Wednesday, January 18, 2012

Another monster Vodafone tax dodge, via Switzerland, Jersey, Luxembourg

The indefatigable Private Eye has dug up another monster tax dodging scheme by the telecommunications multinational Vodafone. This follows an earlier Private Eye investigation into a multi-billion pound Luxembourg-centred transfer pricing scandal, which was one of the inspirations for the emergence and growth of the campaigning group UK Uncut.

Whereas the previous scandal involved Vodafone’s €180bn takeover of the German group Mannesmann, this one involves:
"a 45 percent stake in US mobile operator Verizon Wireless, acquired in 1999 and held through a US company called Vodafone Holdings Inc and a Luxembourg company that has since “migrated” to Jersey."
The borrowings happened via a detour to Switzerland. As with the Mannesmann deal, it involves a classic transfer pricing arrangement: the 'onshore' part of the company borrows billions from the 'offshore' part, generating billions in interest charges. These charges are offset as costs against onshore taxes, and counted as income in the offshore jurisdictions, where they hardly get taxed at all.

Hey presto! Without producing anything new or better in the real world, Vodafone's tax planners have transferred billions away from hard-pressed taxpayers and into the stock options and bonuses of the company's executives. The artificiality of the arrangement isn't lost on Private Eye:
"By March 2011 the total earned in this way had hit $10.2bn and will by now be around $12.5bn, or £7.5bn. All earned by a company showing, in its latest accounts, a total wage bill of $8,000!"
And, as with the Mannesmann deal, it involves a complete cave-in by the (now beleaguered) Dave Hartnett of Her Majesty's Revenue and Custom's (HMRC.)

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