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Vodafone's small, controversial tax bill validated by UK.gov

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The National Audit Office, asked to look into Vodafone's negotiated tax bill of £1.25bn, has decided it was a reasonable deal considering the cost of taking legal action against the company.

Back in 2010 Vodafone was accused of owing £6bn in tax, and the company had reserved £2.2bn to meet it's UK tax obligations, but George Osborne struck a deal to accept £1.25bn. That sparked national protests, and in December last year the Audit Office was asked to take a look at five deals including the one struck with Vodafone. It has now concluded that all were perfectly reasonable.

The report (pdf, surprisingly readable, but still very dull) doesn't name the companies, but Vodafone admits to being "Company D" whose deal is criticised as breaking the Treasury Department's own guidelines though it concludes that this is because the guidelines themselves aren't very good.

"Litigation and Settlement Strategy" lays out how the 'Department negotiates deals, and specifically prohibits "split the difference" deals where the liability party is asked to pay a mid point between the maximum liability and the minimum. In Vodafone's case that minimum was zero, as the company claimed it owed nothing at all:

"The agreed settlement ... was lower than the tax liability that would have been paid if the Department won in litigation. Given the uncertainties and costs of litigation, it was reasonable for the Department to settle at the amount it did" says the report. Later Sir Andrew Park, consultant to the NAO, went further:

"Sir Andrew Park considered that there may have been a sense in which the settlement [with Vodafone] could be characterised as ‘splitting the difference’, but his view is that, if this is the case, it is the strategy that is at fault rather than the settlement."

So if the guidelines were broken then it's because they aren't very good guidelines, obviously.

Vodafone, of course, can barely conceal its glee at the report:

For more than a year, Vodafone has been falsely accused of improper conduct ... the National Audit Office has now concluded that the outcome was good for the UK taxpayer. We welcome this vindication.

Not only that, but Vodafone points out that in addition to paying its legally-mandated tax it also handed £6.7bn to shareholders this year to the benefit of the UK economy - if you're not a shareholder then you only have yourself to blame.

All large companies avoid paying tax, if they didn't then we could have much lower tax rates for ourselves, but the tricks being applied are getting increasingly complicated - to the point where it's almost impossible for tax offices, let alone ordinary citizens, to understand who must pay what. A recent investigation by The Bureau of Investigative Journalism, working with Private Eye magazine, found a Vodafone office in Switzerland staffed by one part-time employee who admitted he didn't go into the Vodafone room very often.

None of this is illegal, and neither, it seems, was Vodafone's deal with the Revenue: repugnant as that might all be to those of without barely staffed international offices in tax havens. ®

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