This is because British law allows relief on a quarter of the money spent on items including debt interest payment, spectrum purchases and installing equipment such as masts and radios. The relief is equal to the tax rate – an average of 25% in recent years.
Hang on, you buy something to make the business work. This is a cost. If it\’s something that makes the business work for a long time then you get a piece, not all of it, as a cost each year. That cost is obviously deducted from your income before calculating tax. Because profit, the thing being taxed, is income minus costs.
It\’s not just the alarmingly cack handed way in which they\’re describing this process: they really do seem to be arguing that you cannot deduct the costs of doing business before you calculate your profit.
Ah, Prem Sikka is involved: we know that it won\’t make sense then.
But critics say that its ability to send large sums abroad while making no corporation tax contribution to the Exchequer highlights the unfairness of British laws.
Cash made here should be taxed here. A fair enough idea in isolation. And then in the companion piece we have:
Vodafone has ceded just £156m in UK corporation tax, but paid £6.7bn to other countries during the past three years.
And, err, profits made elsewhere should be taxed here? Again, fair enough in isolation, but you really cannot go around believing both.