Vodafone are dodgy bastards – Part 2!

This weekend people are coming out again to protest against the tax dodging greedy megacorp Vodafone. At 10am at St Enoch’s subway, Glasgow (if there’s going to be anything happening elsewhere in Scotland this weekend, get in touch and let us know!)  the people’s debt collectors will be meeting again to try and recover some of the estimated £6 billion in unpaid tax that Vodafone owes us all.

You might remember last weekend we were part of a group of activists that had a 9 hour picket of Vodafone on Buchanan Street, shutting them down all day. The reason for this is that it’s emerged Vodafone were hiding profits in a subsidiary in Luxembourg, and therefore managing to dodge paying tax on the huge amounts they’ve had rolling in.

When this multi-billion effort to defraud the people was found out by the government was discovered, the government took the generous decision that, despite their claims that the country is “broke”, that they didn’t need to bother recovering the full amount, and let them off with a derisory settlement.

A common question that people asked on the streets last week was simply, “Why?” This week, in preparation for more direct action, we took a look at why it is Vodafone was allowed by the government to get away with such blatant bastardry.

Vodafone are the 4th largest company in the FTSE 100 index, and is one of the most powerful British companies. But their tax dodging is just the tip of the iceberg, with all the UK’s biggest businesses in on the act of cheating us out of what we deserve. The problem didn’t come about overnight, and it’s not just the Tories fault. In fact, the Labour government was just as bad as the Tories at letting their pals in big business away with incredibly bad behaviour.

As Chancellor, Gordon Brown loved letting big time tax dodgers get away with murder, boasting to the CBI that they were using “not just a light touch, but a limited touch”. In 2001, he commissioned Dave Hartnett (who’s now the Revenue and Customs Permanent Secretary for tax, and ultimately responsible for the Vodafone decision) to review the procedures of the government staff responsible for catching corporate tax dodgers.

Dave Hartnett, the tax dodgers' best friend

The result was a “new, faster approach, focusing only on the most important issues”, a “collaborative approach”, based on “mutual trust.” Translation: we’re going to stop bothering our arses about pretending to enforce the law when it comes to big business.

The result was a string of bad news for those of us unfortunate enough to be forced to pay our taxes. Cable and Wireless got away with paying just £380 million for a bill which they’d set aside £1.8 billion for. Then, rubbing salt in the wound, the HMRC sold their own offices to Mapeley, a tax avoiding company which was registered in Bermuda!

The HMRC were forced by this bad publicity to tighten up a bit, but pretty soon bosses club the CBI was screaming that it was all so unfair. So in 2006, Gordon Brown asked the then head of tax, David Varney (who himself had been responsible for a major tax avoidance as head of 02) to set up another review to see how else they could give them everything they wanted on a plate. Part of the team coming up with new tax plans were Ken Hanna of Cadbury Schweppes (up in court at the time for hiding profits in Ireland), Jon Symonds of AstraZeneca (who had been caught out using transfer pricing to hide profits) and Richard Lapthorne of Cable and Wireless who we already mentioned. Unsurprisingly, the results were not tough on tax dodging!

They agreed there was need for more “mutual trust and respect” (a bit like how cops need to get on with gangsters?), and so they halved the time they would work on investigations on tax dodging overseas, many tax inspectors saw their jobs rebranded as “customer relationship managers” charged with giving “low risk status” to the “well behaved”, and Dave Hartnett promised to intervene personally, (which many staff felt would make them lose credibility in doing there job if Hartnett could go over their head, as he was to do with Vodafone).

The truth is that the HMRC is fighting a war against a nuclear power with swords and muskets. Big business snap up the best and brightest financial minds to execute the most complex and incomprehensible dodging schemes to hide their profits from us, and those out to catch them have just 600 staff to cope with over 700 dodgy organisations. When you take it into account these staff are fighting with one hand tied behind their back by successive Labour and ConDem governments, it’s not hard to see why some are tempted by the up to £40 grand a year more they can make if they defect from the gamekeepers to the poachers, and start working for tax dodgers instead.

That’s exactly what the director of the large businesses unit at HMRC, John Connors, did in 2007, jumping ship to become head of tax at Vodafone, with those he left behind to try and claw back some of the profit they’d been hiding abroad feeling “betrayed”. Not Dave Hartnett, who by this time was in charge, though. Dave kept working closely with John, culminating in the settlement that was reached that has so outraged anti-cuts protesters over the last couple of weeks. Connors brought intimate knowledge of the way HMRC was dealing with big tax dodgers to his new job, along with personal contacts there, that will have proved invaluable for those fighting the good fight for Vodafone to hang on to money they owe us.

Gideon hawking Vodafone in India

But was there more to the story of how Vodafone got away with it than just a culture of acting as yes men for big business? Just days after the announcement of the settlement, Chancellor Gideon ‘George’ Osborne was in India hawking Vodafone. Over there, Vodafone has another set of tax problems, where it’s been ordered to pay back $2.5 billion  it dodged from another offshore deal. It surely wouldn’t look good to have people at the top of the UK government essentially acting as Vodafone salesman when they had two outstanding massive tax deals, and so many are suggesting that the government encouraged their end of the process along by letting Vodafone get away with it.

In the meantime, the government has cut the rate of tax for big businesses to 21%, which in real terms works out more like 17%, meaning that big businesses are paying less of a tax rate than you are in VAT or income tax, and less than small businesses as well. Decisions like the one made for Vodafone only encourage them to try and get away with even this ridiculously low rate – only 33 of the companies in the FTSE 100 publish where all their subsidiaries are, even though the law says they have to.

Indeed, for the heads of big companies, there is a personal incentive to dodge corporate tax. Company directors often pocket bonuses based on earnings per share, meaning that every pound they save in tax is more money for them. This shows why a “relationship of trust and respect” is never going to work with these daylight robbers – there is no amount of nice chat that is going to be more persuasive than the prospect of massive bonuses and billion in extra revenue.

It’s time to get tough with the tax dodgers, and if the only way we can make that happen is with direct action then so be it. The government claim they have no choice but to implement cuts, but they’ve made a cut with their approach to corporate tax, and that choice is to leave billions of pounds in private hands instead of what it should be used for – the benefit of society. It’s time to get out on the streets to show we’re not accepting that.

Meet 10am, St Enoch’s Subway, Glasgow, Sat Nov 6th.