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Hmrc Update 2 : Hmrc Do Deal With Vodafone To Help With Tax Avoidance

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The story can be found in full on page 5 of the current edition of Private Eye.

So, let's see now, HMRC are to take control of every employee's pay thoughout the length and breadth of the country, yet Vodafone now have the official nod to avoid paying tax?

HMRC do deal with Vodafone to help with tax avoidance

By Mof Gimmers

Oh dear. Silly Vodafone. When theyre not irritating just about everyone in the world, prompting us to tell you just how to cancel your contract with them, theyre hiding money in foreign countries and costing us money. Nice.

See, Vodafone bought a German engineering company called Mannesmann for €180bn so it could use it to avoid paying tax, claim Private Eye. This move could have fallen foul of British anti-tax avoidance laws, so to avoid any fuss, they got in touch with Her Majestys Purse Holder and thought everything would be just fine. However, the Inland Revenue pretty much told them to piss off.

Not that this stopped Vodafone. They went about dumping their profits into the company and… well… a rather large legal battle ensued. The result was that tax inspectors went about trying to retrieve some money to go back into our tax system. However, HM Revenue & Customs (HMRC) Dave Hartnett decided to move the case from his specialists and lawyers to find nicer, gentler people to negotiate with Vodafones head of tax, John Connors.

What happened was that Vodafone were billed for £800m a move that was decided without consulting HMRCs litigators and specialists in the tax law. The best additional agreement was that these dodgy arrangements could carry on into the future with a promise of no challenge from HMRC.

Basically, this move from Hartnett seems to be encouraging tax avoidance, leaving the likes of us lot sold well short. Other big companies must be rubbing their hands with glee over this.

Edited by Dave Spart
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HMRC has two big problems;

1. The rules are complex and every time the government introduce anything to socially engineer or to contend with the difficulties of cross-national relationships they make it more complex. Want to incentivise pensions? Great, but watch the wording. Want to alter the rules on investment, fine but look out for the loopholes you're creating. Worst of all, want to close the loopholes? Excellent, but look as you open up some new ones.

2. The biggest earning power is in getting round the rules, so the biggest brains work there. The Barristers working in this area earn many millions every year easily.

So they are playing a handicap game against superior opposition.

In that situation they have to do deals. It might well be that what Vodaphone did was so crafty that in some way that unravelling it would have been impossible, and it was obviously completely legal.

HMRC wants to collect the tax but to be honest they have no hope. And the governments just love making things more and more complicated.

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They don't need to do deals, the government just needs to simplify the tax system.

That would be true also, but it would mean the end of;

* differential tax rates

* allowances

* tax incentives like pensions, ISAs etc.

and still wouldn't solve the problem of how you tax multi-nationals. Like, what is defined as UK tax on a company like Kraft?

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They don't need to do deals, the government just needs to simplify the tax system.

In part. The accounts of large multimational companies are so complex that they can make a loss or a profit depending on what they want to do. I can also tell you for a fact that the tax man goes to these companies and agrees a figure for tax because HMRC does not have the skills, or the time, or the money to try and prove the large companies are avoiding tax.

As the above article points top man at HMRC gets sick of 13 years of trying to prove Vodafone are avoiding tax does deal mano a mano result 800m to the treasury.

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