Why is Chuka Umunna such a prat?

Force firms to reveal tax bills, urges MP Chuka Umunna

Right after that Jersey trust tells us who owns your mother\’s house perhaps. If I\’ve got that little story correct.

But what really marks him out as a prat is this:

“To put it in context…in the tax year 2010/11, business paid £163bn in tax [in Britain]. That is the equivalent to the defence, education and transport budgets for this financial year.”

That\’s 11% or so of GDP. And believe me, that ain\’t corporation tax which is more like 2 or 3% of GDP. To get to that 11% he\’s certainly had to add in national insurance and quite possibly income tax on wages and maybe even VAT as well. Which might well be taxes collected by companies but they\’re not taxes paid by companies.

In fact, I seem to recall, when Chuka was shouting at Barclay\’s he didn\’t like the way that they lumped all these taxes together.

Last week, it emerged that Vodafone paid absolutely no corporation tax in the UK last year, despite taking £1.3bn in earnings before tax and interest.

I\’m becoming increasingly convinced that this is actually wrong. Not just the use of ebitda as the starting point and ignoring capital allowances etc. For there was the settlement of the Luxembourg case. In that settlement Vodafone said that it would be bringing some portion of that money back into the UK where it would be used to finance dividends. And moving such cash from a lot tax environment into the UK to pay a dividend will make it liable to UK corporation tax. At the headline rate minus whatever foreign taxes have already been paid.

It\’s possible that the very specific claim \”Vodafone UK LTD paid no corporation tax\” is true but not, at least I think not, the wider one that \”Vodafone PLC paid no UK corporation tax\”.

4 comments on “Why is Chuka Umunna such a prat?

  1. Vodafone Group plc’s consolidated annual financial statements (a href=”http://www.vodafone.com/content/annualreport/annual_report12/downloads/financials_vodafone_ar2012_sections/consolidated_financial_statements_including_notes_vodafone_ar2012.pdf”>note 6 here) say explicitly that the group (ie all Vodafone companies together) recorded no UK tax expense for the 2012 financial year.

    That doesn’t necessarily mean that it paid no cash to HMRC, tax expense being different from tax paid in cash, but does suggest that Chuka is more right than you are here.

  2. Yes, VF does appear to pay no UK taxes although they do have an overall tax payment. I also note that they have (if I am reading their balance sheet correctly) rather large accumulated losses, wouldn’t that make it rather moot whether they pay taxes as they can amortize those losses against tax ?

    Also interesting to note that their German income is more than 50% greater than their UK income, and Germany + Other Europe is over 3 x the size of the UK.

  3. Some of the £84 billion of retained losses can be offset against current profits, but only against profits arising in the country where the losses occurred so Vodafone is still paying over £2 billion in taxes in various foreign countries.
    Murphy will, I am sure, choose to ignore the accumulated losses just as he did when ranting about the “low tax charge” of the banks in 2010.

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