Berkshire-based mobile phone service giant Vodafone has defended its two-year avoidance of corporation tax after reports indicated that the telecommunications group had paid no tax in the past 24 months. The company claimed that spending and interest payments on large loans reduced its tax obligations in the UK.
Vodafone paid around £3 billion in taxes internationally during the last year and claims that its minimal UK tax payments are due to low profits. The group earned £294 million from its UK operations during the past year, down from £402 million during the previous twelve-month period.
Chief executive Vittorio Colao defended the company’s minimal corporation taxes, claiming that the low UK profits are due to heavy investment in infrastructure and interest payments on corporate debt. While the company’s UK operations brought over £5 billion to the company, they accounted for just 2.5 percent of its profit.
The Vodafone boss also noted that the company paid over £800 million in other UK taxes, despite avoiding the corporation tax. Despite Vodafone’s large tax spending, the company’s minimal corporation tax payments put it in a similar position to that of Google – another international company subject to a recent tax scandal.
Advocates for corporate tax reform have claimed that Vodafone’s stance is unfair to other taxpayers, despite the company’s claim that it pays its taxes. Tax Research UK campaigner Richard Murphy weighed in on the matter, claiming “that’s not the way it works for the rest of us and it’s not the way it should work for Vodafone either.”
Vodafone is the latest international operation to attract scorn for its tax strategy in the UK. Coffee shop giant Starbucks and online search firm Google have also faced accusations of UK tax avoidance due to their ‘Dutch Sandwich’ tax strategies, with both scandals leading to an internal assessment of accounting policy.
