A blog by Jaimie Kaffash, Accountancy Age’s tax reporter
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07 Apr 2008
I don't mean to be partial, but Tesco's threat to take on The Guardian over its tax avoidance articles does, in the words of the paper, send a 'chill' through media debate on tax.
If, like me, you write about corporate tax avoidance day in, day out, it's a bit of a wake-up call, but not an unexpected one. I have been thinking for the last eighteen months that it was only a matter of time before someone sued for libel over tax avoidance claims.
Readers of this blog will need no reminding that tax avoidance is legal, a fact the Guardian acknowledges.
One issue with Tesco is whether anyone would have found its offshore arrangements surprising. Huge numbers of companies benefit from these arrangements. Of course, just because noone finds something surprising doesn't necessarily mean others shouldn't bring it up as an issue.
Tesco says the Guardian is just wrong, disputing the value of tax avoided and the type of tax. The paper says Tesco only says that now, and refused to discuss the matter for months before publication.
Whatever the rights and wrongs, the issue highlights the increasing importance of tax to corporate reputation. I'd been meaning to blog about how someone would inevitably sue for libel for being accused of tax avoidance on a grand scale for a long time now, but events have overtaken me.
Has anyone sued in this way before? I don't think so.
Visitor comments
What an interesting situation.
The Guardian has effectively conflated two issues. The first is whether tax avoidance is immoral and unethical, and the second is whether Tesco has engaged in it. The first question has been in the public domain so long now that one is tired of hearing about it. The second was a confidential matter between Tesco and HMRC before the Guardian journalists stuck their big noses in it.
It seems that we have reached a stage where the rhetoric of journalists, fuelled by their constant pursuit of scandal and inspired by the tendentious writings of self-appointed experts like Richard Murphy, Prem Sikka and their like, has been so successful in persuading the public that tax avoidance is immoral and unethical that merely to state that someone is a tax avoider is seen as libellous if untrue.
I, for one, would love to see the Courts take a view on whether tax avoidance is immoral or unethical as journalists like Alex Hawkes so frequently opine. I would be utterly astonished if any Court found that it was, irrespective of what the journalists have to say.
I rather like Tesco's approach to this case. If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win.
I am particularly looking forward to the day that the Guardian's legal advisers are forced to argue that what they have said about Tesco is not defamatory because there is in fact nothing at all unethical or immoral about tax avoidance!
Posted by: John Kavanagh , 08 Apr 2008
I'm not sure John Kavanagh is right on his first two points. The reality is that the whole issue of tax avoidance is now becoming one not just of public interest, but one of political interest too. I'm not sure people ARE tired of hearing about it, I actually think it's a more relevant issue than ever. So isn't it perfectly legitimate for a journalist to ask questions? And as one of Britain's largest private companies doesn't Tesco have a moral and social responsibility, let alone a legal responsibility, to be transparent about its activities? The disturbing issue here is what appears to be an over-reaction by a company under pressure, and implicit threats to any journalist that looks at the company, Surely in a democracy that is a very worrying development?
Posted by: John Adamson , 08 Apr 2008
Despite their name, public limited companies do not owe a duty to the public in general. Their main duty is to two groups of people; shareholders and customers.
Tesco's duty to its shareholders is to maximise its profits by any legal and ethical means, including the legitimate avoidance of tax. I've no doubt that vast numbers of Tesco shares are owned by pension funds and charities. Is it ethical or moral to deny these groups the higher dividends and capital growth that results from proper management of the company's affairs?
As far as their duty to their customers is concerned, who is the Guardian to say that they would not prefer a penny off a tin of baked beans rather than to give it to Gordon Brown? I can imagine what pensioners, those on benefits and the low paid would say and I think it differs from the Guardian's view.
We need to remember that the tax companies pay is just an element in their profits; in one way or another it is always borne by the shareholder or the consumer, in reduced dividends or increased prices.
I therefore think it is for Tesco to decide, as a purely commercial matter, whether the advantages of a sensible tax minimisation policy are outweighed by the opprobrium heaped upon them by a politically-motivated corner of the press. If the press over-step the mark, as I think they have here, it is their right to seek redress in the Courts.
The major disadvantage of the form of democracy we have is that the opinion that gains most credence is often the one which is shouted longest and loudest, not necessarily the one which has been most carefully and impartially considered. I am tired of hearing just one side of a debate, especially when it is supported by claims of ethical or moral superiority which are subjective and unproven.
Posted by: John Kavanagh , 09 Apr 2008
Re the last comment: why not give the consumer the choice? With a voluntary on-pack logo to signify that the marketer is not practising tax avoidance, the consumer will be able to decide for themselves. People I've talked to understand that their public services have to come from somewhere - not everyone can afford private schools and medical care. And more and more people will have to depend on state pensions now that the banks have thrown our money into a black hole.
Posted by: Alistair McKechnie , 10 Feb 2009
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