I do find this very puzzling indeed.
Everything about their statement suggests that this is the case. I know Private Eye is used to being sued, and I know it would be difficult for HMRC to litigate this case, but that does not change my opinion. I am now quite confident that Private Eye is saying that it has clear and unambiguous evidence that a tax liability of up to £6 billion has been waived as a consequence of the issue under dispute and the other issues that have, apparently, been resolved with Vodafone at the same time. And I’m equally confident based on the form of wording that they used that they have documentation that suggests that this arose as a consequence of the intervention of Dave Hartnett and that in the process he overrode objections from tax officials previously involved in the case by imposing upon the negotiation new participants who were always likely to reach a deal.
His reason for doing that is open to speculation, and I have no doubt we will never know the real answer. Nor do I see any reason why Vodafone should supply it.
One of the leading tax experts in the country (for yes, it is he!) is willing to simply take the word of a magazine?
It should be, for someone with Ritchie\’s deep and intricate knowledge of how the system works, terribly easy to reverse engineer the calculations so as to show that Vodafone really did have a £6 billion tax liability.
You know, the one that they nefariously screwed over HMRC about?
Now I\’m not a tax accountant, certainly not one of the country\’s leading such, but I have to admit that I can\’t quite see how to do it.
You see, as far as I understand it, there was about £18 billion in that Luxembourg subsidiary. To get to £6 billion we could just apply the UK corporation tax rate of 30%. Easy peasy.
But, umm, some of that £18 billion was dividends, wasn\’t it? And thus already taxed in Germany, so what is owed to the UK is the difference between the German and UK tax rates, not the whole 30%.
And other bits were interest: which, so I\’m told, would have been taxed in Luxembourg at 21%. Meaning that again, it\’s only the difference between that 21% and 30% which should be counted as being a UK tax bill in any manner at all.
Indeed, there are those who know a great deal more about the matter than I do who think that Vodafone\’s actual tax liability was about the £1.25 billion that they\’re paying.
Now, in an attempt to clarify this whole issue, here\’s a challenge for Richard Murphy (yes, I\’ve put it in a comment on his site but you know how often my comments get published there).
Could you please reverse engineer the situation so as to show what the true Vodafone tax liability through Luxembourg was? What is the amount, given your knowledge of the system, which should have been caught up in the UK\’s CFC rules (we\’ll entirely leave aside whether the ECJ ruling that they should not apply in the EEA).
How does Vodafone end up owing £6 billion in UK tax from £18 billion from its German operations, given what I\’m told is true, that there have already been German and Luxembourgish tax bites at that money already?
If Ritchie doesn\’t bite, anyone else want a go?