveiling the plans, Alexander boasted:
“Farmers, in the Highlands and across the country, will now be able to enter into contracts with confidence, knowing they will get a fair deal from retailers. I am extremely proud that we are delivering on this in Government.”
But faced with seething public outrage that companies such as Starbucks and Google have paid less than 3.2% tax, he told this morning’s Today programme there would be no naming and shaming of the corporate giants:
Ironically evading the question, Danny told Radio 4:
“I’m not sure that naming and shaming is a good idea by the tax authorities. I think taxpayer confidentiality is a very important part of our tax system”
It looks like large corporations are exempt from more than just tax.
Historic claims made by Starbucks executives in little-scrutinised briefings to analysts and shareholders laid the way for the company to be slammed in a report by MPs today. The multinational is accused by the Public Accounts Committee of conniving to avoid corporation tax by pretending to be unprofitable in the UK – ‘exporting’ the real profits to jurisdictions with lower tax rates:
“Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit.”
Starbucks claimed to the committee that “it has been difficult for us to make a profit in the UK”. Indeed, 2007 was ninth year in ten that the company filed losses in the UK. Strange, then, given that annual reports singled out the UK as one of the company’s cash cows:
“In particular, our Canada, Japan, UK, and China MBUs account for a significant portion of the net revenue and earnings” — Annual Report 2011
“Revenues from countries other than the US consist primarily of revenues from Canada and the UK, which together account for approximately 66% of net revenues” — Annual report 2009
But it was phonecall briefings to analysts from this period in which Starbucks really screwed themselves over:
- On the release of quarterly earnings figures in 2007, then Chief Operating Officer Martin Coles told analysts that the profits from the UK were being used to pay for expansion in foreign markets
- CEO Howard Schultz claimed that Starbucks’ UK arm was so successful that he would adapt lessons learned here for the American market
- Again in 2007, then-Chief Financial Officer Peter Bocian claimed Starbucks UK had pulled in profits margins of nearly 15 percent — almost £50m
Despite that impressive roster of duplicitous statements, it would take something to top claims made in respect of 2011, where Starbucks’ accounts department would have us believe the UK business made losses of £33m. At the time, executive John Culver told investors:
“We are very pleased with the performance in the UK.”
But CFO Troy Alstead told the select committee:
“We are not at all pleased about our financial performance [in the UK].”
Errr … so which is it?
Jeremy Paxman is thought to be among 148 BBC presenters channelling their earnings through “personal service companies” — with significant scope to avoid paying full tax. The figure was revealed by the corporation’s chief financial officer at a grilling by MPs from the Public Accounts Committee yesterday.
While the broadcaster claim the companies are standard industry practice, Paxman’s firm Out In The Dark Ltd was incorporated on 28 May 2009 — 20 years after he started presenting Newsnight but barely one month after Labour chancellor Alistair Darling introduced a 50 pence top rate of tax. A swathe of companies associated with BBC talent were established around this time, with insiders indicating that the corporation had advised them to do so.
When Tory MP Richard Bacon previously suggested on Newsnight that some people at the BBC were using service companies, Paxman responded:
“Quite possible … errr … I don’t know who.”
Food for thought next time Paxo is grilling someone on their financial affairs.
Vodafone’s top lawyer in India has quit after being tangled up in a four-year long tax avoidance scandal. The row has seen the Indian government bullied by its biggest foreign corporate investor — but officials are not giving up on extracting $2.6bn from the company.
Executive Andre Jerome led Vodafone’s defence against the Indian government, which imposed a $2.6bn tax bill on them for the takeover of Indian mobile interests from Hong-Kong based Hutchison Whampoa in 2007. Having lost a case in the Supreme Court, officials are looking to introduce retroactive legislation to recoup the cash.
The dogged determination of Indian authorities stands in marked contrast to Britain’s HMRC, who let Vodafone off tax bills of up to £7bn after senior civil servants — such as permanent secretary Dave Hartnett — were lunched to within an inch of their lives.
On tax enforcement, Britain could learn a lot from its former colony.
- Only Swiss employee is part-time bookkeeper
- Vodafone takes up just 5% of his time
- Office rarely used; orders come from Luxembourg
An undercover sting has exposed Vodafone’s operation in Switzerland as a sham designed to avoid tax. While the telecoms giant contrives to have an “office”, this is rarely occupied – with their affairs in the country being run by a single part-time bookkeeper.
Undercover reporters from the Bureau of Investigative Journalism and Private Eye filmed a Swiss manager spilling the beans on the firm’s operations in Switzerland, casting further doubt on the legitimacy of Vodafone’s already suspect tax affairs.
One of Vodafone’s companies with profits of £1.6bn was taxed less than 1% in 2011 — by using a legal avoidance technique in which a Vodafone subsidiary in Luxembourg attributes profits to a Swiss branch. However the company does not own its own mobile network in the country.
The accountant told undercover reporters:
“We just do the bookkeeping… Vodafone is 5%, or not even 5% of my time … Once a year they come here, once or twice a year I go to Luxembourg”
Vodafone caused outrage in 2010 when it paid just £1.25bn tax in a “sweetheart deal” with HMRC, when it was widely believed that they owed £6bn. This saw them targeted by the activist group UK Uncut, and the government make a much-criticised pledge to crack down on tax avoidance.
Vodafone could relocate their “Swiss operation” to the interior of a cuckoo clock.
- Boasted of tax contributions in annual report
- Claimed tax was “important aspect” of corporate citizenship
- But refused to sign up to code until forced by Osborne
Despite the exposure of Barclays’ “aggressive tax avoidance” scheme — designed to save them billions of pounds over several years — it seems the bank were more than happy to brag about their position as “corporate citizens”.
In the review section of their last annual report, the bank go to great lengths to stress their societal role, including a section entitled “Total tax contribution” – which boasted of the amount of tax they pay:
“Barclays role as a corporate citizen remained a key priority … and an important aspect of this was the tax contribution made to governments in the countries in which we operate.”
In reality, the bank were dragged kicking and screaming into the so-called “voluntary” code. Despite the measure announced in June 2009, the chancellor was forced to threaten binding legistlation when only four of the top fifteen banks had signed up to the scheme nearly eighteen months later — including Barclays.
With an annual report taglined “Delivering on our promises”, there’s obviously a keen sense of irony at 1 Churchill Place.