One of Vodafone’s stores in Central London has been occupied by protestors angry that Vodafone enjoyed a tax settlement signed in July just before George Osborne’s endorsement of Vodafone in India, and which appeared to waive at least £1 billion of tax owing by the company (according to its own estimate) and as much as £4.8 billion in the usually reliable estimate of Private Eye.
I have written about this story, here, and in the Guardian. And in a sense there is nothing to say to what I said then:
I do have sorry news for those who want Vodafone to pay up: if HMRC have really settled the case then the matter is done and dusted, and the opportunity to charge will have gone.
No protest will change that. But I also added:
This does not change the fact that this affair leaves a sour taste in the mouth, not least because days after it was announced, George Osborne was promoting Vodafone in India — a visit that must have been agreed before the tax announcement was made on 23 July. Of course, the coincidental timing may just be fortuitous and no one is suggesting Vodafone has done anything wrong, but the impression given is that HMRC rushed a deal through before the Indian visit.
These timings do look odd, in the extreme. And I have no doubt at all No 11 was behind them. And a “sour taste” is the least they leave behind.
Clearly it’s done more for some. I have no idea who: I have no idea who organised this protest or who is on it. But it does raise serious issues.
First note Sky News’ report that:
An article in the Private Eye estimated the taxpayers' bill for the CFC liabilities and other arrangements "was likely to be at least £6bn" in lost tax.
According to the magazine, a former official familiar with the case described it as an "unbelievable cave-in" by HMRC.
However, HMRC said this claim was untrue, adding: "We cannot comment on the detail of the settlement but we can confirm that it was reached by HMRC following a rigorous examination of the facts and an intensive process of negotiation that tested the arguments of both parties.
"As a result it was agreed that Vodafone’s liability was £1.25bn and at no point was a liability greater than that established.
"There is no question of Vodafone having an outstanding tax liability of £6bn. That number is an urban myth."
With the very greatest of respect to HMRC might I suggest they stop digging? It’s the best advice to someone in a hole. Vodafone expected a bigger liability in this case for good reason, and that was that the UK had a good case. That HMRC caved in is, as I think the Private Eye commentator (who I know well — I sent Sky their way)said a matter that is beyond dispute.
There is clear, unambiguous and certain bias of treatment in my opinion in this case. The ConDems wanted to send out a message to business. To woo one in particular. That’s not to blame Vodafone of anything. It is to accuse No 11 of political manipulation of a tax dispute to suit its purpose evidenced in India days later.
Are people right to protest? So long as they do so peaceably and without causing damage then my answer is yes, that is their right. This is a democracy. The right of peaceful protest is fundamental to democracy. Vodafone can claim to be innocent victim here — but it set out to tax avoid and all claims to the contrary by it would be unsustainable. They say it is their intention to do so. And they must be aware of the social consequences of that — which are dramatic.
I therefore support protest on the conditions I note.
And I hope there will be more protests on many issues. When the ConDems are seeking to tear the heart out of our society; when they are planning to impose on many a cost to benefit a few whom already enjoy all the privileges society can offer, and when people will suffer and even die as a result then I think peaceful protest is not just our right, but our duty.
And I stress — that’s because any democracy should afford us that right and encourage its exercise. And any government faced with such protest should not spread deliberate misinformation in the face of it — as H M Revenue & Customs appears to be doing in this case.
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Lots of innuendo, very little facts in this story.
“I have no doubt at all No 11 was behind them”.
Complete tosh. You really have no doubt? Were you there? Go on, produce some evidence will you?
To claim that the difference between the amount provided for in the accounts and the amount actually settled must have been the amount waived is highly disingenous, and you know it. A provision is not made on the basis of what the company thinks “should” be due, but on the basis of what the company thinks might be payable. It should always be overcautious rather than undercautious in any event.
Do the protesters actually know the details of this case? Does anyone outside HMRC and Vodafone? Almost certainly, no.
“And any government faced with such protest should not spread deliberate misinformation in the face of it — as H M Revenue & Customs appears to be doing in this case.”
The HMRC statement seems to be perfectly reasonable. A rigorous negotiation and an intensive process of negotiation sounds like exactly what would be expected to resolve a case that had been outstanding for many years.
@Chris Swinson, the details of the case are quite well known having been through the High Court and the Court of Appeal (http://www.ashurst.com/publication-item.aspx?id_Content=4548). Vodafone were refused leave by the Court of Appeal to appeal to the House of Lords, but Vodafone had the right to petition the House of Lords, and both parties would have taken advice on the likelihood of whether that or an appeal to the ECJ would have been successful. We don’t know what advice was given, but on the basis of the settlement it looks as though Vodafone were given enough support to encourage both sides to settle.
HMRC would have been mindful that there were a number of other cases that had been put on hold, so the amounts at risk were higher than those of Vodafone and they may have decided to settle rather than put all of the other amounts at risk.
If I understand the HMRC press release, they are saying that the maximum liability due from Vodaphone was £1.25bn. Yet Vodaphone provided more in the accounts, as Chris Swinson says, not because they thought it was a certain liability but because it might be due, from which I infer that they thought the maximum liability was much higher. Agreed that this is completely normal accounting practice, but if Vodaphone’s in house tax department, lawyers and auditors thought that the maximum was £6bn or whatever amount, and it must have been more than a remote possibility in order to provide for it, why didn’t HMRC start by arguing from that amount?
@ Chris Swanson
If the reported provision of £2.2bn is correct, then they set aside almost double what they paid. That seems rather a large margin of error to build in. Do they set aside almost double for all their other liabilities? If so, their internal estimates seem pretty hopeless, or they were genuinely expecting to pay significantly more than they did.
Come off it Chris, this is yet another instance of how the tax system is being manipulated and abused by large companies, and how governemtns, rather than take them on, actually seem to collude in this abuse. I’ve spoken to someone in HMRC who deals with these type of cases, and his opinon was exactly as Richard says, that Vodaphone got off lightly.
This government is going to cut another 13,000 staff from HMRC, has caved in to the Swiss over bank secrecy, (and hence facilitated tax evasion now and in the future), and reversed the decision of the previous government to refuse permission for the Caymans to seek a loan, which means they can carry on acting as a tax haven.
I’ll believe this governments rhetoric on clamping down on abuse of the tax system when I see them take action against companies like Vodaphone, rather than attacking benefit claimants at every opportunity as they are doing now.
@Chris Swinton
Given the complete lack of transparency and openess in this case (and any case like it) the vacuum is bound to be filled with speculation and innuendo. Address the former, so that citizens (tax payers and therefore stakeholders)can see how policies and decisions like this were arrived at and we can then have an informed debate about whether it’s right or not.
But that won’t happen, of course, because the government, HMRC and (in this case) Vodafone will all claim ‘commercial confidentiality’ and hide behind that. So, three stakeholders get their way while the rest of us – who apparently are ‘all in this together’ are completely ignored.
Remember, Cameron campaigned during the election on a ticket of more transparent and open government. No sign of it yet, though.
@Chris Swinson
Are you the Chris Swinson who was president of the ICAEW?
If so, note the other comments here. They show remarkably more insight than most CAs would offer
And note the point Alex makes – HMRC was winning this case
Why cave in?
Tell us more if you know it
@Ivan Horrocks
Given the complete lack of transparency and openess in this case (and any case like it) the vacuum is bound to be filled with speculation and innuendo. Address the former, so that citizens (tax payers and therefore stakeholders)can see how policies and decisions like this were arrived at and we can then have an informed debate about whether it’s right or not.
The facts of the court case are available for public scrutiny, and so are the legal duties of HMRC. What HMRC won’t comment on is their individual dealings with tax payers, but if you think they have been delinquent you can always apply for a judicial review, but I suspect that wouldn’t get very far.
@ Alex
Agreed. But that’s not the problem here is it, it’s the fact that the details of how the settlement was arrived at that aren’t known that’s the problem. While I might agree that HMRC has every right to keep its dealings with individuals over tax settlements confidential when these are beyond a certain scale my view would be that public interest outweighs confidentiality, certainly after a settlement has been reached.
@Ivan Horrocks
Agreed
Large company tax returns need to be in the public domain
And those of civil servants, MPs, cabinet ministers, judges, teachers all civil servants and trade union officials.
@JayPee
Oh dear: you do show yourself to be both very stupid and really rather nasty at one and the same time
The difference between a large publicly owned corporation that needs disclosure to ensure accountability when it is clear that shareholders cannot do so is fundamentally differ not from your petty vindictive comment
Please behave like a civilised and reasonable human being if you want to comment here
That makes sense. But maybe HMRC are not wanting the info to hit the public domain in case it prejudices future dealings with other companies?
Surely this whole episode is another reason why we need a much simpler tax system.
The point I am trying to make that tax affairs are privileged and confidential – just as they are for those are paid from the public purse.
I do not believe there is a country in the world where tax filings are in the public domain, and I can assure you it will never happen in the UK.
@Greg
Oh silly me not to realise the solution was to make it easier to tax abuse.
How terribly short sighted of me
[…] More info on the background to this here: http://www.taxresearch.org.uk/Blog/2010/10/27/vodafone-and-tax-protests/ […]
@Chris Swinson
Chris… Do you not spot the slightest hint of irony in your hypocritical statements? 😕
[…] Background info: http://www.taxresearch.org.uk/Blog/2010/10/27/vodafone-and-tax-protests/ […]
This may be a silly question but what did Cameron’s government have to gain from this tax let-off? What was it’s “purpose”?
“It is to accuse No 11 of political manipulation of a tax dispute to suit its purpose evidenced in India days later”