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back to article Oracle, Dell, CSC, Xerox, Symantec accused of paying ZERO UK tax

Tech giants Oracle, Xerox, Dell, CSC and Symantec paid no corporate tax in the UK last year despite pocketing nearly £500m from public-sector IT contracts, it was claimed last night. According to a study undertaken by Charlie Elphicke, Conservative MP for Dover, the five US behemoths banked taxpayers' cash and had a combined UK …

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Anonymous Coward

Go right ahead...

Raise taxes on those companies and watch them leave for other tax friendlier havens. Then be ready for the fallout. More job losses and outsourcing, further strain on the public purse for welfare and social programs.

These companies are doing nothing against the law. These are the laws the government put in place to stimulate corporate investment. Of course, this does not stop the UK gov from have a Janus like face in all of this.

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Re: Go right ahead...

Like, they wouldn't want to sell stuff in the UK any more?

If stiffer taxes are introduced, they will not take their business elsewhere, I would guess they will rip customers off more than they already do. A bit like tax on fuel here in the Netherlands, where taxes are higher than in Germany, and the oil companies happily pass 150% or more of that difference on to the customer.

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Re: Like, they wouldn't want to sell stuff in the UK any more?

Exactly:-)

At the moment our tax system and its abuse by the "Lets do evil" is encouraging the multinationals to have subsidiaries in tax havens rather than proper UK bases, and its making it difficult for UK based companies, especially smaller ones to compete with the multi Nationals. These are not good things.

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Flame

Re: Go right ahead...

Stimulating corporate investment is fine but when it shafts you right up the arse given the space you give it, it's time to plug it or more sensibly, restrict it somewhat. This would not force such businesses to stop trading in the UK and anyone that says they would is talking bollocks. UK Gov needs to stop greasing its bum.

This scale of tax evasion is simply corporate greed. I really also want to know why HMRC is so hopeless at tracking this and amounts we lose to VAT and missing trader fraud. They need to get their priorities right

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Paris Hilton

Re: Like, they wouldn't want to sell stuff in the UK any more?

I'm sure there's a very good reason not to, but howabout defining a rule for "suspect" companies that recalculates their bill as follows:

"UK Profit" = UK revenue * Global margin

Compare with declared profit for GlobalCorpUK Ltd and if they're vastly different use the larger of the two numbers

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Re: Go right ahead...

"Raise taxes on those companies and watch them leave for other tax friendlier havens."

I hate this argument, and I hear it all the time.

Businesses are not unicorns; we don't have to worry that we'll frighten them off never to return. Plain and simple, they want your money and if the only way to get it is to give some of it to the government then they'll fall in line.

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Pint

Re: Go right ahead...

"Plain and simple, they want your money and if the only way to get it is to give some of it to the government then they'll fall in line."

Well, yes. Customer pays X. Workers get Y and shareholders get Z. Governments take tax T= X-Y-Z. To increase T, you can either put up X, hurting the customer and making it a disguised tax on us, reduce pay Y to workers or reduce profit Z.

How confident are you that it will be Z which is reduced rather than X going up or Y going down? Not very I would suggest.

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Holmes

Re: Go right ahead...

How confident are you that it will be Z which is reduced rather than X going up or Y going down? Not very I would suggest.

The market will decide if the product is overpriced and Government will decide a minimum level for wages, so every business will compete on a level playing field.

At the moment every foreign multinational can under price a UK based firm. The current tax situation is hurting UK businesses.

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Anonymous Coward

Re: Go right ahead...

Indeed, the companies wont vanish if you tax them more, they may reduce their foot print and sell into the country, they may also still distribute from the national market but add the tax value + markup to the cost of goods (the old, we're just passing on the costs to the consumer, it's not our fault.)

Also as we're in the EU economic zone they could move their company elsewhere in Europe and continue to sell into the UK and the UK wouldn't be able to do anything to stop them.

The reality of the matter is that every £ you take out of the economy in tax invariably reduces the amount of money in the real economy by a larger amount (due to government shenanigans with tax and corporate shenanigans with recouping money lost via tax)

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Holmes

Re: Go right ahead...

Also as we're in the EU economic zone they could move their company elsewhere in Europe and continue to sell into the UK and the UK wouldn't be able to do anything to stop them.

Wouldn't matter, as they would still be liable for UK corporation tax based upon UK sales profit. The current row is about reducing those profits by moving money made from UK sales into lower taxed areas (Caymans, Luxembourg etc)

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Re: Go right ahead...

That's like saying if you raise income tax everyone will emigrate. Only if you do something INCREDIBLY stupid and price the company out of the market. A £3bn company isn't going to disappear overnight even if it wanted to and certainly isn't going to stop selling licenses until it *costs* them money to supply them. You would literally be looking at something like 70-80% tax on profit before that happens (remember, it's a tax on PROFIT).

Additionally, if Oracle has to leave the UK because it can't afford to operate... FABULOUS. There'll be a humungous rush for the database market in the UK that doesn't involve them, and lots of other companies will make SOME money (maybe not on the same scale as Oracle did) and we'll pay less for database licensing. Same for Symantec. Same for Xerox. Same for Dell. Same for just about any company.

These companies are doing nothing against the law. Which, in effect, means the law is broken because being able to say you made zero profit in the UK because you paid YOURSELF in another country all the profit, is a blatant tax loophole. Just because it's legal, doesn't mean it's right, or that it should be legal tomorrow.

You could enforce corporate tax on those profits, and tax them to 50%. It'll change the market, but there won't be a mass exodus. If anything, it'll only make things better - you and I will have more money or pay less tax (because the government doesn't need to make up that shortfall any more from our income tax), and those industries will have more competition.

Hell, it might even boost open-source take-up and force government procurement to use suppliers that are more suitable. But that's probably just a pipedream.

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Anonymous Coward

Re: Go right ahead...

And I hate THIS argument, and hear it all of the time.

Businesses don't pay taxes, their customers do. Jack up their taxes, and they'll just pass it on. So really, you end up taxing yourself. BRILLIANT!

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Facepalm

Re: Go right ahead...

Businesses don't pay taxes, their customers do. Jack up their taxes, and they'll just pass it on. So really, you end up taxing yourself. BRILLIANT!

You're arguing against tax in general, which in relation to this article is irrelevant.

If one business (e.g. a small UK based company) has to pay the tax, why shouldn't another company (e.g. a huge US based company) also pay the tax?

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Anonymous Coward

Re: Go right ahead...

It isn't really whether they should or shouldn't it's how do you make it happen, when private companies and to an extent individuals can get some of the best minds in finance, law and, accounting to minimise their tax bills legally through the vast web that is the world of global corporations, banking, finance and, law. While the governments are left with whoever couldn't cut the mustard in the private market (and of course a few people who didn't want anything to do with the private market.)

How do you make it efficient and cost effective. That is always the question, and then of course buying into the notion that tax is a good thing at all (again like raising taxes, it's a fine balance between what's good and what's bad, and what a given society feels that balance should be.) Luckily I'm just a citizen so I pay what I must and leave the rest to whoever is voted in by the floating voters and the civil servant. If I really dislike things I'll emigrate. But things would have to go pretty mad for the tax levels to be my driving factor in emigrating.

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Anonymous Coward

Re: Like, they wouldn't want to sell stuff in the UK any more?

Google, the "don't be evil" organization, has to have one of the most elaborate tax avoidance schemes in the world, see below.

http://www.theregister.co.uk/2012/11/22/how_vendors_avoid_tax/

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Stop

Re: Go right ahead...

Argument fundamentally fails because these people all have people in India or China working for them. If they leave we can get some smaller British companies who are a) capable (which would be a huge improvement on the status quo) and b) local to do the job and thus would be an *improvement*.

"These companies are doing nothing against the law" - in some cases it's debatable but also, we are aware, and it's for the government to make it illegal.

If Starbucks suddenly said oh hey we don't want to pay tax on our profits as per UK law so we're leaving the UK market would a) somebody else sell coffee to fill the gap or b) there'll be a national coffee shortage and people raging at work all day? This question basically sums up my point.

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Re: Go right ahead...

Because you don't have the power, the tanks or the leverage? My suggestion is you charge for government services by the value added by government. This value resides in the market price of being in the uk in the presence of the services. The secret to taxing effectively is to tax for receiving value from the community rather than arbitraily fining people

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Coffee/keyboard

Re: zero profit in the UK because you paid YOURSELF in another country

There is revenue but there are expenses too. If you employ tens of thousands of 200k per year programmers, project and product managers, R&D etc in USA, who make your software, does the UK government still think that your UK subsidiary conjures up s/w boxes out of thin air somehow?

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Re: Go right ahead...

Well the Amazon Kindle Store for example is based in Luxembourg. That doesn't stop Amazon selling ebooks here, and there is absolutely nothing the UK government can do about it. Amazon can pick whichever EU country they like to set up shop for any reason, or for no reason.

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Re: Like, they wouldn't want to sell stuff in the UK any more?

They already have that rule, but for the companies listed, the revenue from UK customers isn't UK revenue, it is Irish revenue. Then the Irish company pays the UK company to provide outsourced support. What sort of money is suitable for that contract? I guess it has to be competitive with an Indian call centre, so that is a good starting point.

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Re: Go right ahead...

No. If Microsoft Ireland ships out Windows 8 boxes to the UK, they don't have to pay any UK corporation tax on the money they make from them. Foxconn China certainly don't pay any UK tax on the fruity devices they ship here.

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Anonymous Coward

Re: Go right ahead...

There's nothing stopping the small UK business from doing the same, that's the point. Sure, it would cost them some money to hire a specialist and such, but I'm sure it would be cheaper. The largest companies already have them on payroll, that's all.

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Re: Go right ahead...

[quote] "These companies are doing nothing against the law" - in some cases it's debatable but also, we are aware, and it's for the government to make it illegal. [/quote]

If what they're doing is against the law, then whatever government body is responsible should prosecute them. As that hasn't happened, I think it's fair to assume that what these companies are doing is not illegal.

And yes, it is "for the government to make it illegal," which is what drives me insane about politicians bleating about XYZ company not paying 'appropriate', 'moral', whatever... levels of tax. It's the government who makes the laws. If companies following the law produces results which the people who made the laws don't like, whose fault is it?

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Devil

LOL

The public purse must get really tight.

Pucker your anus!

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Targeting Vodafone?

Given HMRC already let them off a £6bn tax bill for using tax havens in return for a one off payment of £800k, I'm not terribly confident in our lords and masters managing to squeeze any more money out of anyone ...

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Anonymous Coward

Re: Targeting Vodafone?

Jesus, won't this lie about Vodafone ever die ? Vodafone did business in Germany, and paid German taxes on that. Why the fuck did anyone think they should also pay UK taxes on it ?

This whole subject keeps coming up and the same greedy fucks keep claiming that "it's all our money, give it to us".

First, under EU rules the UK CANNOT tax companies unilaterally, if they are based in, say, Luxembourg, then only Luxembourg can tax their combined profits. Don't like it, get out of the EU. Second, Tax Incidence. Companies don't "Pay" tax, people pay it, so some combination of shareholders, employees, and customers (plus to an extent wider stakeholders) pay it. The only reason so many *love* taxing corporates is that they are stupid enough to think that they are thereby escaping that tax themselves. Politicians love it because they can do their typical act of appearing generous with other peoples money and claim to be gathering all this cash to disburse for the furtherance of their political ends from someone else ! Mugs believe them too...

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Re: Targeting Vodafone?

The reason why this shouldn't be quietly forgotten is because the heart of the Vodafone dispute was that Vodafone should be facing investigation to determine whether its Luxembourg subsidiary in the Mannesmann takeover involved “wholly artificial arrangements intended to escape the national tax normally payable”.

Vodafone had argued your exact point above in their appeal to the Supreme Court and had it rejected.

See http://www.lexology.com/library/detail.aspx?g=1d4278ab-937d-47ba-ba7a-6c4614d03890

This meant that the case was due to be ruled upon by the House of Lords to formally lay down the law one way or another for businesses in the UK. And the sudden and surprising settlement by Dave Hartnett in HMRC meant this didn't happen.

This combines with the fact that George Osbourne was promoting Vodafone as a UK business in India within days of the settlement, an unusually close coincidence, as was the fact that Andy Halford, Vodafone's CFO had been an advisor to the government. And the person who HMRC agreed the deal with was a former HMRC official who had worked closely with Dave Hartnett.

You are correct - companies do not pay tax as such. They do however collect various taxes on behalf of the relevant authorities, and are expected to remit them in a timely manner.

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Facepalm

Why only tech companies?

Do they think that tech companies invented the tax avoidance process? They're just doing what every other multinational is doing.

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Yebbut...

How many of us writing here use tax minimising strategies?

I pay my pension by salary sacrifice to avoid the tax and NI payments on that (not insignificant) portion of my gross income - I also plough any spare money I have into an ISA, for the same reasons.

OK, I'm not on the scale of these organisations, and so the savings I make are trivial in comparison - but I bet savings of the 10+million common folk like me amount to a significant dent in the tax take. I have to temper my outrage based on this.

When the companies were lined up in front of the MPs last year, I experienced the same irritations that most folk had when the folk from Starbucks and Amazon stared at the caps on their shiny brogues and made mealy mouthed prevarications - then the chap from Google got up and bluntly said it was his duty to find as many legal ways of paying less tax - if the government want it to stop, they have to tidy up the legislation.

He does have a point.

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FAIL

Re: Yebbut...

Yes they have to tidy up the legislation, but I bet you nowhere does it say in big letters "Avoid TAX all you can please big multi-nationals!"

Whereas with ISAs and Pensions, they are schemes that the TAX office/Government has explicitly allowed so that people actually save money. This has the effect of reducing payouts by the Government. If you can't see that you are just looking very short term.

The legislation needs to be really simple, stop making exceptions for everything and sundry. Your a business you pay X amount, the end. Yes you may need a little more text but that is effectively it.

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Stop

Re: Yebbut...

I pay my pension by salary sacrifice to avoid the tax.....

Thus in later life helping to save the Public purse millions / billions by being less dependant on the state pension (and all the other benefits that go with it.)

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Uh no.

It's avoid all TAX by ANYBODY, business or personal... I will be buying a copy of Turbo Tax this month to avoid paying the US IRS as much as possible and take advantage of every possible loophole. I will be claiming my mortgage interest deductions, sales tax deductions, and every other one I can.

I can't fault Starbucks, Google, Apple, et al. for doing the same.

And yes, I'm heartily in favor of a cleaner simpler tax code, but every time the government has "simplified" or "cleaned" it up... Well, I don't think I need to spell it out.

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Re: Yebbut...

"the chap from Google got up and bluntly said it was his duty to find as many legal ways of paying less tax - if the government want it to stop, they have to tidy up the legislation."

This is true. A company has a legal duty to it's shareholders to return as much value to them as possible. Normally*, this includes paying as little tax as is legally possible. They are not only not breaking the law, but doing their legal duty by finding as many loopholes as possible.

The only way to stop this is to close the loopholes.

* I say normally to take into account the Starbucks situation. If the company starts to loose sales because of their tax arrangements, they will do something about it. In that case, paying more tax is returning more value to their shareholders.

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Anonymous Coward

Re: Uh no.

"I can't fault Starbucks, Google, Apple, et al. for doing the same."

You must like being butt f*cked by these big companies do you?

'Cause they are screwing us all over by not doing what they have a legal obligation to do.

Have you no morals man? What next? Kids?

S C U M M Y

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Anonymous Coward

Re: Yebbut...

"The only way to stop this is to close the loopholes."

A tory government closing tax loop holes? Don't make me laugh.

The old bummers club aint gonna close no tax holes.

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WTF?

Re: not doing what they have a legal obligation to do.

No, they do NOT have a legal obligation. THAT is the problem. If they had a legal obligation, they would be doing it or prosecuted. They can't be prosecuted because they aren't violating any laws (ie, they ARE meeting all legal obligations).

Starbucks isn't fucking you; your MP is, then complaining about how it's all really evil Starbucks fault.

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Stop

Re: not doing what they have a legal obligation to do.

You're confusing civil and criminal law. Shareholders can take the board of a company to court if they think that they are failing in their duty to maximise profits, but that's a civil not a criminal matter.

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Anonymous Coward

Re: Yebbut...

Fair point, the entire tax system, in the US and the UK for corporations and individuals, is broken. No one looks at the person who paid more taxes than would have been required, without heavy wrangling and definitional hairsplitting, as honest, patriotic or in any similarly positive terms... they think of them as a chump. Everyone is out to see how much they can get away with every tax season. The entire tax code needs to be redrafted, but it is unlikely to ever happen for political reasons and because there are so many "stakeholders" who make millions purely based upon the ridiculous complexity (tax lawyers, accountants, consultants).

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Boffin

In terms of the high-level moral outrage, I'm with the rest of the commentards: nothing illegal is going on, they're doing what any business would do. If you don't like it, change the law.

However.

I like the idea of encouraging home-grown business by favouring bidders who don't offshore their liabilities.

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If you dont like it

buy shares in the company and you then become a beneficiary of their tax avoidance.

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Stop

illegal already

Let's say you're a freelance IT contractor. Let's say you set up a company in BVI or the caymans to own your trade name, something that will cost you around 1000 quid a year. If you make 30 grand profit, you suddenly find out that the offshore company you control wants... 30k in license fees. Hey presto, no corporation or income tax on that amount.

This is all Starbucks et al are doing.

And yet if you the little guy tries it, HMRC will take you to the cleaners.

The difference is that you don't have expensive lawyers and you don't take HMRC employees out for expensive meals to negotiate how much tax you might feel like paying.

The problem is not the law, the law is already clear. You cannot invent unsubstantiated license fees from overseas companies to channel profits overseas. The problem is that tax inspectors are not doing their jobs. And that is what needs looking at... follow the money. I bet you there are tax inspectors with more than they should have. But who polices the tax inspectors' taxes?

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Boffin

Re: illegal already

Not quite...

Starbucks buys their coffee beans from a supplier in a more 'tax friendly' country. Of course they own the company which is supplying them beans. So they capture a reported 20% mark up on the beans. Nothing illegal, except that they could easily have purchased the beans directly and brought them in to the UK 20% cheaper which would mean more profits which can be taxed at the higher UK rate.

With respect to services companies like IBM and CSC... they use an internal company transfer. So if they pulled a resource from India, there's an internal cost for the body. That cost goes back to the country providing the resource. So its possible to then hide the revenue or a reduction on the revenue accrued in the UK.

All of this is very legal.

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Re: illegal already

It would work actually, except that HMRC would want to tax the profits on your BVI company under controlled foreign company rules. Starbucks gets round that because the offshore company isn't controlled by a UK resident.

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Pint

Erm.... surely we are importing software from the US?

Virtually all Microsoft, Oracle, and IBM software is made by programmers in the USA. That's where the high-value-added is. Obviously that's where the profits go.

Its like complaining the profits from selling BMWs go to Germany.

Or the profits from banking stay in the UK, including in the form of banker's bonuses which we levvy 50% tax on.

We get to levvy taxes on bankers' profits, for banking services provided to businesses the whole world over. They get to levvy taxes on software profits, for software sold the whole world over. Because that's where the value-added is taking place.

Swings and roundabouts, sauce for the goose is sauce for the gander, etc.

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Re: Erm.... surely we are importing software from the US?

It isn't that way.

What they are doing is "adjusting" benefits.

In order to du that, they HAVE to falsify their accounts. THAT is the crime.

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Net Cost

When evaluating bids for a contract, HMG should look at the *net* cost of the bid, taking into account the tax that will be returned (income tax from employees, VAT on equipment, as well as corporation tax from the bidder and his sub-contractors). That would probably favour companies doing the work in the UK as well as those with less 'creative' accountants.

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Just responding to government incentives

One example of the way this works is these companies typically all spend a fortune on R&D here in the UK. The tax man gives a 130% tax breaks on all money spent on R&D, helping to keep the tax bill down very significantly. The Conservatives even removed the upper limit on the amount that can be claimed on that in 2012. That's not tax avoidance by these large IT companies, that's working on the sort of thing that the government is incentivizing them to work on. Quite simply, if you don't want companies to reduce their tax bill, don't offer them schemes to do so. But governments want to change behaviour, and can't then be indignant when companies go along with them on that.

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Gold badge

kitemarks?

"Frank Field, Labour MP for Birkenhead, said HMRC taxmen should issue "kitemarks" for firms believed to have paid a "fair share of taxes", thus creating a "white list" of suppliers suitable for the public sector."

Here's a better idea, Frank. Define in law what a "fair share" actually is. I really don't want to live in a society where the amount of tax I have to pay to stay out of jail is decided behind closed doors and without anyone telling me until after the tax is due. I doubt whether corporations want to do business in such a country either.

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Anonymous Coward

Re: kitemarks?

there should also be "kitemarks" for politicians, political parties and govt departments. In fact, do that first. Put their own Houses in order before criticising others.

Or at the very least, retract Vodafone's cosy little deal with Dave Hartnett, prosecute him for conspiracy to avoid tax, and if he is convicted, then feel free to criticise others - after putting Government's own house in order.

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Note to MPs:

Following the laws you've passed and benefiting from it is unethical.

Yes, we get the picture, you've been beating us over the head with it for months now.

Apparently it's only "ethical" and legal if everyone follows your laws in a manner that enriches you and causes us hardship and suffering.

Question: When did the British Government become a fundamentalist sect?

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