The revenue endured the greatest scandal in its history when it allowed Vodafone to pay just £1.25bn of an alleged £6bn tax bill from a takeover organised in Luxembourg.
There never was a £6 billion bill. That was entirely made up by Richard Brooks at Private Eye (he even explained his method to me once, and yes, it really was just made up).
The dispute was, should profits made in Germany, made by selling phones and services to German consumers out of German shops through a German company, profits that were then parked in Luxembourg, should those profits be subject to UK corporation tax?
If they had been parked in Cayman then, under the Controlled Foreign Corporation rules then yes. But in Luxembourg? The EU ruled no. Not Luxembourg, not HMRC, not Germany, but the EU law prevailed here.
Everyone also agreed that if those profits were repatriated to the UK (for example, so that Vodafone could pay them out to investors as a dividend) then they would be subject to UK corporation tax.
And that’s what Vodafone did: repatriated some of those profits and thus paid that £1.25 billion bill.
The tax bill on Luxembourg profits was zero. The tax bill on repatriated profits was £1.25 billion. Vodafone paid the £1.25 billion on those repatriated profits. There was no deal, no avoidance and most certainly no evasion.
The revenue didn’t “allow” anything at all. They collected every single penny of tax righteously and legally due on exactly the date that it was due. Who the fuck would want HMRC to do anything other than that?
But that Big Lie marches on, eh?
Richard Brooks, the author of The Great Tax Robbery, tells me Luxembourg is a far greater menace than the Caribbean laundromats. It benefits from the European Union’s free movement of capital, while the Cayman Islands, say, cannot. More dangerously, it inspires the Netherlands, Ireland and other EU states following beggar-thy-neighbour tax policies to join it in a race to the bottom.
Because tax competition is good, d’ye see? Corporation tax is a bad tax, it has higher deadweight costs than other methods of raising the same revenue. Therefore pressure to reduce the politically convenient but economically stupid corporation tax in favour of less destructive taxes, ones with lower deadweight costs, is a good idea.
The European Commission he presumes to lead is investigating the Luxembourg he created. It wants to know how Amazon could put £11bn through its Luxembourg-based subsidiary in 2013, while paying only £4m in UK corporation tax on goods sold to British customers, packaged in British warehouses and moved on British roads.
Because Amazon hardly makes any profits at all. So, they don’t pay much profit tax on not much profit. This is true at a global level as well as the UK level.
When even normally sensible people like Nick Cohen start believing these lies what hope for the rest of us, eh?