So in the hypothetical scenario where Amazon’s tax structuring is successfully challenged on that kind of a basis, Amazon would have (1) deliberately introduced a tax risk factor, and then (2) wrongly assessed themselves (on the basis of facts of which they were perfectly well aware) to fall on the right side of their own deliberately-introduced tax risk factor. It is very hard to see how this two-stage route to deliberately understating your tax liability is different, in terms of culpability, from simply deliberately understating your tax liability. And deliberately understating your tax liability already attracts a penalty in the existing UK tax system.
What I am proposing as a way of taking Labour’s policy to its logical conclusion, therefore, is that the kind of two-stage deliberate understatement that a failure of Amazon’s tax structuring would represent should be treated in the same way as common or garden deliberate understatement. A provision could be introduced into the existing penalty regime which deems to be “deliberate” any understatement of tax where the taxpayer themselves deliberately introduced the tax risk factor that they end up falling foul of. A provision like that might well have discouraged Amazon from structuring through Luxembourg, because it would have added extra downside to the (shakier than might appear on paper) UK tax risk factor they were introducing.
It will be objected that it is not possible to distinguish a tax risk that has been deliberately introduced qua tax risk from the kind of tax risk that arises from the pursuit of commercial objectives. In my experience this objection is most likely to emerge from the tax profession. I find it deeply curious and interesting that the people who are best placed to distinguish their own contribution to a commercial structure from the contributions of others are the ones most likely to say that the distinction cannot be drawn.
Speaking as a transactional tax adviser myself, I know precisely which features of a transaction are there as a consequence of my advice – they are the features where it is me rather than one of my non-tax colleagues who has to worry about whether they are a good idea or not. And having myself, acting as a tax adviser, set up a structure very similar to Amazon’s, albeit on a much smaller scale, I can assure you that it was my suggestion to put the transacting entity in a tax haven. In any event I have no doubt that, with the benefit of Amazon’s internal communications on the subject, a court would feel competent to decide as a question of fact whether or not Amazon’s decision to transact with UK counterparties via Luxembourg was taken pursuant to what amounted to “tax advice”.