Wednesday, February 04, 2009

Guardian investigation: ARCHIVE

Today is day three of the two-week Guardian investigation into tax, tax avoidance and evasion, and tax havens. A lot of stuff has been coming out, and will come out. On this blog page we will permanently archive all the stories from this series, and we'll link to it from our home page and from our permanent archive page so it will be easy to find in future. This page will grow over the coming two weeks. We will add new stories at the top when they emerge. It's organised into several sections:
  • Themes and issues
  • News
  • Overview pieces
  • Comment articles and editorial
  • Individual companies
THEMES AND ISSUES

Tax loss cost to the developing world
A letter from Christian Aid and ActionAid. "As two of the UK's biggest development NGOs, we are working together to highlight the extent to which the same practices rob poorer countries of desperately needed funds to finance their development and deal with the financial crisis. Christian Aid estimates, on the basis of figures quoted by the World Bank, that corporate evasion through abuses of trade pricing costs developing countries around $160bn each year. Followed by another cogent comment.

The big question: what is the tax gap?
looks at the difference between the £40bn corporation tax collected by HM Revenue & Customs in 2005 and the theoretical tax liability if all taxpayers complied with the letter and the spirit of the law.


Cross-border tax avoidance: has the inspector given up?

Transfer pricing. Most governments acknowledge that the single greatest threat to corporate tax revenues comes from "transfer pricing" – the opportunity for multinationals to manipulate the prices charged by different parts of transnational organisations for the transfer of goods and services in order to divert profits into low-tax locations.


The Swiss whistleblower
The Guardian interviews the whistleblower Rudolf Elmer at his hideaway in Mauritius. Worked in the financial industry for 33 years. Exposure to Cayman, Guernsey, other islands, made me think, and I started to understand what’s really going on – it’s a major problem. The future of society is at risk. Only the tip of the iceberg is prosecuted – but there is a system behind it, and that is the frightening part of it.


Low-tax, low-cost flight to Dublin
Feb 10 (Guardian) - The latest ploy by big businesses anxious to avoid UK tax, is to claim that they have changed residence to low-tax Ireland. But when the Guardian went in search of new company headquarters on the Liffey, we found there sometimes seemed to be a touch of blarney involved in the claims.

Tracking down the addresses of the Irish headquarters
Feb 10 (Guardian) - The Tax gap reporting team goes in search of those elusive relocated headquarters

Court rulings and lobbying help big firms pay less tax
Feb 10 (Guardian) - The threat to relocate to Dublin is only one of the weapons used by big business in their campaigns to pay less tax. Legal challenges are potent too.


In the country where tax evasion is no crime, Swiss private banks are unrepentant about siphoning off other governments' income
Feb 5 (Guardian) - Konrad Hummler, head of the Swiss private bankers' association, singles out Germany, France and Italy as "illegitimate states", whose citizens had no protection from excessive taxes. "We are so allergic to the Germans... because the Germans have the feeling that citizens belong to the state. There is a very old, very deep worry of the Swiss people against the Germans - it goes back to history, especially the second world war."

The tax gap debate: Are aggressive tax avoidance schemes a thing of the past?
Feb 9 (Guardian) - Most of the big four accountancy firms claim the promotion of aggressive tax avoidance schemes, as reported by the Guardian on Saturday, is a thing of the past. Whether you believe that or not, you can't trust their exponents not to return to them if the conditions are right. Long-term answers are needed. Hit them in their wallets?

Loophole logic
Feb 9 (Guardian) - If tax avoidance is legal, is there a problem? The debate has touched a nerve among Guardian bloggers.


Taxwash
You've heard plenty of "greenwash" from companies declaring environmentally friendly credentials, often on the back of questionable third party endorsements. But just like greenwash, the official endorsement doesn't tell the whole story of the company's record. Unless readers can think of a better term, let's call it "taxwash"

The Guardian's tax affairs
Guardian Media Group's arrangements for its acquisition of certain businesses from publisher Emap, in partnership with private equity firm Apax was, by contrast, publicly explained. A fairly full account of the transaction and GMG's view on it was published in May last year. GMG's corporation tax affairs were analysed by Richard Murphy of Tax Research (and TJN) last year. He concluded that there was "nothing abnormal". See Richard's blog here.


Big Business: what they make, what they pay.
This interactive section looks at the companies in the FTSE 100 and looks at their profits and the taxes they pay.

£13,700,000,000? £8,500,000,000? £3,700,000,000?

Another story looking at just how damned difficult it is for anyone - journalists, crime-fighters, whatever - to try and penetrate the offshore world.

Could the banks bail-out carry tax conditions?
Feb 7 (Guardian) - Is there any attempt being made to ensure that companies receiving assistance from British taxpayers are paying corporate tax back into the UK coffers? I would also argue that the same should apply to the individual tax affairs of their employees.

The tax gap debate: A call for more Revenue resources
Feb 7 (Guardian) - The shortage of tax investigators is a real problem - and it's getting worse. Stop firing and start hiring, a union says

What if tax avoidance had to be publicly disclosed?
With corporate reputations on the line, there would be a commercial pressure not to avoid tax. This is a job for government.

The tax gap debate: Principles, what principles? A KPMG update
Can you help us pin down the tax principles of the country's third biggest tax adviser?

Picture gallery: Zug, Switzerland
Feb 7 (Guardian) - Some pictures of one of the world centres of tax dodging (and crime.)

NEWS

14,000 tax avoidance schemes and counting...
Feb 12 (Guardian) - At the last count, since rules requiring the disclosure of tax avoidance arrangements to HMRC were introduced in 2004 there had been around 14,000 such schemes. Or so we thought. Now it seems these might be far from the limit of the problem, as many "promoters" of schemes are refusing to play the game.


The tax gap debate: Labour MP makes a stand in Commons
Feb 7 (Guardian) - The long-standing anti-tax avoidance campaigner and Labour MP Austin Mitchell Austin Mitchell wants the government to decline aid to banks that conjure tax avoidance schemes. Mitchell calls on the government "to decline to provide financial support to banks engaged in devising, marketing and implementing tax avoidance schemes that have no economic substance".

Clegg tackles Brown over tax gap investigation
Feb 5 (Guardian) – UK opposition Liberal Democrat leader Nick Clegg raised the Guardian's tax investigation at prime minister's question time this afternoon - and got an answer as incomprehensible as the subject itself.

Brown “backs” international action on tax avoiders
Feb 5 (Guardian) – Weasel words from Gordon Brown "I believe it is possible to get an international agreement for the exchange of information in relation to tax cases . . . That would be the way that we could move forward our proposals, that we could have both the exchange of information on tax and clamp down on these tax evaders." No 10 said it had been engaged in a "twin track" approach for some time, working with the EU and "leading the way" in efforts within the OECD. It said UK officials had persuaded Jersey, Guernsey, the Isle of Man, Bermuda and the British Virgin Islands to share information. Deeply deceptive: working within the EU = sabotaging the EU’s efforts; sharing = pretending to share; OECD model is fatally flawed.

OVERVIEW ARTICLES

Offshore - and out of reach to the Revenue
How companies have "offshored" legal ownership of valuable trademarks to low-tax locations. Shell has shifted ownership rights of its iconic scallop-shell roadside sign out of London to a third low-tax regime in Switzerland. It was part of a carefully planned merger of its UK and Dutch arms, which enabled the oil giant to keep many operations from the grip of the British tax authorities. For tax purposes, Royal Dutch Shell plc is now resident in the Netherlands. Two drug firms, GlaxoSmithKline, and AstraZeneca, both headquartered in London, have moved title to their drug brands to Puerto Rico in the Caribbean.

What is the point of corporate tax?
Feb (Guardian) - Companies are ciphers for their ultimate owners, so why not tax them instead? And are companies that avoid their liabilities doing any harm if it means more can be passed onto their shareholders and employees or re-invested in their business? These economic questions about "tax incidence" underpin much academic debate about how and on whom to levy tax.


The top gamekeeper
Gordon Brown as chancellor boasted to the CBI of applying "not just a light touch, but a limited touch" to financial regulation. He added: "The new model of regulation can be applied ... to the administration of tax." Now taxman Dave Hartnett has just 600 staff handling 700 groups of companies. Asked if Britain's tax collectors are outgunned by massed ranks of corporate accountants on the other side, he denies it. Her Majesty’s Revenue and Customs (HMRC) is in the process of making 25,000 job cuts. The impression of a lack of grip was exacerbated by the sale of the Revenue's own offices to a Bermuda-registered company, Mapeley.

Video: Dave Hartnett
An interview with Dave Hartnett of HMRC. How big is the problem? “the hardest schemes to unravel have been in the financial sector. We saw one . . that could have wiped out the whole UK tax base in the UK for the financial sector. The most signifiant progress made in recent years was the introduction of the disclosure regime for tax avoidance schemes in 2004 . . we now learn of tax schemes . . . much much faster, years faster . . . it has leveled the playing field between the tax planners and tax admiistration, the government can consider counter-measures within days.


COMMENT, LETTERS AND EDITORIALS

Letters
Feb 13 (Guardian) - My home buildings insurer has just informed me that they have relocated to Dublin. I'm relocating my business with them back to an insurer which is registered in the UK. 
Sid Fewster 
Crickhowell. And more like this.

Tax avoidance laws: the spirit v the letter
Feb 13 (Guardian) - Defending his bank's cross-border tax avoidance scheme before the Treasury select committee yesterday, the Lloyds Banking Group chief executive, Eric Daniels, said: "I would tell you that we do not do anything other than adhere to the spirit and letter of the law". The letter, sure. But the spirit? Text of court documents here and here.


UK plc must do its bit for broken Britain
Feb 9 (Guardian) - Britain has a "rubbish" infrastructure and a substandard workforce, as corporate lobbies point out. But it is right that business makes a contribution to the infrastructure on which it relies. To listen to corporate lobbying groups, you would imagine companies are happy to do their bit but are forced into offshore arrangements by the demands of a punitive tax regime.

The system must change
Feb 9 (Guardian) – A view from the other side. Rather than knock firms for minimising their tax bills, we should focus on reforming the rules.

The poor take the biggest hit
Feb 9 (Guardian editorial) - It has been called the "ugliest chapter in global economic affairs since slavery". Of all the victims of the tax scams we are investigating, those that suffer most are in the poorest countries.

Letters
Feb 6 (Guardian) – Some letters. Following your revelations regarding their tax avoidance, I hope that the executives of these companies are conspicuous by their absence from the next honours list. Hutton Barton, Alnwick -- If only British governments treated tax evasion as seriously as they do "benefit fraud". Perhaps they could provide a "rich tax cheats hotline" we could phone? Dr Pete Dorey, Cardiff University


Backdoor fictions
Feb 5 (Guardian) – Another rebuttal of the bogus “tax incidence” argument. Some people argue that avoiding corporate taxes doesn't really count, because companies aren't real people. It is a seductive but misleading argument. First, and most obviously, not all company shareholders are UK tax resident. If there were no UK corporation tax, other taxes would increase to compensate. Does avoidance bring backdoor benefits? Through, say, pension funds? This is a stretch to believe. For most people, this simply isn't the case

How offshore capitalism ate our economies - and itself
Feb 5 (Guardian) - The author William Brittain-Catlin looks at the history of offshore and how it helped spawn the current financial and economic crisis.

Firms' secret tax avoidance schemes cost UK billions.
Headline story. An extensive Guardian investigation has examined the accounts of the UK's biggest companies - many of them household names - and discovered a series of sophisticated tax strategies which, critics say, amount to an almost unstoppable tide of perfectly legal corporate tax avoidance. . .
UK listed companies are not required to set out exactly how much UK corporation tax they actually hand over to HM Revenue & Customs. When the Guardian asked each FTSE 100 company to provide this information only two offered a response. Similarly each company was asked what its official policy on so-called tax planning is and how this is implemented. No company was prepared to answer the question directly."

This crisis must spur us to take on the tax avoiders
Comment from opposition Liberal Democrat spokesman Vince Cable. An important starting point in this crisis is to establish a tax base that is robust and fair, in which everyone is seen to be paying their share. There is an all-party consensus that non-domiciles should pay more. The tax avoidance by corporations is, however, much greater and more difficult to identify. With further comment on the threats by corporations to relocate if they don't get their way. " The British government's dogmatic opposition to any EU tax harmonisation has inhibited sensible, practical initiatives."

The price of avoidance
Guardian editorial.
"That old chestnut about tax being one of the only two certainties in this world no longer rings true now that big businesses, the super-rich and an entire industry of consultants - many based in the City of London - devote huge amounts of time and money to paying the taxman as little as possible. For most people - including politicians and even company directors - modern tax lies somewhere between sorcery and science. . . One result of the absence of debate or scrutiny is that the people with the specialist knowledge - including the large accountancy firms and powerful voices from business - have a disproportionate share of influence on government and legislation. . . . The professional and legal minds involved have done a masterful job in muddying the waters of debate, where they have not chilled or silenced it altogether. . . . Like the credit boom, the tax-avoidance game represents the triumph of technical proficiency over social responsibility. Tax lies at the heart of the debate of what constitutes good business in a globalised economy."

Rattle and Bang
Polly Toynbee. Delving into the truth of company taxes has taken the Guardian team months of digging, talking to whistle-blowers, and following the knotted strings that lead through a labyrinth of subsidiaries in secretive tax havens. As the story of each famous company unfolds, keep your eye fixed on every twist and turn. You will go on a journey through the minds of people who have wasted their talents on making others pay for everything that makes Britain the safe, civilised, beautiful, enjoyable place where these company directors wish to live and bring up their families."

The tax gap debate: how ethical can banks really be?
Co-operative Bank policy states: "We will not finance organisations that take an irresponsible approach to the payment of tax in the least developed countries. . . . One of the most effective ways that businesses can contribute to poverty reduction is to pay income tax in developing countries. The exploitation of tax havens by multinational corporations operating in the least developed countries is particularly harmful. But no bank, however ethical, could promise investment only in companies that don't avoid tax in ALL countries (not just developing countries) without disqualifying itself from lending to larger companies, so prevalent is tax avoidance.


INDIVIDUAL COMPANIES

Rare glimpse into offshore world of big money and low taxes
Feb 13 (Guardian) - One of the more fascinating sets of records disclosed by Rudolf Elmer is, he says, the confidential investor list of an offshore fund run by the Carlyle Group.

Daggers drawn: Conflict at HBOS
Feb 12 (Guardian) - Paul Moore, asked what prompted him to break a gagging order he agreed to as part of his settlement terms with HBOS, the former KPMG partner says he has been greatly motivated by his faith.


From the high street to a tax haven
Feb 9 (Guardian) - Boots the Chemist has taken its headquarters from Nottingham to the canton of Zug, Switzerland. A private equity company loaded it with debt, whose interest payments are so large that they have wiped out any profit in the UK and all the tax that used to go with it. Also featuring Gibraltar and Luxembourg.

The electronics giant and the Manx connection
Feb 9 (Guardian) – The electronics retailer Dixons uses the laws of the Isle of Man to its advantage. With interactive explanation here.

Creative accountants
Feb 7 (Guardian) - On 18 February 2002, Ernst & Young mounted a confidential slideshow for Nikki Maynard and her tax team at Prudential, the big insurance company. It was a sales pitch. Project Toms ("tax-efficient off-market swaps," outlawed in 2004) was one of the most notable of the avoidance schemes peddled by the "big four" accountancy firms. Accountants were looking at making £15m out of their ingenious "opportunity". The government faced losing a total £1bn.

Gilt-edged profits for profession's 'big four'
Feb 7 (Guardian) - On the "big four" - KPMG, PWC, E&Y and Deloitte. Revenue chief Dave Hartnett described the previous E&Y regime as "probably the most aggressive, creative, abusive provider" of avoidance schemes. A 2005 internal HMRC study concluded that 50% of the big four's tax fees came from "commercial tax planning" and "artificial avoidance schemes", suggesting they bring in around £1bn a year. Internal emails: “... perhaps a point to gloss over ..." or “please do NOT include reference to the dividend.” Unlike in the US, HMRC has never prosecuted any of the major accountants over their tax schemes.

Barclays: The bank that bought a pipeline
Feb 7 (Guardian) – Short video describing a deal between the Irish gas board and Barclays that deprived the British exchequer of £30m, regarding a pipeline under the Irish sea. The money went in a circle via a gas board company in Jersey, and a Barclays subsiidiary in the Isle of Man. The cash ended up at Barclays bank, but the UK had to give Barclays a £30m tax allowance.

Sheltering cash: the intricate schemes drawn up by KPMG
Feb 7 (Guardian) - A flock of over 60 British millionaires bought blueprints of an “eye-wateringly elaborate” KPMG device sheltering a total £156m. Cash was loaned to specially-created trusts, and the resultant IOUs then traded to banks at an apparent loss. The "loss" was claimed against personal tax bills. A tribunal ruled them “entirely artificial.” In the same year as another scheme where KPMG was accused of “acting out a charade” KPMG UK’s boss was paid £3.6m and given a knighthood for "services to accountancy". The separate US arm of this global accounting empire has seen criminal indictments. Not in Britain. "At some point," the IRS protested, "such conduct passes from clever accounting and lawyering, to theft from the people".

The top poacher
Feb 6 (Guardian) - Roger Jenkins is said to earn more than £40m heading the tax team at Barclays, said by some insiders to be Britain's most active legal tax avoider. Deals with corporate clients exploit mismatches in different countries' tax laws - so-called "tax arbitrage". Another banker said: “It's not a level playing-field when Barclays can price in tax avoidance on their products.” With a short list of high-risk and low-risk companies.

The tax gap debate: Principles, what principles? Another KPMG update
Feb 9 (Guardian) - The 'set of principles' that KPMG's head of tax says governs the firm's approach to tax planning didn't turn up over the weekend. I'm now told by KPMG's press office that there is "an internal discussion to see if we can provide something".

The tax gap debate: more reaction, this time from KPMG
Feb 6 (Guardian) - In a memo seen by the Guardian tax team, she notes that "the reporting and analysis is reasonably factually accurate" (hurrah!) and asks KPMG people to "avoid making any public comment yourself on the debate without referring back to the tax leadership team". In answer to the "premise" that "tax avoidance is unacceptable", she responds: "Tax is a business cost to be managed like any other. The striking thing about this defence is that it comes nowhere near to renouncing tax avoidance. On one, issue KPMG seems to feel particularly vulnerable. "We are expecting, at some stage, a reference to our Greenbox personal tax planning from seven or eight years ago". Really? Follow the series and find out.

The transfer of Walkers crisps to a foreign subsidiary has cost UK millions
Feb 5 (Guardian) - A curious thing happened to the UK profits of Walkers Snack Foods in 1999. They fell off a cliff, as did the UK tax bill that went with them. Walkers had been "restructured" by its owners, the US transnational giant, Pepsico. This shifted much of its profits to a tax haven in Switzerland. Pepsico became one of the earliest adopters of the sort of business restructuring that Revenue sources now describe as the biggest threat to the UK tax base.


Hedge funds: Offshore and off the radar?
Feb6 (Guardian) - Figures show that Man Group plc has paid just 14% of its pre-tax profits in corporation tax over the latest four years. Not the most patriotic contribution, you might think, by a company whose chief executive until 2007, Stanley Fink, has just become the co-treasurer of the Conservative party.


Seeing double: Avoidance scheme allegedly used by UK ads agency
Feb 4 - Think of an ad campaign, and a WPP firm was probably behind it. Its chief executive Martin Sorrell, is one of the company bosses most adept at promoting the business line on tax. WPP has spent the past decade successfully running a series of elaborate avoidance schemes, involving billions in assets held in low-tax regimes in Luxembourg, Ireland and the Netherlands. Overseas company filings show that over the years, in response to the UK revenue blocking a loophole, WPP appears to have ingeniously reorganised itself with even more hard-to-grasp spiders' webs of legal entities.


Going Dutch
See how the drinks giant Diageo has slashed its corporation tax bill. Despite average annual profits of almost £2bn over the last decade, its accounts disclose a mere £43m a year in average UK corporation tax charges. This is little more than 2% of its profits.

GlaxoSmithKline

Shell

AstraZeneca

ABOUT THE SERIES - AND HOW YOU CAN JOIN IN

The tax gap debate: the story so far
Midway through day three of the Guardian's tax series and there has already been an enormous reaction. Keep your comments coming. The series has already prompted parliamentary action in the shape of an early day motion tabled by Labour Co-op MP David Taylor. He proposes that parliament "applauds the Guardian's serialised coverage of the tax avoidance industry and its cost to the public" and "calls on the government to respond formally to the Guardian's findings as part of a wholesale review of the corporate tax system". Supporters of the Guardian's work can call on their MP to sign up to early day motion 665.

How you can join in
Introducing the tax gap blog.

An overview of the interactive database on companies' taxes is here - and the interactive map itself is here.

Data underlying the Guardian's database


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