Corporate Watch

Has the Guardian exploited tax loopholes to save millions?

Income tax- Flickr/Images_of_Money

The Guardian’s tax bill is allegedly smaller than it should be.

Despite the Guardian splashing their campaigning investigations into tax avoidance across the front page, the paper’s parent company has been using convoluted but legal techniques to avoid paying tax, according to Private Eye.

Guardian Media Group, publisher of the Guardian and its sister the Observer, has been accused of running a tax avoidance scheme by the satirical magazine.

This has emerged following ‘a huge leak of tax avoidance schemes’.  The people behind the scheme, the Eye claims, are PricewaterhouseCoopers (PwC) – Britain’s biggest accountancy firm.

The Eye alleges that the leaked information has revealed how accountants would submit their UK corporate clients’ tax schemes for approval by the Luxembourg authorities. The schemes would be rubber stamped the same day.

According to the article published today, in 2010 GMG and Apax (its partner in joint offshore venture Emap – now Top Right Group), used Luxembourg’s complicated ‘secret financial structures’ to avoid a multimillion pound tax bill.

Luxembourg employs these financial structures to simulate the effect of a low tax regime, says the Eye.

European law precludes the Grand Duchy from having the vanishingly small tax rates of a tax haven. Although corporation tax is 20%, in the GMG scheme Luxembourg demanded 0.125% tax on £100m claims the report.

Another customer of PwC which had its schemes exposed in the leak is Vodafone. The Bureau and Private Eye exposed the telecoms giant’s scheme earlier this year to avoid paying even what little tax is levied in Luxembourg.

Attributing profit to a Swiss branch is a common, legal tax avoidance technique used by companies in Luxembourg. The profits are tax exempt in the Duchy and the Swiss taxman applies a modest amount.

The Bureau and Private Eye exposed Vodafone‘s use of this particular technique as artificial. The company’s Swiss branches were shown to be run by a solitary accountant which indicated the main purpose of the operation was avoiding paying tax. The Bureau’s investigation called into question the agreement between Vodafone and UK tax authorities that this Swiss branch structure could continue without paying any tax to the UK.

In response to the Bureau and Eye’s investigation Vodafone said: ‘The Swiss branch has not been involved in Vodafone’s global financing for a number of years.’

But the PwC leak puts this assertion in doubt, says Private Eye.

A spokesperson from the Guardian Media Group told the Bureau neither GMG nor the offshore joint venture Emap – now Top Right Group – have paid less corporation tax as a result of its arrangement than they would if Emap had been held onshore.

‘GMG is a privately owned company incorporated in the UK and subject to UK tax law,’ the spokesman added.

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