Mega corporations and tax : Mon Jun 02, 2014 11:53 pm  

According to Private Eye, Vodafone have lined up another scam. Basically, their Luxembourg branch, which claims turnover over 2X Luxembourg's GDP yet has never sold a phone there, has "recognised" that in the future it will suffer losses of dozens of billions.

All the profits made in (for example) the UK can therefore apparently be used to offset these losses. And there is enough to ensure that Vodafone won't pay any UK tax for at least 25 years.

All this is seemingly perfectly legal, and judging by the way HMRC infamously did a deal with Vodafone previously over its tax bill, costing the UK taxpayer billions, we can apparently expect the old boys club to wish them good luck and slap them on the back in this latest wheeze. No doubt to be used as a template by the rest of the usual suspects.

Re: Mega corporations and tax : Tue Jun 03, 2014 6:35 am  

Ferocious Aardvark wrote:

Basically, their Luxembourg branch.........has never sold a phone there, has "recognised" that in the future it will suffer losses of dozens of billions.

Not surprising the Luxembourg branch is losing money No phone sales, from the 300 employees

I can't find anything about the latest deal. However, Corporation Tax being paid on profit and not revenue (AFAIK) how much should Vodafone pay? More than £275m? (which wasn't Corporation Tax) and the non-tax payments to the UK gov of £825m?

£46m paid to the Lux gov, £454m, to the Turkish gov and £1.1bn to the Dutch gov BTW.

Re: Mega corporations and tax : Tue Jun 03, 2014 6:46 am  

Boycott Vodafone.

Re: Mega corporations and tax : Tue Jun 03, 2014 7:16 am  

Dally wrote:

Boycott Vodafone.

for what, obeying the law?

the law is wrong, not the behaviour of Vodafone

Re: Mega corporations and tax : Tue Jun 03, 2014 10:11 am  

The law is not wrong, it is the appetite of HMRC to enforce it. they should just say "Look, these are all associated operations, the reality in the round is its a scam to avoid paying full UK tax on the profits you make in the UK", and assess them to the appropriate percentage of corporation tax.

It would be open to Vodafone to then fight the assessment through the courts if need be.

I look on this from the other end. Which is that I damn well know Vodafone makes billions in the UK, whichever way they want to arrange the books, and so need to pay tax on the billions they make in the UK. Whatever else they may arrange elsewhere through complex international schemes would be of no interest to me, as i would argue it is not real, but a pure device to reduce the tax they should pay.

I am not saying they are doing anything illegal, (all these complex scams are based on arguable and very arcane and technical interpretations of extremely complex rules) but the burden should be on them to prove that it is not tax avoidance. Given we all know perfectly well that it is pure tax avoidance, that might be a heavy burden to lift. The best way to deal with them would be to assess them for the full tax, which they would then have to pay, and leave them to argue it in court if they want.

If at the end of that Vodafone managed to win, then I would quickly whiz a retrospective statute through Parliament closing the loophole neatly in accordance with whatever loophole the court had allowed.

Re: Mega corporations and tax : Tue Jun 03, 2014 12:51 pm  

Standee wrote:

for what, obeying the law?

the law is wrong, not the behaviour of Vodafone

I was just saying, if you don't like it then don't use them. I don't.

Then lobby your MP.

[DaveO]

Re: Mega corporations and tax : Tue Jun 03, 2014 10:47 pm  

Standee wrote:

for what, obeying the law?

the law is wrong, not the behaviour of Vodafone

It is now illegal for individuals to indulge in schemes designed simply to avoid tax that technically may be legal in an accounting sense. That is why Gary Barlow is now facing a huge tax bill.

If you come up with a scheme designed just to avoid tax you remain liable for the tax.

Such behaviour is now deemed to be wrong regardless of the accounting technicalities used to make out nothing illegal took place. So if Vodafone are doing the same kind of thing I'd say there were just as much in the wrong as Barlow was.

If it's wrong for individuals to set up tax avoidance schemes I can't see why it isn't wrong for corporations to do the same. In fact I am pretty sure it is just as illegal for corporations to do this but it requires HMRC to go after them as enthusiastically as they went after the Ice Breaker scheme Barlow was involved with.

If Vodafone is coming up with a scheme to make profit seemingly vanish which is basically what Ice Breaker did I can't see why they aren't having to cough up the full whack.

Another angle on this is how come the Luxembourg operation that makes such vast losses isn't simply shut down? It must be basically insolvent so why wouldn't Vodafone want to prune this loss making enterprise and be rid of what must be 300 extremely incompetent individuals? The liquidators should be called in and the directors done for Wrongful Trading.

The answer is of course they don't shut it because it is used for tax avoidance if Private Eye is correct. So again Vodfone should be liable for their full UK tax bill.

Re: Mega corporations and tax : Wed Jun 04, 2014 5:54 am  

A lot of ifs there, Dave.
Luxembourg is the finance centre for Vodafone, so gets the debts and the interests on those debts. I was only kidding about their inability to sell phones (which isn't even how mobile telephony providers make profit anyway)

Re: Mega corporations and tax : Wed Jun 04, 2014 6:39 am  

DaveO wrote:

It is now illegal for individuals to indulge in schemes designed simply to avoid tax that technically may be legal in an accounting sense. That is why Gary Barlow is now facing a huge tax bill.

If you come up with a scheme designed just to avoid tax you remain liable for the tax.

Such behaviour is now deemed to be wrong regardless of the accounting technicalities used to make out nothing illegal took place. So if Vodafone are doing the same kind of thing I'd say there were just as much in the wrong as Barlow was.

If it's wrong for individuals to set up tax avoidance schemes I can't see why it isn't wrong for corporations to do the same. In fact I am pretty sure it is just as illegal for corporations to do this but it requires HMRC to go after them as enthusiastically as they went after the Ice Breaker scheme Barlow was involved with.

If Vodafone is coming up with a scheme to make profit seemingly vanish which is basically what Ice Breaker did I can't see why they aren't having to cough up the full whack.

Another angle on this is how come the Luxembourg operation that makes such vast losses isn't simply shut down? It must be basically insolvent so why wouldn't Vodafone want to prune this loss making enterprise and be rid of what must be 300 extremely incompetent individuals? The liquidators should be called in and the directors done for Wrongful Trading.

The answer is of course they don't shut it because it is used for tax avoidance if Private Eye is correct. So again Vodfone should be liable for their full UK tax bill.

There are perfectly valid reasons why they could have large losses in Luxembourg. It may be, just as an example, that they purchase their operating licences for the 3G and 4G spectrums across Europe via their Luxembourg company which would give them massive cost with little income.

There may well be some perfectly legal offsetting going on, but there is not enough information to give a considered opinion.

You have to remember that HMRC has signed agreements with the tax authorities of many other countries regarding double tax and other issues and are therefore powerless to prevent some things happening if the other country allows it under their tax laws.

[DaveO]

Re: Mega corporations and tax : Wed Jun 04, 2014 9:54 am  

Derwent wrote:

There are perfectly valid reasons why they could have large losses in Luxembourg. It may be, just as an example, that they purchase their operating licences for the 3G and 4G spectrums across Europe via their Luxembourg company which would give them massive cost with little income.

But the point is if they do so to avoid tax in the UK then that ought to illegal as the mechanism being employed is only being employed to reduce tax.

For example if the example you use of Vodafones set up costs for 3G and 4G in the UK still meant after such costs were taken into account the UK operation still turned a profit then tax should be due on that profit.

If what they do is use losses elsewhere as in "recognising" losses in the Luxemburg operation as a means of wiping out that UK profit this seems a thinly disguised attempt to avoid tax and nothing to do with offsetting investment costs incurred by the UK business.

The UK has not benefitted from whatever led Vodafone to incur these losses and it wasn't investment in the UK so offsetting UK profit against these losses does as I said look like something being done for tax avoidance purposes not because they just invested a shed load of cash in the UK.

There may well be some perfectly legal offsetting going on, but there is not enough information to give a considered opinion.

You have to remember that HMRC has signed agreements with the tax authorities of many other countries regarding double tax and other issues and are therefore powerless to prevent some things happening if the other country allows it under their tax laws.

There is a difference between legitimate offsetting such as taking advantage of a tax break on R&D spend for example and offsetting done just to reduce tax.

It's also nothing to do with double taxation but employing mechanisms to not pay any tax at all. The courts view any such scheme as illegal so what HMRC needs to do is decide if shiting profit and loss around multinational corporations is being done to avoid tax and for no other reason. Private Eye alleges this is what is going on and if so HMRC needs to act.