They\’re really straining to say Vodafone is tax dodging here

So here\’s the headline:

Vodafone paid no corporation tax in Britain last year

Generous tax breaks mean second largest mobile phone company able to reduce bill to zero for second consecutive year

Blimey. What did they do then?

In common with many other UK businesses, Vodafone\’s British operating company is able to shelter much of its profit from tax legally. The firm made a £294m operating profit in Britain last year, but was able to transform that into a loss.

In common with other mobile phone networks, Vodafone claimed back part of the money it has spent on its network, building masts and laying cables. It also claimed back part of the cash it paid the government to buy the airwaves that carry mobile traffic, as well as interest charges on the money it borrowed to pay for them.

So it deducted from its gross operating profits the further costs of doing business. After which is made no taxable profit.

Seriously, this is now being described as tax dodging?

There\’s another way of putting this.

It also claimed back part of the cash it paid the government to buy the airwaves that carry mobile traffic

Yup, the government got the tax money a decade and more back in the telecoms auction. The reason Vodafone isn\’t paying tax now on UK activities is because it\’s already paid it.

25 thoughts on “They\’re really straining to say Vodafone is tax dodging here”

  1. It is immoral that Vodaphone make profits. They should make colossal losses, like Governments, and steal the money to cover the shortfall.

  2. Interesting reading the comments below the Guardian article.

    Overwhelmingly pointing out that “what’s all the fuss about, this isn’t some dodgy tax haven deal, but the usual accounting practice of offsetting business against profits.”

    The Guardian, UKUncut et al are like the boy who cried wolf. By their constant ignorant attacks on companies that legitimately (and for reasons government’s wnat to encourage – like 3G/4G investment) they actually set back any reasonable public call for more appropriate tax laws for the likes of Google in a mobile, internet age.

  3. Also demonstrates yet another aspect of Gordon Brown’s short-termism and lack of economic foresight.

    Raise £22.5bn in 2006 with the 3G auction and then wonder why corporate tax receipts are light for the next few years.

  4. What is most worrying about that article is not the thing itself, which is misleading enough to be worthy of a place in any tabloid, but some of the responses.

    Lots of people seem to be outraged that companies are encouraged to invest in providing a better product. It seems this article is the first time in their lives that they have ever heard of this happening, despite the fact it has been a commonplace of business life since corporate taxes were invented.

    It really is about time that basic business knowledge was provided in schools.

  5. [email protected]
    Not quite right — the sentiment being expressed is that it’s immoral that, after making profits, businesses don’t send all the excess money to the Treasury.

  6. Shinsei,

    Also demonstrates yet another aspect of Gordon Brown’s short-termism and lack of economic foresight.

    Raise 22.5bn in 2006 with the 3G auction and then wonder why corporate tax receipts are light for the next few years.

    No, Brown did the right thing. You’ve got a license for sale, you make as much as the market will pay for it, rather than taxing the productive part of the economy.

  7. Interesting use of the the words “shelter” and “transform” in the article. Implying that they are doing wrong but written to stay just on the right side of the libel laws.

    I find it astonishing that a company is being criticised for doing what exactly what we want them to, i.e. invest. Ultimately though, if Voda failed to invest in its network, it would quickly cease to exist along with the jobs and any future taxes it may pay.

  8. Tim Almond

    “No, Brown did the right thing. You’ve got a license for sale, you make as much as the market will pay for it, rather than taxing the productive part of the economy.”

    But you do end up taxing the productive” part of the economy because all the money Vodafone paid up front in 3G fees results in lower taxes paid by them in the future, which means others pay more taxes.

    And that’s before you factor in the slow roll-out of 3G services, and resultant slower than might be expected economic growth, because of lack of cash from the telecom companies to invest in actual 3G infrastructure rather than just the licence.

  9. I really am sick of all this.

    What about the “journalists” (yeah, right) who avoid tax on the expense payments they receive from their employers? It may well be legal, but is it moral?

    And coming from The Gruaniad, it’s even more sickening. http://order-order.com/2012/11/28/guidorama-investigation-guardian-offices-owned-offshore/

    Really, I’m out of touch with modern life, where Ed Miliband can say Labour’s crazed spending has nothing to do with our current economic position, where Ed Davey can kill off the UK as a civilised place to live and where the Guardian can imply that to deduct operating expenses is a tax dodge when it indulges in pure, uncompromising championship league tax dodging of it’s own…

    I need a lie down.

  10. The spectrum auction is slightly misleading as it wasn’t tax but a charge for using spectrum. Which as a commons (not sure my economic terminology is correct) has to be restricted to certain users otherwise it becomes useless with everyone cluttering it up. And the least inefficient way of so doing is to have the govt auction it off.

    But yes, it’s still a cost of doing business.

  11. The [email protected]
    Still not quite right – the sentiment is that all businesses are immoral especially big ones and that they should not make any profit at all and that all money earned should be paid as tax BEFORE deducting things like material costs, salaries, etc.

  12. Shinsei1967,

    But you do end up taxing the productive part of the economy because all the money Vodafone paid up front in 3G fees results in lower taxes paid by them in the future, which means others pay more taxes.

    No. The spectrum is unproductive, given by nature. It cannot be created or destroyed. The productive aspect is what you do with it.

  13. @BigFire Post 16

    The Guardian haven’t made a profit in decades.

    True dat. They are sustained by the Scott Trust, which also owns AutoTrader, which does make a good profit.

    I would guess by carefully not following the advice of the economics ‘experts’ who write for The Guardian.

  14. The comments on that article are particularly depressing, even by Graun standards.

    Some patient soul will clearly explain the basic principles of accounting. Then the toddlers come out and scream and shout. Rinse and repeat.

    There is just no way to get through to these people.

  15. Shinsei: so how do we allocate resources like frequency bands? “Homesteading”? If Vodafone were willing to pay x for the band; it was an auction, it’s because they believed they could make money after that price.

  16. |Point of detail but spectrum was auctioned
    |also in 2012 in the Uk

    2013 actually. I am not sure that Vodafone have gained access to to spectrum yet – it’s happening in the next few weeks I think – so it is possible that they haven’t paid for it yet. Certainly none of the payments for the new spectrum would have been paid last year.

    In any event, the costs of the new spectrum are tiny compared to what they paid for the 3G licence, which were late 1990s telecoms bubble silly. Call that a tax or call it something else if you like (I call it a tax), but if you include it, Vodafone’s total contribution to the treasury over the last 15 years is much higher than would be justified by its level of profitability. This is true for all its competitors as well.

  17. What’s next?
    In common with many other UK businesses, Company Z was able to deduct the cost of “Employees” and shelter much of its profit from tax legally. The firm made a £XXXm operating profit in Britain last year before “Employees and Wages” were deducted, but was able to transform that into a loss of £Ym by continuing to engage the services of “Employees”, many of whom are suspected of being unproductive…

  18. Auctioning the licenses crowds out the smaller players, reduces competition, and pretty much like corporation tax, the consumer ends up paying it. Notwithgstanding the fact that the money “raised” will be mostly wasted by politicians.

    As very efficient ways, I’ve known better.

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