It’s  a cracking dispute. Labour and Tory women MPs hammering away at each other hammer and tongs.

Hodge CrickBlog 730 Hodge threatens Tory MP Patel with libel writ over family shares
Margaret Hodge (pictured), the Labour MP who chairs the Commons Public Accounts Committee (PAC), is threatening the Conservative MP Priti Patel  with action for libel.  At dispute is Hodge’s substantial shareholding in her family’s multinational steel-trading firm Stemcor, at a time when she is leading a parliamentary inquiry into tax avoidance.

Yesterday Margaret Hodge used Twitter to condemn as “totally false”, allegations in a letter by Priti Patel to Hodge in which the Conservative backbencher suggested that Stemcor’s involvement in transfer pricing conflicts with Hodge’s chairmanship of the PAC, at a time when the committee is investigating tax avoidance by major multinational firms such as Google, Amazon and Starbucks. These firms are accused of avoiding UK tax through their own transfer-pricing policies. Last week, amid considerable publicity, bosses of the three firms were grilled by Margaret Hodge and her PAC colleagues.

More from Channel 4 News: Starbucks, Amazon and Googled grilled by MPs

Hodge has also tweeted: “Wont be deterred from pursuing tax avoidance by petty politicians seeking publicity.”

I first blogged on this issue eleven days ago, and questioned Stemcor’s apparent involvement in transfer pricing – one of the methods used by multinational firms to avoid tax, and which is being explored by the PAC.

Hodge letter Hodge threatens Tory MP Patel with libel writ over family shares

 

(Above: an extract from Priti Patel’s letter)

“There is legitimate concern,” Priti Patel wrote to Hodge, “that your leadership might detract from the objectivity of the inquiry, and could undermine both the authority and integrity of the committee as it produces its report.”

Patel alleged that nine per cent of Stemcor’s total shareholding is in the name of Margaret Hodge, with an estimated worth of £20m.  This seems to contrast with Hodge’s comment to me, as reported in my previous blog, that she is only a “tiny, tiny, tiny shareholder”.

The Conservative MP also claims that whilst Stemcor UK accounts for 33 per cent of the multinational company’s worldwide turnover, only three per cent of its worldwide tax contribution is paid in the UK.

Priti Patel wrote to Margaret Hodge.  “My priority is that the PAC inquiry is carried out as thoroughly as possible. As chair of the PAC, you have to be able to hold people to account for their decisions and judgement. My primary concern is that without answers to these questions, you would not be able to carry out your role.

She continues:  “In light of these concerns, I am writing to ask for a full explanation of the points above. Until we have this explanation, people will question your role as chair of this inquiry.”

“Ultimately, as chair of the PAC, I believe that you must both meet and be seen to meet the standards to which you hold others to account.”

More from Michael Crick: A roasting for Starbucks… but a grilling for Hodge?

Margaret Hodge insists that Stemcor have promised her that they do nothing to avoid tax, and that she has sought and received assurances from the company and from her brother, Ralph Oppenheimer, the boss of Stemcor, that they do everything “by the books”.

Margaret Hodge tweeted that details of Priti Patel’s letter are inaccurate.  “Will be demanding full apology.  Everyone should pay full and fair tax.  I do.”

How tiny is “tiny, tiny, tiny” as Margaret Hodge put it to me.  In a statement Stemcor said that Hodge’s personal shareholding “in her name” in Stemcor is 2,399,600 shares, which is 1.26 per cent of the total share capital.  but the company added that “this excludes shares held in trust or in her children’s names.”

In the 2011 Stemcor Holdings Ltd annual accounts, it states that “the company is controlled by RD Oppenheimer, the chairman and his relatives.

“In aggregate they have an interest in 71 per cent of the issued share capital of the company”.

Stemcor also said it was “libellous” to suggest that Stemcor had followed other multinational companies who “may possibly use transfer pricing to avoid or evade tax in high tax jurisdictions”.

On the question of how much tax they pay, Stemcor denied Priti Patel’s allegations, saying: “Over the past five years Stemcor has paid £27m in UK corporation tax, an effective tax rate of 32 per cent based on UK generated profits. This compares to an average corporate tax rate in the UK for the same period of 28 per cent.

“A high turnover gives no indication of profit. Corporate tax is levied against profits, not turnover. As a trading company, Stemcor’s profits tend to be only around 1 per cent of turnover and, in difficult economic conditions, profits are quickly eroded.

“The tough economic environment in the UK squeezed margins during 2011, resulting in a loss of £2.9m on UK operations, which reduced Stemcor’s UK tax payments compared to prior years. In 2009, by contrast, despite the fact that the Stemcor Group globally made an overall loss of £16.5m, a profit was made in the UK and consequently £8.5m was paid in tax that year in the UK.”

In a letter to Priti Patel, Margaret Hodge answers the Conservative MP by referring her to the Stemcor statement, but Hodge also accuses Patel of making a “potentially libelous accusation that my family’s company is engaged in tax avoidance”, and engaging in a “shameless exercise in self publicity”.  Hodge also demands that Patel makes a “full and public apology”.

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Channel 4 News asked for an interview with Margaret Hodge but the MP declined.