With comedian Jimmy Carr’s tax avoidance dominating headlines, bold statements have been coming out of HMRC about “investigating” the K2 scheme — but a report by the NAO indicates that the taxman is too scared to pursue tax avoiders through the courts.
Confirming that they were investigating the offshore loophole, HMRC said:
“If it [K2] does work technically, HMRC will challenge it in every way. There is no way anyone, no matter who they are, is going to get away with paying less than they should.”
Which sounds pretty tough. But a report from the National Audit Office into HMRC’s dealings with tax avoidance revealed that the department were frequently reluctant to take avoiders to court, for fear that they would lose. The report says of one case:
“If [the matter had gone to litigation], there was a substantial risk that the Department would have received nothing.”
HMRC’s record is, admittedly, not brilliant. After Vodafone avoided a £6bn tax bill, and was earlier this year revealed to have used a sham operation in Switzerland in order to avoid tax on its profits, with an office run by a single bookkeeper.
Jimmy must be quaking in his boots.
The Indian government is to target Vodafone in a $7bn move against tax avoiding corporations. The mobile operator will be issued a payment reminder notice after a new retroactive law overturned a court decision exempting them from paying billions of pounds worth of tax.
The behaviour of Indian regulators stands in marked contrast to HMRC, who let the telecoms company off £7bn worth of UK tax for no apparent reason. Despite a Supreme Court ruling in Vodafone’s favour, the parliament has passed a retroactive amendment to tax laws to plug the loophole.
The $7bn amendment won’t hit Vodafone alone, though they are the highest profile affected company set to be hit with a bill. Their $3.6 bill dates from 2007, when they took over Indian interests in Hong Kong based company Hutchinson Whampoa. Since then they have battled the Indian government through the courts, in a scandal that led to the company’s top lawyer quitting.
Where India targets corporations, George Osborne targets charities.
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.
Laurie Penny’s gonzo account of a UK Uncut protest against Vodafone was littered with her characteristic impassioned quotes from activists:
“I have a friend with five kids, her youngest is eight months, and they’ve just taken away her benefits, and now you’re telling me they let Vodafone off six billion? How’s she going to look after her baby now?”
And it seems the £90bn telecoms giant and doyen of tax avoidance is once again on the receiving end of this moral indignation — owing to the great injustice of, err, cutting Laurie Penny’s Vodafone mobile phone off:
As the domain of parody becomes a small speck on the horizon, please allow Scrapbook to paraphrase:
“First the tax dodging and support for despots … and then they cut off my mobile!”
Following in the footsteps of Vodafone in Egypt, the biggest mobile phone network in Libya, Libyana, had been sending anti-protest text messages since the start of the uprising in February. Not any more.
The translation of the message above comes from Libyan Youth Movement:
“Allah is Greater,
We congratulate the Libyan people on the toppling of Muammar Gaddafi, and we urge them to go out in the streets to preserve and protect the public belongings.
Long Live Free Libya,
The National Transitional Council. “
The late Gil Scott-Heron claimed that “the revolution will not be televised”.
He never mentioned mobile phones though.