HOUSE OF COMMONS

LONDON S\T1A
OAA

The Rt Hon Lady Hodge MBE MP House of Commons

London
SW1A OAA

19th

November 2012

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I am writing to regist{
Holdings Ltd.

^y Public Accounts Committee (PAC) and the ongoing PAC inquiry into international tax avoidance in relation to your family's company Stemcor
On 9 November 2012, you told the Daily Telegraph that you were only a'very small shareholder' in Stemcor. You repeated this assertion to Channel 4 News, when you said: 'I'rr. a tiny, tiny, tiny shareholder'. In light of these comments, I would like to raise the two points outlined below:

serious concern over your position as Chair of the

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The extent of your shareholdings. According to the most recent Annual Return submitted on L8 September 2012, you own 17,004,600 shares. The company has 189,284,825 shares in total. This means 9 per cent of the total
number of shares are in your name.

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Your shareholdings have an estimated worth of more than f,20 million. According to Stemcor's balance sheet as at 31 December 201'J., the shareholders' funds are worth f242 million, giving your shares an estimated worth of more tharrf2} million.

In addition, you commented to the Dnily Telegraph:'They [Stemcor] have always promised that they do absolutely nothing to avoid tax'. You reiterated this to Channel 4 when you said: 'Time and time again I have sought assurances to ensure they [Stemcor] do it by the books. And I wouldn't be doing this if they weren't. I've sought assurances all the time'.

But I would note the point below:

. Only 3 per cent of tax paid on 33 per cent of turnover in UK. The 2011
Report and Accounts show Stemcor Holdings Ltd UK turnover to have been f2.1billion. Stemcor's total turnover was f6.3 billion. Stemcor's business in the UK therefore accounts for 33 per cent of Stemcor's total turnover. Yet the same accounts show that Stemcor Holdings paid f743,000 in UK corporation tax. The same accounts show that the level of overseas tax was f26.5 million. Stemcor's tax contribution in the UK therefore accounts for only 3 per cent of its total tax contribution.

While questioning Google, Starbucks and Amazon over their international tax structures, lou said: 'We are not accusing you of being illegal. We are accusing you of being immoral'.

The statement released by Stemcor on 10 November 2012 admits to using 'transfer pricing' and annual reports show extensive trading between various subsidiaries of the company. Given the very serious accusation you made of
Starbucks that they were 'exporting profits to minimise tax', a seemingly similar approach taken by Stemcor, these points raise serious concerns.

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. There is legitimate concern 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.

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. In the interesls of transparency I am making this letter available to the public.

Priti Patel Member of Parliament for Witham

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