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To be frank, journalists like me who commentate on the media have to admit that we are indulging in a form of incest. We write in newspapers about other newspapers, usually about people we know well, and there are times when it would take up as much space to declare each layer of interest as it would to write about the topic.
I say this because I am about about to defend The Guardian, a paper for which I write a daily blog and contribute occasional articles. But I want to make it abundantly clear that I am also going to defend journalism and the freedom of the press.
The story first surfaced last Friday with a lengthy statement from Tesco's public relations department announcing that the supermarkets giant was suing The Guardian and its editor, Alan Rusbridger, for libel and malicious falsehood. The Tesco statement accused the paper of publishing a series of articles and a podcast that "wrongly alleged that Tesco had contrived a tax avoidance structure involving a series of joint venture partnerships held largely offshore to avoid paying up to £1 billion of UK corporation tax on sales of its UK properties".
The company's executive director for corporate affairs, Lucy Neville-Rolfe, claimed Tesco explained to the paper's reporters before the articles were published at the end of February that its allegations about the company avoiding paying corporation tax were untrue. She did concede that Tesco had structured certain offshore transactions in order to secure savings of £23 million in taxes and that further savings, maybe up to £40 million, could be achieved.
At the risk of saying something blind-ingly obvious, what the company appears to be disputing is not that it has engaged in tax avoidance - which is, of course, perfectly legal - but it objects to the amount reported by the paper. In the words of Richard Northedge, a respected City journalist, "it is the degree that is being disputed, not the principle".
Degree can be important, of course, especially in the eyes of readers. There is a yawning gap between £1 billion and £23 million. But the paper contends that its reporters did their level best to obtain information from Tesco in a series of questions that they contend were not answered fully.
They worked on the story from November and there were many emails and interviews as the journalists tried to discover the truth. The paper says the company was vague and unhelpful, never properly explaining the position. A request for a meeting with the tax director was refused. The Guardian felt Tesco was obfuscating, preferring opacity to transparency. Tesco is presumably aware that is very difficult indeed to track down the details of offshore financial transactions.
But some deals do come to light, as The Guardian knows all too well enough.
After publishing the Tesco articles, it then discovered that its own parent company, Guardian Media Group (GMG), had used an offshore facility in partnership with private-equity firm Apax Partners, when recently acquiring the Emap business magazine division. It published that fact immediately its editorial team became aware of it.
Embarrassment number two is the position of GMG's chief executive, Carolyn McCall, who also happens to be a non-executive director of Tesco. If the libel action proceeds, I understand she will step down from that role.
Now let's consider the implications of Tesco's action and the wider question of journalistic inquiry into tax affairs. I am much taken with the arguments of Alex Hawkes, tax correspondent of Accountancy Age magazine, who argues that Tesco's action sends a "chill" through media debate on tax. As someone who writes about corporate tax avoidance on a regular basis, he guessed "it was only a matter of time before someone sued for libel over tax avoidance claims".
Why should someone sue, however, over engaging in a legal manoeuvre? The answer, I imagine, is because of public perception, a feeling that ordinary taxpayers would be mightily upset at large companies taking advantage of (albeit perfectly legal) schemes to minimise tax payments. As Hawkes says, corporate reputations can be harmed in such circumstances.
I have to say I am amazed at Tesco bringing out the big guns on this matter. In a previous dealing with the company, over its newspaper sales, I was struck by its positive response and its attention to detail. It was a classic case of PR savvy. But the company is obviously edgy at present. It has just sued two men in Thailand over criticisms of its expansion in that country, one of whom is a newspaper columnist who faces bankruptcy if he loses the action, in which Tesco is claiming damages of £1.6 million.
Unsurprisingly, free speech campaigners believe it to be a denial of free expression. I think the company's response to the tax stories is also worrying for the same reasons. There is a legitimate public interest in knowing how public companies conduct their tax affairs, and they should be open to scrutiny. Papers exist not only to hold governments to account but big business too. Tesco should think again.
