Tesco faces new tax questions

Tesco is facing new allegations that it set up complex structures to avoid
corporation tax.

The magazine Private Eye last week published claims that Tesco had set up a
financing arm in the Swiss canton of Zug.

The arm helps finance the supermarket’s international business. Tax is paid
on the interest on the loans it provides at a lower rate in Zug than it would be
in the UK, saving Tesco £16m, the magazine said.

Tesco was quoted saying: ‘This partnership is used to fund our overseas
business. It is common practice for global businesses operating in other markets
to fund development in similar ways. We have an open relationship with HMRC and
discuss our tax arrangements and planning with them on an ongoing basis. We
believe this structure is compliant with the government’s controlled foreign
companies legislation.’

Tesco is suing The Guardian over reports in that paper that it had avoided up
to £1bn in corporation tax through a Cayman Islands structure.

paper reported the latest allegations
at the weekend, with Tesco saying:
‘The Guardian has already admitted a serious libel against Tesco after the last
time it conducted an inept investigation into our tax affairs. It appears from
these further allegations that the paper is waging a vendetta against Tesco in
order to, somehow, justify this earlier libel.

‘The truth is that Tesco pays a disproportionately high amount of tax in the
UK – around £1bn a year including corporation tax, business rates and employer’s
NIC. As well as being materially inaccurate, the continued attempts to portray
Tesco as a business devoted to avoiding UK tax are wholly and deliberately

‘The legal case against the Guardian is ongoing which limits what we can say,
but the information put to us continues to show a complete lack of knowledge
when it comes to tax. It is also riddled with inaccuracies and designed to
portray as unethical what is in fact entirely legitimate and commonplace funding
of international companies by successful global businesses based in Britain.’

Further Reading:

the Guardian story

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