Vodafone tells tax critics it more than pays its way

Vodafone hit back over accusations of tax avoidance yesterday, insisting that it made an "absolutely huge" contribution to the UK Treasury, as the British mobile giant unveiled a big slump in annual pre-tax profits.

Andy Halford, the chief financial officer, admitted that Vodafone had not paid much UK corporation tax in some years, but said that must be seen in the context of the company putting £7bn into the Treasury's coffers for airwave spectrum.

"For the company as a whole, we pay £2.5bn to £3bn a year in tax," said Mr Halford. "We clearly pay about a quarter of profit in tax. That's well up with the international average."

Vodafone has come under repeated fire from critics, including senior MPs, who claim it reached an over-generous settlement with HM Revenue & Customs over historic tax issues.

There has been further controversy as Vodafone claimed tax allowances to slash its UK corporation tax bill to zero a year ago.

"The UK offers incentives for investment in networks and infrastructure, and we invest heavily and we get tax allowances," Mr Halford said.

"We've contributed £7bn to the Exchequer in spectrum in 12 years," he added, claiming that Vodafone has spent 70 per cent of its operating cash flow in the UK on reinvesting in its network.

"It's a huge, huge investment. The collective of what we're paying the UK Exchequer is absolutely huge. It may not be the corporation tax line [in the accounts] but it's absolutely huge."

Vodafone's southern Europe operations continue to weigh heavily as pre-tax profits crashed by two-thirds to £3.26bn for the year to 31 March. Underlying profit was up, leaving aside a huge £7.7bn impairment in Spain and Italy. Full-year revenues fell 4.2 per cent to £44.4bn.

Vittorio Colao, Vodafone's chief executive, said bundling data and phone services in a simple "Vodafone Red" tariff was proving popular as he moves away from charging separately for every call and text.

Mr Colao said it was important to embrace this "generational shift" as younger customers use free over-the-top messaging services such as What's App.

There was no news about any sale of its 45 per cent stake in the US operator Verizon Wireless as Mr Colao keeps "an open mind".

He dismissed suggestions that Vodafone was overly reliant on the performance of Verizon Wireless, saying it generated £5bn in free cash from non-US operations.