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Every little helps

Amidst the kerfuffle of Gordon Brown’s humble pie about his “mistakes” over the abolition of the 10p tax rate, and anxiety to help those who face difficulties as a result of rising prices, we should bear in mind a few home truths about the true relation between New Labour and corporate taxpayers.

Last month, Tesco, Britain's biggest retailer, reported a 13% rise in full-year profits to £2.55bn. They have made the most of rising prices and their dominating position in most towns. On top of that, the reality is that while low-income earners face an increase in taxes courtesy of New Labour, Tesco has allegedly avoided paying around £100 million in tax – and there is very little that the government can or will do about it.

The details of Britain’s biggest retailer’s tax avoidance was revealed at the weekend in a special report published by The Guardian in response to a libel writ issued against the newspaper in April. Tesco was angry about star reporters Felicity Lawrence and Ian Griffiths’ discovery of a chain of offshore companies it had set up for tax avoidance purposes.

Tesco’s legal action is a serious matter for the newspaper, which currently faces charges of libel and malicious falsehood. To defend itself, The Guardian had to assemble an expensive team of corporate tax experts, specialist accountants, academics and lawyers, including two QCs, so that they could untangle the complex web of companies set up by Tesco over a period of years. It took them all of four months to work out how the company created a chain of off-shore companies so that it could raise £5 billion over five years through property sales and a leaseback programme of some of its stores.

The paper's editorial provides a graphic description of a secret trail, which would have defied the likes of Sherlock Holmes:

“To follow the cleverest tax avoidance twists and turns is beyond all but a tiny group of experts – usually the very experts who are paid to outwit the Treasury and the evident intention of parliament. [my emphasis] Understanding a really sophisticated scheme – involving offshore structures, including unit trusts, limited partnerships and companies which are liquidated almost as soon as they are established – involves an arduous trawl through the tangled world of Cayman, Jersey and Guernsey brass-plate companies, cross-checked with published company accounts and a minute reading of stock exchange announcements.”

The complexity and secrecy of these transactions is such that “even the Treasury and Revenue, with considerable resources in forensic tax analysis, find it hard to keep track of the sophisticated tax avoidance devices used by modern corporations”. The Guardian noted: “The Treasury has particularly voiced its frustration at the artificial structures used by some companies to avoid SDLT [the Stamp Duty Land Tax which Tesco sought to avoid paying].”

Whatever the outcome of Tesco’s legal threats, one thing is clear. Tax evasion is the name of the game for all the global corporations, who have monopolies in the provision of the essentials for our existence, be it food, clothing or fuel – and vast power over their suppliers. And there is actually nothing that governments or the main political parties can or will do about it because the state has hitched its star to the very same global corporations who are able to ignore the rules of taxation that apply to ordinary people.

And if journalists challenge corporations like Tesco, they find an army of lawyers outside their door delivering writs. In fact, it’s not just The Guardian that's under attack. Tesco in Thailand is suing two columnists from a Bangkok business newspaper, one for £1.6m in libel damages.

And, of course, while Tesco excels at tax evasion activities, they naturally haven’t forgotten the need to screw their labour force. For its new chain of shops in California, Tesco has placed job ads for two senior managers which listed their responsibilities. These included "maintaining union-free status" and "union avoidance activities". As the Tesco slogan has it, “every little helps”.

Corinna Lotz
A World to Win secretary
6 May 2008

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