4th Apr 2008 16:27
Tesco PLC04 April 2008 For Immediate Release: Friday 4th April 2008 TESCO BEGINS LEGAL PROCEEDINGS AGAINST THE GUARDIAN Tesco today began legal proceedings for libel and malicious falsehood againstGuardian News and Media Ltd - publishers of The Guardian - and its Editor, AlanRusbridger, over allegations made by The Guardian concerning Tesco's taxaffairs. Lucy Neville-Rolfe, Tesco's Executive Director of Corporate and Legal Affairs,said: "It is very regrettable that we have had to take this step. We had hoped thatThe Guardian would be able to accept it had made a mistake and apologise forwhat it had written, but despite our requests to them to set the record straightthis has not happened. We feel driven to take this action because we cannotallow Tesco's reputation to be so seriously attacked with such wilful disregardfor the truth. We support free and open debate about the role and conduct ofbusiness so long as that debate is based on fact, not fiction." The Guardian misled readers and did so knowingly in a series of articles and apodcast. It wrongly alleged that Tesco had contrived a tax avoidance structureinvolving a series of joint venture partnerships held largely offshore to avoidpaying up to £1 billion of UK corporation tax on sales of its UK properties. TheGuardian also wrongly accused Tesco of having already avoided corporation tax onwhat it said were £500 million of profits from two property deals using thatstructure. The Guardian published its stories despite Tesco explaining the true position toits journalists beforehand on numerous occasions. Before the story waspublished, Tesco explicitly told The Guardian five times that allegations thatthe company had avoided paying corporation tax were untrue. But the newspaperpublished the allegations nonetheless and didn't publish Tesco's denials. In fact, all profits from these property transactions are or will be included inTesco's UK tax returns as The Guardian was repeatedly told. By structuring these transactions in this way, Tesco expects to achieve savingsof £23m in stamp duty related taxes on the transactions completed to date. Themaximum additional savings in stamp duty related taxes that might be achievedfrom using these structures could be another £30 - £40m, depending on marketconditions. This compares with The Guardian's allegation of corporation taxavoidance of up to £1 billion. It is not uncommon to use offshore companies for the purpose of joint ventureswith third parties. In fact the Guardian Media Group has itself announced anoffshore structure as reported in The Guardian on 4th March 2008: "Guardian Media Group plc, parent company of the Guardian, in partnership withApax Partners, has incorporated a new company registered in the Cayman Islandsas part of its proposed acquisition of Emap plc. The sale of Emap plc is due tocomplete later this month. A spokesman for GMG said: "The tax arrangements ofApax Partners and GMG for the acquisition of Emap plc are completely legitimate,and are based on accepted practice and the recommendations of our advisers. Thisis not about GMG avoiding tax - indeed we have paid an average of 34% tax overthe last five years. The purchase of Emap plc is structured as a UK Scheme ofArrangement which, as has long been accepted by HM Revenue and Customs, does notattract stamp duty on acquisitions. The new company will pay its full UKcorporation tax." Notes to editors 1. The Guardian ran several stories (the first on its front page) on Wednesday27th and Thursday 28th February, as well as on its website. Its leading articleof 28th February falsely accused Tesco of "bilking the public purse" out of upto £1 billion in corporation tax. 2. Tesco made it clear on five occasions to The Guardian that allegations thatthe company had avoided paying Corporation Tax were untrue. For example on 23rdNovember 2007 Lucy Neville-Rolfe wrote: "I must repeat that the profits from the sale of the 50% interest in the Red andAqua partnerships arose to UK tax resident companies and will be included infull in our UK corporate tax returns for the years in which the transactionstook place." And again on 13th December 2007: "There is categorically no avoidance of corporation tax by Tesco in any of thecolour partnerships to which you refer." Neither of these important statements (or anything similar) featured in any ofThe Guardian's extensive coverage or its podcast. For further information please contact the Tesco Press Office on 01992 644645. Out of hours the Duty Press Officer can be contacted by calling 01992 644733 (select option 2 from voicemail). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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