Seema Malhotra MP, Shadow Chief Secretary to the Treasury, in response to press reports on tax avoidance by the owners of Cadbury’s, Mondelez, has written to Chancellor George Osborne MP saying:

Dear George,

I’m sure you will have seen press reports over the weekend on tax avoidance by the owners of Cadbury’s, Mondelez.

Mondelez have put in place a financing structure which has allowed the company to pay no corporation tax in the UK last year, despite reportedly making profits of almost £100m through Cadbury’s UK.

The scheme, using a bond registered in the Channel Islands to claim back interest payments, is currently legal, though Mondelez and others are clearly using it for purposes other than those for which it was intended.

At a time when further spending cuts are being urged across government, there is a clear disparity of treatment here. Public concern has rightly been growing at the ability of large companies to duck the obligations the rest of us are held to in paying our taxes, with Mondelez the latest in a long line of companies shirking their responsibilities.

The issuing of a bond between two connected parties would appear to be, in this instance, an attempt to exploit incentives provided within the tax system for the sole purposes of tax avoidance. The Labour Party called at the General Election for this loophole to be closed.

HMRC have raised concerns with this scheme before, suggesting in 2012 that the loophole being exploited should be closed. The government has not taken the advice of its own tax inspectors, with the consequences we see in lost revenues today. Why was the decision taken to ignore these issues? In light of recent revelations surely the only way forward is to listen to Labour and change the rules so that where bonds have been actively issued to connected parties they do not qualify for a deduction from UK withholding tax.

Over the longer term, further cuts to HMRC’s own funding, with the closure of tax offices and the loss of experienced staff, will simply make life very much easier for those corporations seeking to avoid paying fair taxes.

I look forward to hearing from you.

Yours,

Seema Malhotra MP
Shadow Chief Secretary to the Treasury