Vodafone Hits Back At Tax Protesters

by Robin Pilgrim, LawAndTax-News.com, London

02 November 2010

UK mobile phone company Vodafone has dismissed suggestions that it avoided billions of pounds in tax relating to its takeover of German telecoms company Mannesman in 2000.

A Vodafone spokesman said that reports suggesting the company has an outstanding tax bill of GBP6bn "are incorrect as this was never the case."

"We pay our taxes in the UK and all of the other countries in which we operate," the spokesman added. "In a statement from HMRC, the figure of GBP6bn was referred to as an 'urban myth'."

Vodafone has been forced to temporarily close many of its stores across the UK after protesters staged a series of demonstrations and sit-ins as part of a campaign organized on social networking websites.

Vodafone has been involved in a long-running legal battle with HM Revenue and Customs (HMRC), which accused the company of flouting the UK's controlled foreign company (CFC) rules when it used a Luxembourg company, Vodafone Investments Luxembourg (VIL) to dispose of its shares in Mannesman. The CFC rules seek to ensure that a UK-resident company pays tax at no less than the UK tax rate on the non-trading income of its foreign subsidiaries, especially if the subsidiary is tax-resident in a jurisdiction with a very low tax rate.

In May 2009, the Court of Appeal overturned a decision by the High Court in 2008 that Vodafone did not have to pay UK corporation tax on income attributed to VIL. The UK Supreme Court later refused to hear an appeal launched by Vodafone against this ruling. However, in July this year, Vodafone agreed to pay HMRC GBP1.2bn to settle the dispute, according to the BBC.

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