Alex Hawkes is reporting that Tesco is suing The Guardian over its allegations that Tesco has bilked the UK taxpayer of around £1 billion through the use of offshore tax arrangements. Alex seems perturbed wondering:
If, like me, you write about corporate tax avoidance day in, day out, it’s a bit of a wake-up call, but not an unexpected one. I have been thinking for the last eighteen months that it was only a matter of time before someone sued for libel over tax avoidance claims.
I’m delighted. Assuming Tesco chooses to pursue this course of action in court then it will have to defend its position by showing its tax computations in open court, explaining the rationale for its actions and demonstrating exactly how The Guardian has libelled. It is fairly safe to assume it will do everything in its power to avoid that course of action.
Last month, Richard Murphy gave a detailed description of a meeting he had with Tim Voak, Tesco’s tax director and Emma Reynolds, head of government affairs. In Richard’s words:
The only reason no tax is not due is not accident or chance. It is because an “immensely complicated” structure has been put in place to ensure that tax has not been paid, quite contrary to the spirit underlying UK corporation tax rules laid down by parliament and using an offshore structure to achieve that objective. In the circumstances I am quite categoric: the choice of that structure constituted a tax avoidance exercise which achieved its objective in that no tax was paid when the contrary would be expected by an informed person, like me. In addition Tescos ensured that the structure that they used was not tax compliant in that it moved the centre of taxation of UK property out of the UK and out of the UK tax net. This I also consider to be tax avoidance by it, from which it must have expected to benefit (and no doubt did through the low rental yields it paid on these properties according to its annual accounts for 2007). As such this exercise was also an action in tax saving for which Tescos was entirely responsible capable of being added, in my opinion into the tax loss calculation the Guardian might have used since Tescos (and no one else) created that loss.
Richard’s opinion is that The Guardian has done nothing wrong. Apart from a sensationalist headline, I’m inclined to agree. We will wait and see if that is tested. I believe it should be tested and that pursuing a libel action is a very good way to examine the issues. People like Richard, Alex and to a lesser extent myself have been drawing attention to the way large companies try to find ever more ingenious ways to walk around tax law, to what we see as the detriment to civil society. One can argue that is Tesco’s right to avoid especially given the complexities inherent in the UK tax system. That does not make it acceptable, especially when it involves complexities that can only have one purpose – the avoidance of tax.
The real test then becomes whether Tesco has a duty to operate as tax efficiently as possible. This is at the heart of what anti-avoidance is all about. The intersection between social responsibility and the exercise of corporate duties under the law. It will be an interesting debate.
