Johann Hari's unconventional attitude to facts
And he’s at it again today. Now, when he first mentioned the Vodafone tax dispute a few days ago, I commented that things often look straightforward to the ill-informed, and assumed that Hari’s confusion on the subject was just a symptom of that ignorance. But since he’s so much more specific here, I’m not sure that holds.
In my column last week, I mentioned in passing something remarkable and almost unnoticed. For years now, Vodafone has been refusing to pay billions of pounds of taxes to the British people that are outstanding. The company – which has doubled its profits during this recession – engaged in all kinds of accounting twists and turns, but it was eventually ruled this refusal breached anti-tax avoidance rules. They looked set to pay a sum Private Eye calculates to be more than £6bn.
Then, suddenly, the exchequer – run by George Osborne – cancelled almost all of the outstanding tax bill, in a move a senior figure in Revenues and Customs says is “an unbelievable cave-in.”
Starting at the beginning, the tax dispute relates to an overseas subsidiary of Vodafone based in Luxemburg. Under the Controlled Foreign Companies tax provisions, HMRC (although since this was in 2000, it would have been the Revenue that would have started all this) claimed tax on this transaction in full – that’s where the £6bn figure comes from. Vodafone argued that the CFC tax regime was incompatible with EU law on freedom of establishment – and there was an ECJ case (Cadbury-Schweppes if you’re interested) that ruled that CFC rules are in principle a restriction on the freedom of establishment and that they should apply only to wholly artificial arrangements where the CFC in question was not carrying on genuine economic activities in the non-UK EU member state.
Far from it having been "ruled that this refusal breached anti-tax avoidance rules" Vodafone won their case with HMRC’s Special Commissioners, and won again at first instance when HMRC appealed – the court ruling that the CFC code was in basic conflict with EU law, and should be disapplied. HMRC won the right to appeal this decision further, but elected to settle it out of court instead. The tax bill wasn’t outstanding, it had been ruled invalid both by HMRC’s own internal commission and subsequently by the High Court. Now, it’s possible (hell, it’s more or less certain) that Johann is as ignorant of the law as he is of history and economics. But that’s why newspaper columnists are supposed to have editors.