Our exposé of the Eurobond tax exemption scandal raises questions that need answers

There is no shortage of fuel for public outrage here


Is it any wonder that corporate taxation has become a source of such controversy? After five years of economic torpor and deep government spending cuts caused by the excesses of the banks, the perception of big business of any kind not paying its share is understandably incendiary. Nor is there any shortage of fuel for the public outrage. With Starbucks, Google and Amazon among the big names barracked for their – albeit legal – sleights of hand, the arcane terminology of the Double Irish has crept into the lexicon.

During the past week, The Independent has taken matters a step further by exposing the extent to which just one of HM Revenue and Customs’s tax exemptions is taking a chunk out of the revenues flowing into the public purse.

The scheme in question is simple enough. Rather than buying shares in a British company, an international investor makes a high-interest loan to it instead; but by routing repayments through a designated stock exchange such as the Channel Islands, the 20 per cent “withholding tax” usual on overseas interest fees is avoided. Meanwhile, of course, the UK group records much lower profits, so it, too, pays less tax.

Take, for example, Spire Healthcare. The company was lent £760m by its  private-equity owner, Cinven. Thanks to interest payments totalling £81m last year alone, the private hospitals group cut its UK tax bill by an estimated £20m.

The Cinven/Spire Healthcare arrangement is just one of many. As this newspaper has detailed this week, the list of ostensibly British companies minimising their bills in this way is a long and varied one, from the lottery operator to high street retailers to transport schemes.

The problem, of course, is that the mechanism is not only legal, it is deliberate. The “quoted Eurobond exemption” was introduced in 1984 with the specific purpose of encouraging foreign investment in British business. And when it was reviewed last year, HMRC’s conclusion – reached with the help of, among others, the Big Four accountancy firms – was that changing the system was not advisable.

It was upon this that the Prime Minister relied when he tried to brush off a parliamentary question on the topic this week. But the evidence is inconclusive. The most conservative estimate of how much the Treasury is forfeiting comes in at £200m per year; more likely, the total is more than double that. Furthermore, the issue is emblematic of the fundamental tension between the Government’s crusade against tax avoidance and its desire to ensure that Britain is “open for business” in an increasingly competitive global marketplace.

There is, of course, always a trade-off. David Cameron’s efforts to raise international tax rules at the G8 are no fudge. Unilateral action would come with a cost. But this week’s exposé raises the same question in reverse: in this instance, is it the price of inaction that is too high?

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

IT Project Manager

Competitive: Clearwater People Solutions Ltd: Our client based in Chelmsford a...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

IT Manager

£40000 - £45000 per annum + pension, healthcare,25 days: Ashdown Group: An est...

Day In a Page

Read Next
Nigel Farage has urged supporters to buy Mike Read's Ukip Calypso song and push it up to the No 1 spot  

Mike Read’s Ukip calypso is mesmerisingly atrocious — but it's not racist

Matthew Norman
Shirley Shackleton, wife of late journalist Gregory Shackleton, sits next to the grave of the 'Balibo Five' in Jakarta, in 2010  

Letter from Asia: The battle for the truth behind five journalists’ deaths in Indonesia

Andrew Buncombe
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London