I am not amused by Npower's defence for tax avoiding, which I have accused them of this morning. They say in The Sun:
Despite the tax dodge, npower insists it has done “nothing wrong” and HM Revenue & Customs was “aware of everything”.
MPs were already angry with Npower after its boss Paul Massara admitted two weeks ago the firm hadn't paid corporation tax for three years.
He blamed its huge investment in wind farms – which gets a tax credit.
He then told a select committee the firm borrowed some cash from its German parent RWE but insisted it was “standard business practice”. There was no mention of Scaris.
Last night npower said: “HMRC are aware of everything here and still class us as a low-risk company. It's sad to see this continued harrying of a company like ours that has invested billions into the UK.”
I'm also aware Npower have said I think all payments of interest are tax avoidance. What nonsense; of course they're not. If this was paid straight to a bank I could not argue. But it isn't. This is a domestic arrangement It's like a husband borrowing from his wife and paying it through the children to get a tax break on the way. Let's not pretend for a minute it's the same as a commercial deal.
That does not mean what they're doing is illegal. It isn't, of course. It's just they're doing something they say is not tax avoidance. Two weeks ago they were saying this:
A spokesman for RWE npower last night said: "This is in no way tax avoidance, and all of our business is taxable in the UK. We've not paid corporation tax because we've been investing hundreds of millions to keep the UK's lights on.
The company pointed out it does pay "substantial employment and property taxes".
And that wasn't true. They are avoiding. And that costs us all. And the pretend we should be grateful for the fact that they are dumping on us extra taxes or NHS cuts is not just disingenuous, it is plani straightforwardly ethically wrong.
And that's what this story is about.
Npower has to stop using tax havens.
And Npower needs to publish accounts that tell us what it is really doing in the UK, and it isn't right now.
Those are reasonable demands. Please support them by signing the 38 Degrees petition.
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I personally think your stance on this issue is ridiculous, ‘you can only borrow from uk banks not your parent company’. I’m pretty sure that’s anti-competitive and illegal for an eu country to insist on that. Besides its the German economy which is losing out on tax not the uk.
None of these claims is true
Jim, you do not seem to be able to appreciate the bigger picture. Even the OECD appear to understand that the rules brought in to avoid double taxation have led to double non taxation! If multi nationals do not pay tax where their true economic profits arise, in their market places, which is the developed nations, then who is left to foot the bill? When tax revenues decline as they do in a recession, what happens to services on which the vast majority rely?
So, he told the PAC that the interest was paid to its German parent; whoops!!
But then, he’s not the only one with selective memory is he.
Paul Massara has just pulled up a chair next to Dud Billwell at the Mad Hatter’s tea party. Rumour has it that the Mad Hatter has ordered a tea urn, because he’s expecting a few more guests in the coming weeks!
My Own Reply to the 38 degrees petition:
I’m NOT shocked to hear that you haven’t paid a single penny in corporation tax in over three years. I’m even less shocked to hear that you’ve apparently been avoiding tax by channeling your UK profit through Malta. I used to be a customer but you could never get my bills right, clawing more and more money off me, and when YOU owed ME money, it was like pulling teeth to get a few measly quid back.
At a time of government budget cuts and national austerity, wriggling out of tax isn’t great. It’s even worse when you’re hiking customer prices they way you consistently do. In times of hardship and recession, you are praying on the old, the poor and the vulnerable people in the UK to line your own pockets. your greed is despicable.
Privatising the UK utilities portfolio was the single worst thing that the Conservative Government did, and left millions with the choice of heating or eating s that gloaters and bloaters such as you can live with more money than you could possibly ever spend.
I have no desire to meet someone such as yourself, You will have all the answers constructed like a politician, and avoid anything you consider uncomfortable or unpalatable. The only place i’d like to see you, is in a 6×6 prison cell for tax avoidance.
Your analogy of cross-border financing with a husband and wife is every bit as idiotic as the common tory meme of comparing the national finances to a household. Evidently your contempt for that sort of facile simplification is based only on who is making it.
If groups could freely lend money between tax jurisdictions with no tax impact then you would be at the head of the queue to criticise any that, in your view, benefit from the arrangement. If Npower disregarded that interest then the German Richard Murphy would be complaining that a company listed in Germany, and funded from Germany, and claiming tax deductions in Germany for any borrowing.. was transferring the associated income on that borrowing to low-tax UK.
I would have some difficulty complaining about a loan from Germany
I could reasonably raise thin capitalisation rules – and would – but not the principle
I can completely appropriately complain about wholly artificial arrangements
Your objection is utter nonsense – and without any logic at all
Forgive me, but you’re being anything but clear. Do you consider cross-border financing withina group to be inherently artificial? Because that’s the only conclusion I can draw from your comments in the previous discussion on Npower, and your post above. That is an absurd position.
If you’re just saying that these financing arrangements *can* be artificial, then that’s perfectly reasonable. Npower routing financing through a Maltese subsidiary would seem to fit that bill entirely. Financing from Germany, however, would not.
I consider all intra-group funding artificial until proved otherwise, yes
That does not mean all is; it means it has to be proven not to be
I disagree (of course), but appreciate the clarification.
Come on Lee, Richard is not trying to prove the existence of UFOs (and no that’s not untaxed foreign organisations) with a few blurred photographs! Try looking at the economic whole of the group and stop looking at the individual companies as independent and self-governing.
The reality of most multi-nationals is that individual segments very often *are* independent and (broadly) self governing. That is why, for example, we can have parts of Apple and Samsung continually battering each other in the courts in over spurious patent claims.. whilst, at the same time, Samsung are a key element of the Apple supply chain.
Multi-national corporate groups are rarely unified and coherent entities (you may have noticed that if you’ve ever had to deal with more than one part of one on a consumer level). Often, in fact, the central function is little different, operationally speaking, to an investment manager or Private Equity fund.. they build up a portfolio of businessess, put them in silos along regional/sector lines, and just look at the numbers once a month.
Further.. the economic whole of the RWE group shows that they pay a reasonable rate of tax. This dispute here is about where the pay it which, by definition, requires us to look at individual entities.
Respectfully, that’s yet more utter drivel of the sort that seems to be pouring onto this site form the apologists for abuse today
As RWE shows – this was a deeply coordinated act
And that’s how – I am assured by all the group tax managers I know – groups are run
So let’s stop the BS shall we?
Richard
I am talking about how they are run on an operational level. You can all it drivel if you want, but it’s the way they work. I have been involved in audits within large groups, I have worked in a corporate group (not mult-national, but genuinely divisional), and I have friends and associates within such organisations.
I don’t dispute that genuine structures are often also used to facilitate tax avoidance, nor that elements of structures are planned specifically in order to get a tax advantage. I am under no illusions as to why a financing subsidiary would be established in Malta.
I’m not apologising for abuse, and no reading of what I posted could reasonably lead you to think that. I was trying to give the commentator a little bit of insight into how corporate groups operate and make decisions. Of course, sometimes they do this for tax reasons.. but it’s also an entirely rational way to manage a large and complex organisation.
And I’ll say straightforwardly – on things like tax that’s just wrong
Totally wrong