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Vodafone and taxes

May 2, 2011

I was out shopping in Leeds city centre a couple of days ago and encountered a noisy and enthusiastic demonstration outside the Vodafone shop, castigating the company for the avoidance of large amounts of tax. The purported details of the case were well set out in an Observer comment article by Nick Cohen last November: essentially, the claim is that Dave Hartnett, HMRC’s head of tax, has been successfully wooed by Vodafone and agreed to do them a favour by cutting their tax bill.

This brings to mind a number of issues that seem particularly topical at the moment. The first is just how powerful international corporations are yet, unlike the power wielded by governments, this power is exercised with very little accountability whatsoever (even, in most cases, accountability to shareholders). The second is, quite obviously, that international corporations operate internationally – with the result that, in the absence of particularly effective international political bodies, the use of corporate power will not always be monitored by accountable bodies. Finally, the third issue is that corporate power can in some cases by used against democratically accountable bodies. This last issue is illustrated when companies threaten to move location unless they receive favourable treatment.

I’m not accusing Vodafone of any of this kind of behaviour; I’m not familiar enough with the details of the case. However, the general significance of these issues can be seen by reflection on the recent financial crisis. Notice, for example, the recent threats to abandon the UK that followed the publication of the Independent Banking Commission’s interim report.

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