Holding the UK’s major corporations to account
Our innovative online database helped shed light on the murky world of corporate tax avoidance
Monday 27 July 2009 19.04 BST
Corporate taxation is one of the fundamental issues in British society that rarely gets discussed in mainstream media. A large but twilight industry has grown up in recent years of offshore tax havens and arcane avoidance schemes. They benefit large corporations and rich individuals, but cost governments billions in lost taxes.
The facts about corporate tax avoidance rarely emerge in the British media for a number of reasons. The details of so-called “tax-planning” are often fiendishly complicated, and are deliberately obscured by highly paid lawyers and accountants who cook up the schemes. Government departments allow corporations complete secrecy over their tax affairs. And the only experts who can advise, often have vested interests and are expensive to consult.
The Guardian set out last year to open up the whole field. As world economies crashed, the need for fairer sharing of taxes also became the focus of campaigns launched by both Gordon Brown and incoming US president Barack Obama against individual tax dodgers, and against transnational corporations that shift profits around the world in legal, but artificial ways.
As a result, the Guardian’s pioneering multimedia series became an indispensable reference point for campaign groups, politicians, and ordinary taxpayers, many of whom said they were astonished by the scale of the abuses revealed. Tax havens, such as Switzerland, Liechtenstein and the Caymans came under political pressure to reform.
The paper soon discovered first hand, however, the difficulties and dangers of highly technical tax investigations. One of its first exposures, of offshore tax avoidance schemes by the supermarket giant Tesco, led to bruising litigation. The paper’s reporters established that perfectly legal multibilllion-pound sale-and-leaseback schemes of Tesco stores, organised through Caymans and Jersey entities, involved tax avoidance. But mistakes were made: the tax avoided in those particular transactions turned out to be stamp duty land tax, not corporation tax levied on Tesco’s profits. The sums avoided were not as big as the Guardian believed. Tesco decided to sue for libel. After much legal expense by the Guardian, the retailer obtained an apology and a sum in damages.
Another difficulty turned out to be the reaction of the Guardian’s rivals and opponents, who pointed the finger at commercial transactions by Guardian Media Group, the newspaper’s own parent company. Offshore entities had been used for tax purposes by a private equity fund which had partnered GMG in acquisition of some magazine businesses. It was necessary for the Guardian to stress the independence of its journalists, and its willingness to interrogate and publicise its parent company’s own tax arrangements.
The newspaper’s editor decided not to be deterred by those problems, but to invest considerably more resources in an authoritative series which would break fresh ground in reader relationships. A team of six Guardian writers, led by investigations editor David Leigh, was strengthened by the inclusion of a former tax inspector, Richard Brooks, and spent three months investigating many more avoidance schemes across the whole of British corporate life. The resultant “tax gap” series cost more than £90,000 in specialist legal advice and professional consultancy. It ran every day for two weeks, alongside an innovative online database, which enabled readers to pull up the published tax information on every FTSE 100 company. Interactive graphics were used to show money-flows in the avoidance schemes, plus there were video interviews with key figures.
A central feature was Richard Brooks’s daily blog. This, along with a dedicated confidential email, enabled readers to post their own comments, and those with specialist knowledge to supply their own tip-offs. The consequences were dramatic. With new information that came in, the Guardian was able to spotlight hitherto unknown avoidance schemes by the big banks, particularly those in the process of being helped by state funds.
The series revealed the tax stratagems of many of Britain’s corporate household names. It documented brands shifted offshore by Diageo, Shell, and drug companies AstraZeneca and GlaxoSmithKline. It detailed offshore schemes in Luxembourg used by WPP, one of the world’s biggest advertising agency groups, and the re-engineering to Switzerland of profits by both Boots the chemists and the owners of Walkers Crisps. The series described how Dixons stacked profits from warranties in the Isle of Man, and how Barclays claimed tax relief by buying an Irish pipeline. The “tax gap” also analysed the little-known role of major accountancy firms, particularly Ernst & Young and KPMG, in profiting from the invention and sale of elaborate tax avoidance schemes.
The climax of the Guardian series was a court attempt by Barclays to gag the full publication online by the Guardian of documents detailing its avoidance schemes. They had been supplied by a whistleblower. Barclays’ attempts failed when the Guardian’s documents were also reproduced online by Wikileaks, an international website specialising in leaked documents. The controversy was a demonstration, once again, of the power of the internet as a publication medium.
Lord Oakeshott, Liberal Democrat treasury spokesman, was among many who congratulated the Guardian on its exposures. He said: “I don’t shock easily my day job has been in the City ever since I joined Warburgs bank in 1976. But the Guardian’s evidence of massive, aggressive tax avoidance as a core profit centre for British banks, aided and abetted by our bluest chip accountants and law firms, turned even my hardened stomach. Too many boards right across Britain tick the green and diversity boxes, then reward their financeor tax director for cheating their customers, the taxpayer.”