I note that Liberal Conspiracy has drawn attention to an article in the Daily Telegraph that describes the Vodafone tax protestors as “anti-capitalist”.
This is utterly ridiculous. The Vodafone tax protesters are demanding that companies:
1. Seek to uphold the rule law;
2. Minimise risk for their shareholders by being tax compliant, as is their duty;
3. Reduce the cost of tax collection in the UK;
4. Do not abuse the tax sovereignty of the UK by routing transactions through tax havens;
5. Do not abuse monopoly power;
6. Do not create artificial barriers to entry for competitors by exploiting tax advantages only available to established companies;
7. Be corporately socially responsible;
8. Pay the taxes that their customers, employees, suppliers, and stakeholders are all dependent upon for the provision of the services that they expect in accordance with the democratic mandate that the people of the UK have provided to the government.
And that is anti-capitalist?
Far from it, these protesters are seeking to uphold the capitalist system. It is the tax avoiders who are trying to exploit it, and in the process undermine its very existence.
The Telegraph ought to get its facts right.
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Oh come off it!
The protesters are motivated by nothing more than than a feeling that somebody (in this case Vodafone) is beneffitting unfairly. The majority of them have little or no clue about how the issue arose apart from what they have read in the paper. I suggest that when next they protest, have a chat to them, I have!
However, I am sure that they will gladly adopt your 7 points, even if they haven’t the foggiest what they actually mean.
@Justin
But they can probably count up to 8! Which puts them ahead…
Two days ago you had a commenter on the Vodafone case ‘Stephen’ who suggested that the real target was indeed HMRC, not Vodafone, but the shops were being targeted because they were easier. Simply out to bash a corporate with little regard to the proper direction of their anger, causing disruption to ordinary people (e.g. Vodafone workers, customers, neighbours etc) in the process.
I don’t know Stephen, or know whether he is typical and am unsure how his comment got past your comments policy. Normally you aren’t slow in disagreeing with commenters, but in this case you didn’t respond. Do you endorse his actions?
If there has been a stuff up here, it is squarely in the hands of:
1) HMRC
2) Previous governments who signed up to ‘freedom of movement’ treaties and then try to regard one of the countries they sign up as a tax haven.
It is a nonsense to have freedom of movement relationship with a country like Luxembourg and then regard it as a tax haven. If we have freedom of movement (which supposedly we do, rightly or wrongly), then Vodafone (like anyone else) is perfectly entitled to exercise that freedom without answering to anyone bar its owners. If freedom of movement means anything, it isn’t even answerable to the UK government in how it exercises that right. That’s what ‘freedom of movement’ means.
@Justin
You are hearing exactly what you wish to hear
I – and they – are trying to engage in dialogue
You should tru it some time
“The Vodafone tax protesters are demanding that companies…minimise risk for their shareholders by being tax compliant, as is their duty;”
I would have thought that if a key demand was to minimise risk for shareholders then I would have expected to see shareholders among the protesters.
The truth is surely that the demonstrators are anti-capitalist. They are opposed, on principle, to large corporations making large profits, often at the expense of the health of individuals and the environment. There is nothing wrong with that – I notice that a lot of mobile phone companies are opposed to recent plans in California to publish radiation emissions at point of sale.
I think there is a huge debate that is starting to arise about capitalism and in particular, the absurd position whereby those who exploit scarce assets get exponential returns. People are starting to look at things like Zeitgeist and the idea of a transition to a zero-growth economy. I suspect the protestors share many of these concerns and it is both absurd and insulting to describe them as attempting to uphold capitalism.
And what better way to make this demand than by trespassing on private property and disturbing a business that stands accused of no wrongdoing? Come on.
The issue is not whether these protesters are anti-capitalist. The issue is around their anti-democratic methods.
Unless something fundamental changes in our law, companies and their shareholders have as first and primary duty to maximize the profits for their shareholders, in compliance with all laws and regulation. Since Vodafone is not accused of breaching any rules, the company, its employees and its directors have the done the right thing under the law.
If protesters have a problem with our laws, and would like to see companies’ responsibilities expanded to include such things as those itemized from #2 to #8, the right thing would be to campaign for, or elect legislators minded to change them. It certainly is not to break into private property, harass customers and staff and disturb uninvolved neighbors.
@Justin
I too have talked to some people who have been on the Vodafone protests and it seemed to me they have a very good understanding of the issues – much more than your caricature suggests.
In any case, if being pro-capitalist means endorsing the right of multinational corporations to avoid tax and trample over democracy then I’m anti-capitalist too on that definition.
Vodafone, do not hold a monopoly. All of their activities use bandwidth and licenses that are acquired b public auctions, and the tax liabilities at issue arose offshore in EU jurisdictions, not tax havens. If anybody should be complaining it is Germans and Spaniards not UK protestors.
Thanks for that information, Justin.
So if what you say about the majority, say 60%, is correct, that means 40% are fully aware of the background, approx 30% are partially informed and the remaining 30% feel it is unfair/unjust that Vodafone have not paid their taxes.
Seems about right. What’s wrong with that?
I can see that numbers aren’t your strong point, so I’d be reluctant to get into an argument as it wouldn’t be fair to you – but those figures are better than how well-informed voters are in general elections.
@Adrian
I will be unambiguous. I have said repeatedly that Vodafone has done nothing wrong in the sense that they have settled a tax deal in accordance with an arrangement reached with HM revenue and customs, and that is legal and as far as they are concerned the end of the issue. I stick by that.
But let us also be clear. Vodafone has paid, or will pay, £1.25 billion of tax that they have sought to avoid. Let’s not pretend that they aren’t tax avoiders. They are. They avoided at least £1 billion extra of tax provided for in their accounts. So they are not an innocent party in this. The protesters who say that Vodafone should not have tax avoided and have every legitimate right to do so, because that is what Vodafone set out to do, and did. And I consider it a moral offence to tax avoid and so do the protesters. So should every right-thinking person. So should everyone who supports free-market systems.
if you want to argue otherwise, please do. But us a reasoned argument as I do. Don’t just say it is because they have a duty to shareholders. Judith Freedman, professor of taxation law of Oxford University with whom I have relatively little in common apart from an enthusiasm for General Anti-Avoidance Principles says there is no requirement in English law for a company to avoid tax will stop I’m quite sure she is right.
and as for the matter of trespass, so what? I do not condone violence, and I will not condone damage to property. But the right to protest is fundamental to democracy. If you oppose it, then you oppose democracy. It is as simple as that.
These are the facts. Do not make illegitimate excuses which have no foundation in law, ethics or common sense
Richard
Thanks for the reply.
I am not looking to argue whether or not there is strictly a legal duty to shareholders to minimise tax.
However, when a manager of a plc is managing other people’s money, all the incentives will point to that person trying to minimise tax (and to minimise costs generally). You just won’t be subject to the same incentives to pay (or avoid) tax as you would with your own money.
My other point regarding the Vodafone case is this: if we are going to have ‘freedom of movement’, then by definition, putting your affairs in country X rather than country Y cannot in itself be tax avoidance in any sense. If you think it is, then we have chosen the wrong place to have a ‘freedom of movement’ arrangement with. But we can’t have both.
As you may recall, I come from Australia which has freedom of movement enshrined in the Constitution. These days, there is little difference between the states. But in the past there were some differences, usually around minor issues like gambling. But for a time back in the early 80s (which predates my working life so knowledge is hazy), there were death duties in some states (e.g. Victoria) but not others (Queensland). So elderly Victorians shifted to Queensland and didn’t pay the tax.
Victoria had no legal right to interfere with the movement of these people from one state to the other, and had no right to regard them as ‘tax avoiders’. That is simply the price of having a ‘freedom of movement’ arrangement.
If you think we shouldn’t have a freedom of movement arrangement with Luxembourg, that’s your legitimate opinion, and please say so.
“But the right to protest is fundamental to democracy. If you oppose it, then you oppose democracy. It is as simple as that.”
Sure, but don’t you think it is utterly wrong to target of your protest against X when your beef is against Y? This is what commenter ‘Stephen’ was saying.
@Adrian
I don’t believe in freedom of movement of capital
Nor in the right to locate in tax havens to secure a tax advantage
It’s also why we have controlled foreign company rules
So I’m not alone
26 out of 27 EU states have them
So, what’s your problem?
My problem is this:
A country cannot be both a tax haven under CFC rules AND a party with us in a ‘freedom of movement’ treaty.
If Lux is a tax haven, then one of us has to leave the ‘freedom of movement’ arrangement – either us or them.
If we both stay, then any attempt to include Lux as a haven in the CFC legislation conflicts with the treaty.
Can’t have it both ways.
Presumably HMRC took the view that the ‘freedom of movement’ thing would eventually prevail. Seems like a rational explanation for the settlement, and I can’t see how Vodafone has done anything wrong. If they have ‘freedom of movement’, they are free to move and it is really not the business of HMRC or anyone other than their employees and shareholders.
Presumably, then, you do not contribute to any kind of pension, hold any ISAs, National Savings Index-linked Certificates, or use Gift Aid when making donations to charity?
@Alex B
Of course I can do those things. In each and every case they are tax compliant
Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
I promote that
Tax avoidance is seeking to get round the law
Fundamentally different
@Richard Murphy
OK, but each of those things is only “tax compliant” because our *previous and current* mores say that they are. If we say that our government’s current financial needs and corresponding interpretation of the spirit of the law trumps what the letter of the law says, then what’s to stop some future government raiding “tax compliant” savings when it’s policitically expedient to do so? As an aside, if that’s the case, why not pass some other retrospective legislation that criminalises previous non-financial behaviours (for rather extreme examples example, consumed alcohol, had less or more than x children, had an abortion, had a child with someone of a different race or religion, worked for a usurer aka bank and so on; I’m sure there are plenty of people who would like to see one or more of those enshrined in national law!)
The letter of the law is the only thing that should matter. I’d certainly encourage constantly vigilance and monitoring of how the law is actually being used, and if necessary, changing the law with effect from some future date.
@Alex B
no, you are utterly and completely untrue and show your inability to interpret the letter of law as a result, rather amusingly
all those things are specifically encouraged by law
Getting round the law is not
You can persuade yourself that undermining the rule of law is something worthwhile but that just shows you to be an antisocial, antidemocratic anticapitalist seeking to undermine society
@Richard Murphy
Leaving aside the confused attempt at ad hominem in your reply…
I wholly oppose tax evasion. It is criminal and should be prosecuted at least as vigorously as other financial crime, including benefit fraud.
What I’m really trying to do is encourage people like yourself to clearly and unambiguously state a codifiable distinction between good “tax compliant” avoidance and bad “tax avoidance” that cannot be subject to shifting moods over time. Everything I’ve read so far seems to be of the form “if it quacks like tax evasion, it’s tax evasion, even if technically it’s just tax avoidance”.
You’ve already said elsewhere that perfect law cannot be written, and I agree with that. The way we find out the limits of the law that’s in place is by testing it in courts between interested parties. Perhaps laws could be better-annotated so as to preserve the intent and spirit over long periods, and perhaps this would encourage courts to send problematic law back for review and revision.
Individuals and businesses need clear guidance as to which types of behaviour are encouraged, permissable or tolerated, and which are not. Without this, they cannot act without fear of later legal or financial liability. The best way we have of giving this guidance is written law.
@Alex B
Call it a General Anti-Avoidance Principle
@Richard Murphy
Yes, I read http://www.tuc.org.uk/economy/tuc-18825-f0.cfm linked from here. Everything there seemed to be inductive and defined circularly in terms of itself.
I personally had to wrestle with this when I established my own computer consultancy business after accepting redundancy from an employer during the dotcom bust of 2001. I was aware from the outset of IR35 (intended to clamp down on so-called perma-temps; disguised permanent employees paying themselves in the form of dividends from their tenuously-established limited companies). You may rightly surmise from my perjorative description of those affected by IR35 that I broadly agree with the purpose of it, if not the uncertainty experienced by many borderline cases.
Given the financial and legal risks involved in the precise type of work my business was doing, I obviously wanted the protection of a limited company. I also wanted to build the business into something larger than myself over the course of time, so I greatly emphasised that business’ brand rather than my own name in its publications. Its customers did not normally provide equipment for their other business partners, so I invested my own redundancy payment, post-tax income and savings in the company and it bought and provided my own business equipment. These things and others meant that HMRC and I considered my business and I squarely outside IR35 (i.e. tax-compliant to use your terminology). As a result, the business was regarded by HMRC as a “real business”, and as director, I was allowed to elect for the company to pay me with dividends based upon my investment of labour and personal, post-tax income and savings in the business.
From the the GAntiP document on the TUC’s website, however, that would appear to be precisely the sort of thing that that would be disallowed, despite none of the arrangements being artificial and driven purely by tax considerations and despite cheerfully complying with every rule and scrap of guidance I could obtain from HMRC.
As it happened, I wound up my business after a few years of disappointing results in the market. I’d like to have the option to try to create another business in the future; uncertainty about how current tax law will be retrospectively interpreted at some future point in time would greatly discourage me from doing so, however.
@Alex B
The problem is real
The structure of the limited company does not suit small business need
I have addressed this issue here http://www.taxresearch.org.uk/Documents/SmallBusinessTaxation.pdf
I am meeting the Office for Tax Simplification about this soon
A GANTIP is not a definitive rule but just a tool. It will still require proper indications in legislation about intention and the ill-defined concept of “spirit of the law” will be wholly unsatisfactory.
@Justin
maybe so from your point of view, but not from the point of view of the tax authority, or all those taxpayers who wish others to comply with the law
@Richard Murphy
Not just my point of view – have a look at Freedman and other academics.
And are you really saying that the revenue are unwilling (as are the taxpayers you refer to) to discard the the rule of law?
@Justin
Correction – should read “unwilling to apply the rule of law?
@Justin
They can’t if the think they got close to the Duke – who needs to be dead and buried for good
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