First, labour practices under the cosh, now it’s the turn of the transnationals

What is “British” (or indeed “Irish”) labour these days? Wildcat strikers at any rate are clear it’s non-foreign, but what’s “foreign” in the EU? Next question: what is a “British” company? The Guardian exclusive takes the traditional view as the basis of their story about massive if legal company tax avoidance. e.g.:

The UK-based drinks giant Diageo plc has transferred ownership of brands worth billions of pounds, including Johnnie Walker, J&B and Gilbey’s gin, to a subsidiary in the Netherlands where profits accrued virtually tax-free. Despite average profits of £2bn a year, it paid an average of £43m a year in UK tax – little more than 2% of its overall profits.

Some UK-listed companies which have moved control to Dublin to benefit from Ireland’s low-tax regime appear to have little real presence there.

HM Revenue & Customs estimated that the size of the tax gap could be anything between £3.7bn and £13bn. The Commons public accounts committee put it at a possible £8.5bn and the TUC said £12bn.

According to the National Audit Office, in 2006 more than 60% of Britain’s 700 biggest companies paid less than £10m corporation tax, and 30% paid nothing.

I daresay this is old hat to those in the know. But it’s worth visiting the Guardian website to get the full story. Good journalism or another neanderthal attack of globalisation, just stirring it at a time of intense economic anxiety?

  • Dave

    “…but what’s “foreign” in the EU?”

    Plenty. Your national debt is sovereign, but the purposes for which you accrue it is not. For example, under EU regulations, any government investment in infrastructure – or any government spending project – over a certain size must be advertised throughout the EU and open to all foreign contractors within the EU.

    So, in effect, other states can get the financial benefit of your government’s investment but you – the taxpayers – get the benefit of the debt. When Keynes spoke about public spending being used to stimulate the economy, he didn’t mean that you would spend to stimulate foreign economies. Likewise, your government can spend taxpayers’ money to attract foreign companies to create jobs in the UK but it can’t specify that those jobs are for UK workers.

    What is the point of attracting those companies if not to create jobs for UK workers? Their profits are exported and they have no loyalty to the host nation. Now many of the workers in Dell (dearly departed) that were created with millions of Irish taxpayers’ money were foreign? It was full of Poles. In addition, the Polish Central Bank said that 46% of the Poles in Ireland extracted €1.87bn from the Irish economy last year. That doesn’t include transfers such as Western Wire or cash carried out. If 46% of them extracted that much via the banks, then the figure for all of them and all means must be circa €6bn. Apply that to other migrant groups pro rata and Ireland is losing circa €20bn per year in capital to foreign states.

    With 80% of all British jobs created in the UK in the last 12 years (and how much taxpayers money was used to create them?) going to foreign nationals, whoever is benefiting from ‘globalisation’ (or, in the case of the EU which accounts for just 7% of the global population, regionalisation), it isn’t ordinary British people.

  • Brian Walker

    Dave, while acknowledging a world system under strain, at least the jobs created generate increased wealth through the single market and then in world markets. The logic of EU harmonisation, still resisted by most governments, would eventually pool what are still national debts. Is your 80% figure actually true? If so,it hardly amounts to unalloyed failure. What else other than globalisation, a phenomenon which has existed since before WW1, is likely to expand the world economy so effectively, despite imperfections and dislocations? Is today better or worse than the 1930s? There’s only one answer.

  • Mack

    It’s odd they chose Diageo as an example. It was founded by a foreign worker who migrated to Britain, an Italian in fact (Giacomo Justerini)..

  • Mack

    Dave

    Arguably of more importance to tax payers (and purchasers anywhere) is value for money, and the quality of the product recieved. EU regulations do not state that contracts must be awarded to companies from other member states – merely that they be allowed compete. The government then chooses the company it feels will deliver the best service for the best value. This is a gain for tax payers, and ultimately a gain for business. If a countries companies aren’t strong enough to compete within the EU, then that country should not be a member. It’s really that simple.

    Unless you are comfortable with the alternative which is the kind of price gouging endemic in protected or cosseted Irish sectors (legal, property, domestic services (taxis, many retailers) etc) in recent years?

  • Ulster McNulty

    Dave,

    “Apply that to other migrant groups pro rata and Ireland is losing circa €20bn per year in capital to foreign states”

    LOL, it’s a dirty job but somebody has to make some money out of the celtic tiger.

  • cynic

    Great to see the Guardian run such a moral campaign, until that is you look at Guido Fawkes at:-

    http://www.order-order.com

    So to save you the work let me quote:

    “According to the their own annual report Guardian Media Group made £306.4 million before tax. Using astute tax planning and legal manipulation of the tax laws; such as the use of an equity owning trust and a Caymans Islands offshore corporation to avoid stamp duty, they managed to only pay £800,000 in tax last year. That is less than they paid the Guardian Media Group’s chief executive, Carolyn McCall, she got a package of £827,000 whereas the media fat cats paid HM Revenue Commissioners a mere £800,000 in corporation tax”

    Well, fancy that. Surprised that the Guardian didn’t mention that in its articles. Perhaps no one told the Editor or one of those pesky subs edited that section out. And isn’t it a shame that this campaign has popped up now just when others are starting to follow up on the stories about alleged practices by Labour members of the House of Lords. I assume the Guardian won’t have time for any of that now and will be busy working closely with the Labour Minister of Injustice in his plans to ban from the Lords anyone who doesn’t pay their taxes as opposed to anyone who is corrupt or selling changes to UK laws for cash. We couldn’t have that, of course, when so many of the Labour front bench fully expect to be in there in the next 18 months or so.

    I am also always delighted to see such articles penned by journalists with Tuscan Villas who are so close to the real issues that really matter to the people of the UK.

    Given the state of the Euro have you seen the price of sun dried tomatoes and pecorino these days and it’s so hard to get a plumber now all the Poles are going home?

  • willis

    Cynic

    Very good.

    I have also found it very difficult to find any references to the Evening Standard sale on the Daily Mail site.

  • A certain Paul Hewson and his mates have their money in Holland too…

  • Harry Flashman

    Cynic, well spotted, I also note from today’s Guardian that the government spin machine is in full damage control over the corruption involving Labour Peers in the House of Lords; they have decided that Lords Black and Archer, two disgraced Tory peers shall be stripped of their peerages.

    You gotta love the Guradian for its fearless unbiased reporting (and yes willis, I agree about the Daily Mail but no one ever put the Mail forward as a beacon of journalistic impartiality).

  • Brian Walker

    cynic, ditto well spotted. Mick, worth a cheeky blog on Comment is Free?

  • Brian Walker

    Given the spate of comment as picked up by cynic, you may care to note the reply below in Commment on the original Guardian story. Clearly, they’re trying to control their blushes! Hacks of course have no control over investment policies but a declaration of interest or some kind of declaration, seemed appropriate.

    Hi everyone,

    If you’d like to discuss the Guardian’s tax affairs, please do so on the following piece, which has been especially designed for you to do just that:

    http://www.guardian.co.uk/money/tax-gap-blog/2009/feb/02/tax-gap-guardian

    We’re happy for that conversation to continue there but we’d like to keep the discussion here on the topic the piece was authored to address.

    We’ll now be removing any future content that we feel would be better placed in the Guardian’s tax affairs piece. You’re welcome to repost the same content there.

    Kind regards,

    Mark Fothergill
    (Guardian) Community Manager

  • Dewi

    Guardian actually lost money – “profit” arises on profit on disposal of assets – it’s been a while but I seem to recall some rather arcane taxation treatment for these types of profit…..

  • Dewi

    …and the Guardian actually received a tax rebate of £800k

  • willis

    Hi Harry

    You gotta love the Guradian for its fearless unbiased reporting (and yes willis, I agree about the Daily Mail but no one ever put the Mail forward as a beacon of journalistic impartiality).

    You might think not, but amazingly that is not how they see themselves.

    http://www.guardian.co.uk/media/2008/mar/14/dailymail.pressandpublishing

    Big bag of sweets to anyone who can link to a comment on the Daily Mail site which is critical of the Daily Mail.

  • Dave

    “Is your 80% figure actually true?” – Brian Walker

    According to The Times: “Official figures have shown that immigrants have taken four out of every five new jobs in Britain since 1997.”

    As for the idea that we shouldn’t defend the nation-state here and now because we will all be one big happy united single-government world at some point in the future…

    Err, that would be an ecumenical matter.

    “If a countries companies aren’t strong enough to compete within the EU, then that country should not be a member. It’s really that simple.” – Mack

    This part I agree with. Open competition offers the larger EU economies an advantage but it offers none to a tiny country like Ireland. We won’t be competing to build power stations in Germany or to supply cars to the French police because we don’t have indigenous industries that are capable of doing any of those things. We could probably send a few Paddies out to supervise road building in Spain but we wouldn’t be able to supply the labour because the new additions to the EU can supply that cheaper. We are subject to all of the disadvantages but to none of the advantages.

    “EU regulations do not state that contracts must be awarded to companies from other member states – merely that they be allowed compete. The government then chooses the company it feels will deliver the best service for the best value. This is a gain for tax payers, and ultimately a gain for business.”

    EU Procurement Directives specifically forbid the national government from acting in its national interest. If the Irish government award a contract to a national company in preference to a more competitive tender from a foreign company, then the Irish government would be acting illegally under EU law. Now why would the Irish government want to do that? Would it be because it is a false economy to save 2% on a 200m contract when you will then lose all of the tax revenue from the profits that the foreign company makes and lose all of the tax revenue from the income earned by the foreign workers in addition to seeing the bulk of 200m in capital exit the country? EU law forces the government into making that false economy by making it illegal to consider its own national interest, declaring it an offence to ‘discrinimate’ on the grounds of nationality. There is no point talking about the ‘national interest’ within an EU context because the EU is designed to destroy the national interest.

    “LOL, it’s a dirty job but somebody has to make some money out of the celtic tiger.” – Ulster McNulty

    Is this what I get for standing shoulder-to-shoulder with the British working man? Anyway, if the UK taxpayers go bankrupt, they may take a different view about your subvention, and you may yet end up as a bowlegged Rickshaw Runner scampering around Northern Irish shantytowns in a coat of many colours begging other tramps for loose change. 😉

  • Billy

    Harry

    I certainly don’t defend the hypocrisy of the Guardian but as Willis correctly pointed out – the Daily Mail does present itself as a newspaper that “tells the truth” against the left-wing bias of the mainstream media.

    Although, I don’t agree with their views, I have no problem with right-wing newspapers or TV stations (i.e. Fox news) expressing their opinion – that’s their democratic right after all.

    What is laughable is their contention that they are impartial and even-handed. That simply insults people’s intelligence.

  • barnshee

    “We are subject to all of the disadvantages but to none of the advantages.” Hard luck —at accession it was the other way round now –the rough with the smooth

  • willis

    “Is your 80% figure actually true”

    10 mins research brought up this gem.

    http://www.statscom.org.uk/uploads/files/other/foreign workers briefing note Dec 2007.pdf

    (Link needs tidied up, just paste it into url)

  • Harry Flashman

    “the Daily Mail does present itself as a newspaper that “tells the truth” against the left-wing bias of the mainstream media.”

    It certainly does Billy but that is hardly the same thing as being impartial.

    The gripe that DM readers have is that they and their fellows in the Daily Torygraph and the Soaraway Sun don’t actually claim to be unbiased but are in fact upfront and honest about their political leanings whereas the Beeb, their favourite bugbear, pretends to be politically neutral and balanced when in fact it is the televisual branch of the Guardian (which again in fairness also does not hide its political slant).

    In US terms it is the same with Fox, where Fox viewers are at least spared the fiction of impartiality which the mainstream news networks claim and which following the canonisation of Saint Barack the Pure is now surely beyond dispute.

  • willis

    Oh Harry

    I really don’t know if I can take you seriously.

    Still, for the record: What is Fox News’ motto?

    Fair and Balanced?

    But sure they are only joshing, they don’t really mean it.

  • Mack

    Dave

    Looks like you studied at the De Valera school of economics!

    “We won’t be competing to build power stations in Germany or to supply cars to the French police because we don’t have indigenous industries that are capable of doing any of those things”

    So it’s not possible that Curam Software will be competing successfully to implement social security systems in other EU states?

    It’s not possible that Creganna medical supplies will be competing to supply medical devices to health services across Europe?

    It’s possible that Elan will compete to provide drugs to health services across Europe?

    Or that CRH would be able to provide building materials for those power stations you think we won’t be building?

    We don’t have a construction industry capable of building government installations in Europe?

    The multinationals that set up base in Ireland, as a low tax gateway to the EU – that pay tax on their profits here, they can’t compete in Europe?

    ———

    Dave, in your world the EU sucks Ireland dry, the Celtic Tiger boom (1922-1973) that marked our glorious years of economic isolation and protectionism died a sudden death once we opened up our markets to Europe. You are right, it was an unmitigated disaster.

  • Harry Flashman

    “Fair and Balanced?

    But sure they are only joshing, they don’t really mean it.”

    That’s fair enough but no one takes that seriously, the point is that their motto is no more ridiculous than the mainstream news channels (and I do hate the term but what else is there?) who also pretend to give a fair and balanced coverage despite not doing so.

    Despite Fox’s motto (actually their main motto is “we report, you decide” which I think is reasonable) no one is under any misapprehension about their political agenda, would that the “mainstream media” were as equally honest about their blatant biases.

    I enjoy Channel 4 News, I like Jon Snow, I know he’s a die hard Islington Leftie and so I can watch his programme and make my mind up accordingly, he’s honest about his politics. On the other hand my blood boils when the BBC make their programmes and pretend they’re giving an unbiased and impartial viewpoint when I know they’re pretty much regurgitating the Guardian’s talking points from that morning.

    I have no problem with biased news reporting, I actually appreciate it but I deeply object to news reporting that pretends to be neutral and then takes a wodge of cash out of my back pocket in order to lie to me.

  • mnob

    Dave – its a bit misleading to complain about Poles working in Dell extracting money from the Irish economy, when in fact Dell is in Limerick *because* its part of the EU, and in fact Dell is extracting money from the other EU states. How much of Dell’s income is generated by the ROI ?

    You can’t have it both ways.

  • willis

    Harry

    So how do the BBC get money out of your pocket if you are in Oz? You may have single handed solved the UK media’s funding crisis!

  • Nomad

    Willis,

    So how do the BBC get money out of your pocket if you are in Oz? You may have single handed solved the UK media’s funding crisis!

    Just by reading BBC news online, or watching BBC America/Australia(?)/Worldwide, Harry and I are contributing to BBC Corp’s advertising coppers.

    They show ads on the News website here which only appear if you’re outside the UK.

    So there :p

  • willis

    Nomad

    Well done. Keep it up.

    Of coures if you don’t want to, you don’t have to.

  • Nomad

    Willis,

    Relax. I was trying to be a little lighthearted.

  • willis

    I know.

  • Comrade Stalin

    Dave,

    Your national debt is sovereign, but the purposes for which you accrue it is not. For example, under EU regulations, any government investment in infrastructure – or any government spending project – over a certain size must be advertised throughout the EU and open to all foreign contractors within the EU.

    What’s the problem with this ? Irish companies benefit from such tenders from other EU states; and a transparent process in an open market ensures the usual Irish problems of croneyism and back slapping can’t interfere in the selection process.

    In addition, the Polish Central Bank said that 46% of the Poles in Ireland extracted €1.87bn from the Irish economy last year.

    You’ve now gone straight into propaganda mode. Had those Poles not been in Ireland doing work in exchange for money, wage inflation particularly for manual labour would have done serious damage to the Irish economy.

    Your narrative here seems to be that foreigners should not be allowed into the country to do the work that Irish people won’t do for a reasonable rate. We’re well into blueshirt territory again.

    Let’s be clear about this. An open and free labour market – subject to reasonable ethically responsible regulation – is essential for the effective functioning of the economy and the achievement of growth without inflation. Restricting the labour force to people on factors other than their ability to do the job at the best price is the road to ruin. The same applies to open trade. If protectionism is your stance, you should at least be honest enough to say that out loud without blaming it on the EU.

  • Harry Flashman

    “So how do the BBC get money out of your pocket if you are in Oz? You may have single handed solved the UK media’s funding crisis!”

    Jesus H Christ willis! Did we not have a conversation about this issue not a couple of days ago, will ye fer feck’s sake get over yourself about my personal circumstances?

    What is it about me that obsesses you so fucking much?

    Have you completely lost the ability to debate issues rather than people?

    If I say the BBC takes a wodge of money out of my pocket I am not lying, you have no reason whatsoever to disbelieve me, ok?

  • City slicker

    “A certain Paul Hewson and his mates have their money in Holland too… ”

    He genuinely believes that it is in Ballymun!