Vodafone & The UK Government

DrumSteve

Just seen this on Sky News this morning:

Controversial tax boss Dave Hartnett agreed a deal to let Vodafone off a £6bn tax bill, it emerged yesterday.

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Let off: Vodafone escaped a £6bn tax bill
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In what was described as an 'unbelievable cave-in', the HMRC's permanent secretary for tax allowed the phone giant to avoid paying vast amounts of tax on profits racked up by a subsidiary based in a tax haven.

The disclosure comes after it emerged that Her Majesty's Revenue and Customs had undercharged 1.4million Britons a total of £2billion in tax and would be claiming it back.

Last week Mr Hartnett was forced by Chancellor George Osborne to issue a grovelling apology.

The agreement between HMRC and Vodafone came after negotiations-between revenue officersand John Connors, Vodafone's head of tax. Until 2007, Mr Connors was a senior official at HMRC, where he worked closely with Mr Hartnett.

The saga began a decade ago when Vodafone bought German engineering firm Mannesmann for 180bn euros.

Wanting to route the purchase through an offshore company to avoid paying UK taxes, it set up a subsidiary in Luxemburg where profits would be taxed at less than 1%.

But it was ruled that the deal broke anti-tax avoidance rules.

Nevertheless, Mr Hartnett took the Vodafone case away from his team of lawyers and gave it to another negotiating team, which said the phone company could get away with paying a lump sum of £800,000 and a further £450,000 over five years.

HMRC also agreed that the firm would no longer have to pay tax on its Luxembourg subsidiary's profits. The deal is understood to include some other tax avoidance ruses by Vodafone.

One former HMRC chief told Private Eye magazine the deal was an 'unbelievable cave-in'.

An HMRC spokesman said: 'Our legal obligation to maintain customer confidentiality means we are unable to offer comment on the tax affairs of named individuals or organisations.'

If this is true then it is ludicrous... he can they justify letting VF away with 6BN in tax when they are making cuts across the boards. Surely if they are going to take tax avoidance seriously then they could have made an example of VF here...

The only thing I can thing of is that maybe VF threathened to shed a load of jobs if this went through.

From : http://www.thisismoney.co.uk/news/article.html?in_article_id=514832&in_page_id=2#ixzz13YaMxJs5

Cookie_Monster

Wanting to route the purchase through an offshore company to avoid paying UK taxes, it set up a subsidiary in Luxemburg where profits would be taxed at less than 1%.

I don't see anything wrong with that, I mean its basically the reason for the IFSC over here, for companies to route profits through us at a lower rate.

But it was ruled that the deal broke anti-tax avoidance rules.

Nothing wrong with tax avoidance and can't see why there are rules there in this case. if it was evasion, that'd be different of course.

drunkmonkey

I wonder will India cave in as well, they've given them 30 days to pay 2.5billion dollars in Tax http://www.independent.co.uk/news/business/news/vodafone-given-30-days-to-pay-16316bn-indian-tax-demand-2114408.html

Any change the Brian's could stick a 15billon tax on them for us!

OhNoYouDidn't

Cookie_Monster wrote: »

I don't see anything wrong with that, I mean its basically the reason for the IFSC over here, for companies to route profits through us at a lower rate.

While some IFSC stuff is close to the wind, they set up a shell company in Lux for a British company to buy a German company and used it for nothing else. That is against the rules in both Britain and Germany and, the key bit, were found and admitted to being in violation of British tax law but for political reasons yet to become clear, HMRC were ordered to drop it.

Long and short of it, the Tories are back in power. This sort of thing was rife in the 80's.