Vodafone's £84bn tax avoidance bonanza: Nothing for taxpayers in Verizon deal while bankers share £500m in fees

Treasury under pressure to review rules as public spending watchdogs claim UK-based phone company has a moral duty to hand over some of its gains to taxpayers

The Treasury is under pressure to urgently review rules allowing Vodafone to avoid paying tax on its massive £84bn windfall from selling its stake in the American mobile phone giant Verizon.

Public spending watchdogs claimed the UK-based phone company has a moral duty to hand over some of its gains to taxpayers. But there was no sign that the Chancellor George Osborne would change the law.

While UK taxpayers miss out, banks working for Verizon could earn as much as £80m in fees and Vodafone’s advisers could reap a £76m dividend, according to estimates by New York research group Freeman & Co, which exclude underwriting fees.

In one of the biggest deals in corporate history, Vodafone confirmed last night that it is selling its 45 per cent holding in US firm Verizon Wireless to Verizon Communications. About £60bn will be returned to Vodafone shareholders, £24bn to those in Britain.

Vodafone says its US stake is owned by a holding company based in the Netherlands, and so will not be liable for tax in Britain. It will pay £3.2bn in tax in the United States.

Even if the US shareholding were held in the UK, the firm would not be liable to tax on its gains under rules on shares sell-offs introduced by the then Chancellor Gordon Brown in 2002.

Margaret Hodge, Labour chairman of the Public Accounts Committee (PAC), said: “We need assurances that HM Revenue & Customs (HMRC) have crawled over this deal and done its damnest to make sure taxpayers receive the highest amount of this sudden windfall. If there is a flaw in the legislation, Treasury ministers should look at it urgently.”

The PAC, which has attacked tax avoidance by companies such as Google, Amazon and Starbucks, also criticised an alleged “sweetheart deal” between Vodafone and HMRC which allowed Vodafone to forgo a reported £6.75bn of tax after its own takeover of Germany’s Mannesmann company in 2000. Dave Hartnett, the former HMRC boss, was accused by the MPs of letting Vodafone off the hook, which he and the company denied.

Ms Hodge’s committee may now investigate Vodafone’s US deal as part of an inquiry into tax reliefs. She said: “It is a British company with British customers. It takes advantage of services provided by the public purse and should pay its rightful dues. If Vodafone has, as it has done before, played the [tax] system, then it has an obligation to UK consumers to do the right thing.”

Lord Oakeshott of Seagrove Bay, the Liberal Democrats’ former Treasury spokesman, said: “Vodafone is right up there with Google and Amazon in the world tax dodgers’ league. What possible commercial justification is there for pretending that Newbury-based Vodafone made their investment in Verizon through Holland?

“They led HMRC a merry dance in the unlamented reign of Dave Hartnett - the new HMRC management and the Government must make every effort now to collect some tax at least on this profit.”

The Government refused to comment. But ministers are expected to stick with the “substantial shareholdings exemption”, which means firms to do not have to pay tax on profits from selling a 10 per cent stake or more in another company held for more than  a year.

The Treasury believes the 2002 change boosts Britain’s competitiveness and encourages multinationals to be based in the UK. It thinks it more likely that decisions on sell-offs are taken for the right reasons rather than the wrong ones, such as limiting a tax bill.

Vodafone sources argued that the tens of billions could be paid to UK investors, a significant injection of cash into the economy, similar to the Bank of England’s quantitative easing programme, which could aid the fragile recovery. Investors would also have to pay tax on it.

Vodafone insists it pays the taxes due in every country in which it operates - about £2.3bn around the world in the 2011-12 financial year. “For every £4 we make in profit, we pay £1 in corporate taxes globally,” it said. Vodafone paid £1.25bn to settle a long-running legal dispute with HMRC over the Mannesmann takeover, but denied reports that the tax authorities demanded £8bn.

Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
News
i100
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
PROMOTED VIDEO
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Life and Style
A small bag of the drug Ecstasy
Health
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
News
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmReview: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
Extras
indybest
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Financial Analyst - Forecasting - Yorkshire

£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

Business Architect - Bristol - £500 per day

£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup