Leading Article: What Clinton can tell Blair about Murdoch, the titanic tax avoider

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The Independent Online
Tony Blair flies off today to consort with the President of the United States. A love feast is prepared. The two men have a lot in common, starting with wives of considerable distinction. They share something else. In both their countries a large chunk of media power is exercised by the same corporate conglomerate controlled by a single man, Rupert Murdoch. His sway in American politics is a good deal less than the influence he enjoys in this country. Not even the most imaginative paranoid can trace a pattern in the products of the Murdoch-owned Fox television and 20th Century Fox film, Bart Simpson and Independence Day included. But then again not even the biggest sceptic could deny Murdoch's role in bankrolling the American right: if there is, as Mrs Clinton so memorably affirmed, a right-wing conspiracy out to do her husband down, rest assured Rupert Murdoch's fingers are somewhere in the pie.

As for Britain, Murdoch is a man to whom a Labour prime minister opens the doors of Downing Street, the potentate to whom, mysteriously, party policies on concentrations of power and competition are not to be applied. So will Messrs Blair and Clinton confer on how they perceive the power of Citizen Murdoch? Bill Clinton ought to tell him what the United States Department of the Treasury has been up to, and as a result Tony Blair might, just might, return to Britain with a gram or two more calcium in his backbone, prepared to look again at his pusillanimous and profoundly mistaken approach to the power of Murdoch.

Led by the Internal Revenue Service of the United States, tax officials from several countries recently got together to swop notes on the global reach of News Corp, the Australian-based entity Murdoch uses to rule his empire. They confront a striking question. Why does News Corp pay an effective corporation tax rate of just under 8 per cent while comparable media entities, such as Disney, pay nearly four times as much?

Let's be clear that the problem with Murdoch is not his success or his reach. News International - the British arm of the empire - is quick to allege that rivals are merely jealous, that they are anti-enterprise. Wrong. Murdoch's acumen as a businessman has been as a manipulator of the state. He is a connoisseur of regulatory regimes. He uses his property to do his politics. The News Corp story is a tale of tax havens, write- offs, accounting rules and clever balance sheet manipulation across different jurisdictions. It reports results in Australia which, if presented under US rules, would look dramatically different. Globalisation, in Murdoch terms, is the science of outsmarting national tax authorities. The man admitted to Blair's boudoir is a titanic tax avoider.

The thing to register is that the Murdoch empire is built on lack of transparency. This must be borne in mind when he pleads innocent to charges that he is a predator in British media markets, siphoning off money here to subsidise aggression there. Exactly what are internal relationships between News International and the (part-owned) BSkyB, let alone his other telecoms and transport interests? The answer is that there are very few people inside the loop who know, let alone external competition regulators. Is Murdoch using funds from broadcasting to supply his newspaper operations in order to afford sustained price-cutting? The impact of those price cuts on the market is palpable. We at The Independent feel cuts in the cover price of The Times, and it hurts.

But the argument goes much wider than the fate of one newspaper and the resulting minimisation of pluralism in the market for news and opinion. It has two legs. One is about the effectiveness of competition rules and the regulatory bodies meant to enforce them. The Blair government's Competition Bill fails to give the United Kingdom rules on predatory pricing anywhere near as tough as those in the United States or even Australia. If it passes in its present form, however keen Derek Morris, the chairman in waiting of the new Competition Commission, might be to investigate, his hands will be tied. With his lobbying might Murdoch seems likely to escape invigilation.

But there is a second reason why the complaisance of New Labour about Murdoch is shocking. Murdoch is an over-mighty foreigner in our midst. Any prime minister (remember those famous words of Tory Stanley Baldwin) ought to be concerned about unaccountable power, especially as it is brought to bear in the political arena. Yet Blair demurs, his henchmen exulting in their friendship with Murdoch's children and satraps. Has this prime minister no pride? Talk to Mr Clinton, Tony, and ask yourself why a predator who would not be tolerated in the United States can flourish untouched here.