Vodafone Caught Up in Fresh Tax Scandal
Vodafone has been thrown into a fresh tax controversy after it emerged that the company had made a settlement with the UK tax authorities over how it recorded returns from its Irish subsidiary.
Vodafone settled the case back in 2009, but it has only now emerged.
Although the exact amount of the settlement is unknown, it is said to involve Vodafone reclaiming EUR67 million in tax from the Irish government that it should have paid in the UK, where the Group is headquartered.
According to a report in the Guardian newspaper, Vodafone set up a holding company in Ireland to receive royalty payments from its operating subsidiaries, which by 2007 was said to be generating revenues of EUR380 million per year.
Accounts filed in Dublin show that in 2009, the UK authorities settled a dispute with Vodafone over its Irish tax returns. The dispute appears to have stemmed from an issue of avoiding double-taxation, which is common enough in companies operating in multiple countries.
The controversy stems from the use of a holding company to collect royalties and then basing that company in a low tax country, such as Ireland.
Vodafone denies any wrong doing and says that it was fully compliant with UK tax laws.
Vodafone said it "conducts itself in full compliance with the law and always operates under a policy of full transparency with the tax authorities in all countries in which we operate".
"The royalty payments that were made were done so under domestic and international transfer pricing rules which are set up by governments to allocate appropriate taxable profits from one country to another. The company's local UK and Italy operating companies continued to pay fees to Vodafone Group in the UK and no royalties have ever been paid from the UK to Ireland or elsewhere."
The royalty collecting company was however moved to the UK in October 2011.
On the web: The Guardian