Corporate Tax Avoidance: The Corruption of Gordon Brown

[John Simkin]

The Guardian newspaper has been investigating the accounts of the UK's biggest companies and discovered a series of sophisticated tax strategies which, critics say, amount to an almost unstoppable tide of perfectly legal corporate tax avoidance.

http://www.guardian.co.uk/business/2009/fe...x-gap-avoidance

The veil of confidentiality that covers these tax avoidance schemes is so difficult to penetrate that nobody knows exactly how much tax goes missing each year. But HM Revenue & Customs estimated that the size of the tax gap could be anything between £3.7bn and £13bn. The Commons public accounts committee put it at a possible £8.5bn and the TUC said £12bn.

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. However, the investigation, which we publish over coming days, has established that:

• The UK-based drinks giant Diageo plc has transferred ownership of brands worth billions of pounds, including Johnnie Walker, J&B and Gilbey's gin, to a subsidiary in the Netherlands where profits accrued virtually tax-free. Despite average profits of £2bn a year, it paid an average of £43m a year in UK tax - little more than 2% of its overall profits.

• Two major drug firms have shifted ownership of their brands to tax havens in the Caribbean. Their UK operations can then be made to pay royalties for the use of the trademarks, reducing their profits and the amount of tax due in this country.

• An internationally renowned corporation has structured itself so that it is now simultaneously a British public company, tax-resident in Amsterdam, but whose brands are Swiss-owned.

• The makers of an iconic British food product have shifted the rights in it to a tax haven in Switzerland.

• A household name has been deliberately loaded with debt so that it no longer has any profits to pay tax on.

• Top accountancy firms are charging £500,000 a time to invent tax-avoidance schemes.

• Some UK-listed companies which have moved control to Dublin to benefit from Ireland's low-tax regime appear to have little real presence there.

According to the National Audit Office, in 2006 more than 60% of Britain's 700 biggest companies paid less than £10m corporation tax, and 30% paid nothing.

Britain's top taxman, Dave Hartnett, told the Commons public accounts committee last year that 12 major corporations had "extinguished all tax liabilities in 2005-6" thanks to avoidance schemes.

Tony Blair and Gordon Brown are the two men behind these tax avoidance schemes. I imagine the two men have been well-rewarded by their financial masters. You can read the full report here:

http://www.guardian.co.uk/business/series/tax-gap