Vodafone tax dodgers
THE value of Britain as a tax haven for the world’s biggest multinationals is revealed in Vodafone’s latest, surreal, results.
The company has never been known for generous worldwide tax payments – typically reporting a tax rate well below the average of the countries it operates in – but for the year to this March its figures show a credit – that is, a profit from tax – of £14.8bn.
The remarkable windfall is largely the accounting result of the firm “recognising” the future tax benefit, worth £17.4bn, of losses racked up in Luxembourg. This equates to around £70bn of losses booked in the Grand Duchy – equivalent to twice the country’s entire gross domestic product – where Vodafone sells, er, no phone contracts at all. The £70bn isn’t a real loss at all but the paper write-down of acquisitions, including that of German engineering company Mannesmann in 2000, for which Luxembourg’s predatory tax system, somehow tolerated by the EU, gives relief.
A single beancounter
The outcome is a tax haven into which Vodafone will “for a significant number of years”, it says, pour profits from the UK, Germany and other countries that are struggling to fund public services in the age of austerity. The losses will mop up the profits and take billions off the company’s tax bill. Last year £2.5bn was sent there, dodging more than £500m in tax. At this rate the losses will last 25 years or so. As Eye readers know, the Luxembourg company making most of this profit employed less than a single beancounter, earning $15,000 a year in a company earning profits of $2.4bn.
Until recently Britain’s tax laws would have caught profits that a British multinational diverted into tax havens in this way – unless a deal could be struck with a friendly taxman. But chancellor George Osborne has neutered the relevant legislation in the name of “competitiveness”. The specific changes that allow for Vodafone’s ruse, and thus create its £17.4bn Luxembourg tax break, were forged in a Treasury/business “monetary assets” working group that included… Vodafone tax director (and ex-HM Revenue & Customs director) John Connors!
In return for the multibillion pound tax dodging opportunity, many more multinationals will set up head offices in the UK, amounting to not much more than brass plates with directors flying in for a board meeting and a night in the West End, while companies like Vodafone that were headquartered here anyway will escape tens of billions in tax.
PS: Andy Halford, the finance director who presided over Vodafone’s gargantuan tax avoidance structure and negotiated a cushy settlement over it with ex-HMRC boss Dave Hartnett, has just moved to Standard Chartered, the UK bank looking to restore its reputation after being embroiled in sanctions busting and money laundering. The future of British banking is in safe hands!
Originally published in Private Eye 1367.
It was Private Eye that first exposed the tax dodging activities of Vodafone and led to the formation of UK Uncut and their first direct action.
Want an explanation for austerity, public sector cuts, look no further than Vodafone and other tax dodgers such as Starbucks, Google, Amazon, Caffe Nero and the lax attitude of the ConDem government to tax collection and tax avoidance.
UK Uncut has nationwide action planned against Vodafone on Saturday 14 June 2014. If there is not an action planned against Vodafone near you, then why not start one?