Tesco's claim that it doesn't avoid tax has been blown clean out of the water by Private Eye. In this week's edition the Eye notes that, as it puts it, Tesco has been avoiding corporation tax through a complex web of offshore operations. That is, of course, exactly the allegation the Guardian also made a couple of months ago, over which Tescos sued.

On this occasion, as the Eye recounts, Tescos has set up a finance operation in the Canton of Zug in Switzerland. The structure is as fantastic as that used in the joint ventures used for its so called sale and lease back deals on which the Guardian reported in February and on which I commented in March. The arrangement revolves around a UK LLP (whose accounts are available here) with partners comprising Hungarian and Irish subsidiaries of Tesco. The LLP has a branch in Zug. It is this branch which appears to be used to loan funds to non-UK based members of the Tesco group. As the Eye notes, the result is that Tesco is running an offshore finance operation on which tax is being paid at an effective rate of 6%. In just over two years some £66 million of income had been earned by this structure, saving Tesco some £16 in tax when comparison is made with the reasonable UK rate that one would expect Tescos to pay.

So significant is the activity that Tescos has committed more than £1 billion to it.

Full marks to the Eye for first rate reporting. I have little doubt that this story will stick since it is based on public data.

But let's be clear what this means. First, the Eye has shown that Tesco is a tax avoider whatever reasonable definition of that term is used. The wholly artificial structure that Tesco's has created in Zug can only be for the purposes of tax avoidance. The Eye has shown it has achieved this objective. This of course confirms something I have also consistently argued. Indeed, I have shown that Tescos has underpaid tax to the tune of £1 billion over the last nine years when its cash payments of tax are compared with the UK statutory tax rate.

Second, Tesco's absurd claims of moral indignation when countering claims that the Guardian suggested it avoided tax are shown to be hypocritical. Which means the party is over for Tescos. As is the usual case when someone sues the Guardian, they have been shown to be making baseless claims. So, whilst I accept that the Guardian did get its article on the sale and lease back deal wrong in detail, it was true, as I suggested in my blog on that issue, that corporate tax avoidance was a key component in that deal, just as it is central to the arrangement that the Eye has now discovered.

All of which says that Tesco's claim that the Guardian launched a 'devastating attack on its integrity and ethics' when suggesting Tesco avoided tax was, to put it nicely, bunkum (and that's being as polite as it is possible to be).

This suggests that it's time for Tesco's to say 'fair cop' and to withdraw from its case against the Guardian. It should accept that even if the Guardian made a technical mistake in the way it presented its story, that:

- it was avoiding corporation tax when locating its sale and lease back deals in Cayman,

- that it is a seasoned tax avoider, and

- it does create complex offshore structures for this sole purpose.

This structure in Zug is proof if ever it were needed. All of which means that Tesco's claim against the Guardian has already seriously backfired, simply because it must have known that it's protestations were inappropriate.

But there is a broader issue to consider as well. Tescos has proved that HM Revenue & Customs are 100% right to challenge the structures that big business is using to abuse the tax systems of the UK and other countries. It's exactly the sort of structure that Tesco is using that the proposed rule changes on foreign profits are targeted at. But its these same rule changes that have created furore and have caused some companies to say they wish to leave the UK. But what is wrong with targeting this sort of abuse, and why should multinational enterprise be allowed to operate in this way? These structures are, however looked at, abusive. And that's why they must be brought under control. No one has the right to abuse the ordinary people of the UK in this way by denying them the tax they have the reasonable right to enjoy.

Which then leads to the obvious question, which is why Alastair Darling has acceded so speedily to the will of this group when he should be in possession of the facts on this sort of abuse? Might it just be the time for the Revenue and Treasury to go on the counter offensive and make quite clear what sort of challenge they are facing by publishing, even if in anonymised form, examples of the abuse they are tackling? I do think this appropriate. After all, how else can people realise the extent of this abuse if government is not going to put as much effort into stopping it a they do into the equally repugnant, but much less costly, fraud in the benefits system?

This is a question that really does need to be answered.