Vodafone - How much tax did they avoid?

There will be a rash of spontaneous demonstrations (Twitter: #UKuncut) in Vodafone stores today protesting about their avoidance of large amount of UK tax.

It is alleged that they avoided about £6 billion in UK tax, but this figure is rejected by Vodafone, and obfuscated by HMRC (the tax man).

Private Eye ran the story in Sept 2010.

Vodafone brought Mannesman for 180 billion euros, using a Vodafone Investments Luxembourg (VIL), and subsequently poured profits of up to 18 billion euros into VIL.

Vodafone put aside £2.2 billion before the negotiations with HMRC, and finally settled for £1.25 billion.

This suggests that HMRC lost at least £1 billion in the negotiations. So they may call the £6 billion figure an "urban myth" as much as they like, the fact remains that they lost a significant amount of money in these negotiations.

Why?

The Eye asserts that HMRC's Permanent secretary for tax, Dave Hartnett, took tough specialist legal advisors out of the loop, and moved negotiations to a "dimmer but more amenable group".

On its side, Vodafone had  John Connors, who until 2007 was a "senior official at HMRC working closely with Hartnett on handling big business". 

In summary, a typically complex tax affair that tires the brain, involving sub-companies, exploitation of legal ambiguities between EU and UK law,  and also, worryingly, the possibility that elements within the Civil Service are acting to serve the corporations rather than the people.

No doubt emboldened by their success with HMRC, Vodafone is trying to bully its way out of a £1.6 billion tax bill from the Indian Government. Incredibly, the Telegraph reports that George Osborne lobbied on behalf of Vodafone.

This is a watershed protest. Corporations routinely avoid billions in tax by relying on expensive lawyers, complex company structures, and now, the weakness of HMRC, which is losing staff.

Corporation Law needs to be reviewed and tightened up.
In particular, there needs to be a multilateral, world wide clampdown on tax havens.

Vodafone is the third largest corporation in the London Stock Exchange, and is worth £80.2 billion.


Action Point
If you are a Vodafone customer, you need to get in touch with them here, and ask for your PAC code. It takes about 3 days, and then you find another supplier and give them the PAC code to complete your switch.