By Tom Bergin
LONDON, June 7 Vodafone Group Plc said
it paid no corporation tax in Britain for the year to March
2013, prompting fresh criticism from campaigners who have made
the UK mobile telephone group a target in the debate on
corporate tax payments.
Revelations of profit shifting by big companies have
provoked anger among austerity-weary citizens across Europe and
political leaders have pledged to act.
Vodafone's annual report published on Friday said the
absence of a UK income tax bill for the second year running
reflected tough operating conditions at its British operations.
Reported profits at Vodafone's main UK unit have collapsed
in the past decade, even as sales rose sharply. The company said
the cost of buying its third generation (3G) phone licence and
falling profit margins weighed on UK earnings, although both
factors were also observed at its German unit, which has
continued to report big profits and tax bills.
UK press including British investigative magazine Private
Eye have noted strong profits at Vodafone's subsidiaries in
Luxembourg, where it has few customers or employees but where
companies can enjoy tax rates below 1 percent.
Vodafone Procurement Co Sarl, which buys equipment for the
group, reported profits of 215 million euros ($284.2 million)
for the year to March 2012 and paid no income tax, according to
accounts for the period, the most recent for which figures are
Vodafone Luxembourg 5 Co Sarl, which lends money to other
group units, reported profits of $2.43 billion for the year to
March 2012 and reported a tax bill of less than 1 percent, its
A Vodafone spokesman said the company did not shift profits
out of the UK and that its Luxembourg operations had no impact
on its UK tax bill. He said the low Luxembourg tax bill was tied
to the fact the units there can offset income against writedowns
in the value of assets held by these companies.
Vodafone said it also paid hundreds of millions of pounds in
other taxes in Britain, such as payroll taxes and value added
tax (VAT), a European form of sales tax.
The company added on its website: "Companies have legal
obligations to pay tax, but those obligations do not extend to
paying more than the amount legally required. Companies also
have a legal obligation to act in the interests of their
The company has been under scrutiny since a 2010 deal under
which it paid the UK tax authority, Her Majesty's Revenue and
Customs (HMRC), 1.25 billion pounds ($1.9 billion) to settle a
back-tax claim, for which it took a 2.2 billion pounds provision
in its accounts.
Some lawmakers criticised that deal as pointing to a
too-cosy relationship between big business and HMRC. A
subsequent review by a government watchdog said the deal was
"reasonable" but criticised processes at HMRC.
Tax campaigner Richard Murphy of Tax Research UK said
Vodafone's explanation for its lack of a UK tax bill did not
"Vodafone would like us to believe that because they pay
their property taxes, VAT and staff's national insurance, that
they don't have to pay tax on their income," he said. "That's
not the way it works for the rest of us and it's not the way it
should work for Vodafone either."