Vodafone Group, which has been the target of public protests for not paying enough tax in some markets, has voluntary disclosed its tax and “economic contributions” on a country-by-country basis.
The operator says it’s one of only a few multinational companies worldwide to make a disclosure of this nature on its own volition.
Vodafone clearly hopes that by opening up its books in this way it can address any public and government disquiet over its tax affairs.
The latest breakdown – Vodafone published its first country-by-country tax disclosure in June – covers the financial year ended 31 March 2013.
Vodafone emphasises that it pays a wide range of taxes, not just corporation tax, as well as contributing heavily to “non-taxation revenue mechanisms”, such as regulatory and licence fees.
During the 2013 financial year, in which the group reported pre-tax profits of £3.25 billion on revenues of £44.4 billion, Vodafone’s businesses around the world paid more than £4.2 billion in direct taxes to national governments.
The group also paid more than £3.2 billion in other non-taxation-based fees and levies.
Moreover, Vodafone made a total indirect tax contribution to national governments of £6.1 billion. Indirect contributions include such things as PAYE (pay as you earn) income tax, employee national insurance contributions as well as VAT.
It means that Vodafone made a total cumulative contribution to the public finances of more than £13.5 billion in its countries of operation.
For good measure, Vodafone said it also invested more than £6 billion in networks and services during the 12 months ended March.
Within the published document, Vodafone also devotes a section to why it pays “little or no corporation tax” in the UK.
The operator points out that it spent over £1 billion in 2012/13 – up from £767 million in 2011/12 – building and upgrading the networks “relied upon by millions of UK consumers and businesses”.
It also paid the UK government more than £7 billion for UK radio spectrum licences, adding that money raised for those licences (from UK banks and capital markets), further increased its overall UK borrowings: it’s now paying more than £600 million a year in interest costs to UK banks and financial institutions.
“The UK is an expensive and highly competitive country in which to do business and has one of the least-profitable mobile markets anywhere in the world,” said Vodafone in a statement.
“Many people confuse revenues with profits. However, our UK profit is a small fraction of our gross UK revenues; below £300 million in 2012/13, which is significantly less than the interest costs on our UK debt and just over one-quarter of the amount of our annual UK capital investment programme.”
Not surprisingly, perhaps, detailed tax disclosures do not have universal support.
The CBI business lobby, reports the Financial Times (FT), has opposed publication of country-by-country profits and tax on the grounds that “rather than improving transparency it risks reducing public understanding of the tax debate by swamping people in highly complex data with no context”.
But there seems political momentum to go ahead anyway. Andrew Packman of PwC, a professional services company – cited in a FT report – predicted that country-by-country reporting of tax information would eventually be put in the public domain by politicians eager to win popularity.
“In the next four or five years, I think we will see it come in [country-by-country disclosures]. There is such a head of steam behind it,” he said.