Vodafone – the world’s second-largest mobile phone company – paid no corporate tax in Britain in 2012 for the second year running, despite handing out £4.8 billion in cash dividends to shareholders in the last 12 months.
The London-based telecom giant said investment in the UK coupled
with interest payments eliminated its corporate tax liabilities
at home, although the firm paid around £3bn in tax abroad.
Vodafone raked in £45bn in revenues last year, with underlying
earnings of £13bn and a global profit exceeding £3bn. More than
£5bn in revenues were generated in the UK, though underlying
earnings – income minus one-off items – fell to £1.2bn from
The firm’s UK operating profits fell to £294 million from £402mn
a year prior amidst falling voice and service revenues.
Mobile networks such as Vodafone are able to reclaim money spent
developing their own networks, including the construction of
radio masts to support antennae and the laying of cables. The
company further received a return on part of the expenditures
paid to the government to buy the airwaves which carry mobile
traffic, as well as interest charges on cash borrowed in order to
make those payments.
A large portion of the firm’s infrastructure investment went
towards new base station equipment, which will allow Vodafone to
launch its 4G mobile broadband network over the summer.
The firm was also able to avoid taxes by sending profits to its
Luxembourg subsidiaries, where both its customer and employee
base is low, and tax rates dip below 1 percent. Vodafone
Luxembourg 5 Co Sarl, which funds money to other branches,
reported profits of $2.43 billion for the year to March 2012 and
paid a tax rate of less than 1 percent, Reuters reported.
A spokesperson for the firm claimed Vodafone did not funnel
profits out of the UK, insisting its Luxembourg operations had no
bearing on taxes paid at home. He further explained that unites
in the tiny European state are able to offset income against
write-offs in the value of assets held by those companies.
Vodafone stressed its commitment to “integrity in all tax
matters,” noting that it paid £882mn in other UK taxes and
contributions during the year.
However, with £4.8bn in dividend payouts, the tax revelation is
likely to spark further debate over domestic multinational tax
contributions, with Google, Starbucks and Amazon all being called
upon by parliament to justify their tax status.