Tesco faces new tax questions - but why?
Wednesday, 4 June 2008
Source: AccountancyAge.com
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.
SG comment: I think it very unwise for high profile publications to make allegations about Tesco's tax position. Let's look at the facts - Tesco is a multi-billion and now very international business - because of this, it employs some very bright in-house tax professionals to devise overseas structures that will mitigate the group's tax liability, all of which has to be agreed with UK HMRC. Everyone's a winner - the UK is a winner for having a fantastic and entrepreneurial employer. At the end of the day, Tesco is a commercial enterprise that will look to increase shareholder value, it is not set up to donate corporate tax to the UK treasury. The UK treasury should be thinking of ways to simplify the UK tax rules for companies, thereby stopping them from considering relocating their tax residency elsewhere. I think the Guardian are now paying the price for trying (and failing) to understand Tesco's tax position.
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.
SG comment: I think it very unwise for high profile publications to make allegations about Tesco's tax position. Let's look at the facts - Tesco is a multi-billion and now very international business - because of this, it employs some very bright in-house tax professionals to devise overseas structures that will mitigate the group's tax liability, all of which has to be agreed with UK HMRC. Everyone's a winner - the UK is a winner for having a fantastic and entrepreneurial employer. At the end of the day, Tesco is a commercial enterprise that will look to increase shareholder value, it is not set up to donate corporate tax to the UK treasury. The UK treasury should be thinking of ways to simplify the UK tax rules for companies, thereby stopping them from considering relocating their tax residency elsewhere. I think the Guardian are now paying the price for trying (and failing) to understand Tesco's tax position.
Labels: company news, corporate tax, FTSE 100, HMRC, tax planning, tax rules
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posted by Simon Godley
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