Vodafone has avoided as much British tax as the “savings” the Tories want to make by slashing incapacity benefits for half a million people.
The world’s largest mobile telecommunications firm has done a deal with Her Majesty’s Revenue and Customs (HMRC) that means it will not pay around £6 billion tax.
The money was due after the firm profited from buying a German engineering company.
The £6 billion is almost exactly the amount the government wants to cut by forcing 500,000 people off incapacity benefits and on to jobseeker’s allowance.
The change will see many claimants losing £25 a week.
According to Private Eye magazine, Vodafone used bank accounts in Luxemburg and Switzerland to hide its profits—and even wanted to use an offshore company to further disguise the trail of loot. The HMRC refused to agree the deal, but the company went ahead anyway.
Tax inspectors were confident they could win the cash back. But they reckoned without the policies of HMRC boss Dave Harnett, the permanent secretary for tax.
“HMRC is packed full of intelligent people,” mused Harnett in the Financial Times about another case. “But we are sometimes too black and white about the law.”
Harnett pulled his specialists off the Vodafone case and installed a more “flexible” team to negotiate with the company’s head of tax, John Connors.
Connors was until recently a senior official at the HMRC and has worked closely with Harnett on handling big business tax affairs.
The new team went into talks with Connors and agreed to bill Vodafone just £800 million, with another £450 million payable over five years—a tiny fraction of what is owed.
Andy Halford, the firm’s finance director, is spreading his knowledge. He is a member of chancellor George Osborne’s group advising on company tax matters.
Bosses of Britain’s greediest firms will be eyeing Vodafone’s example. Half a million of the country’s poorest people are wondering how they will survive after their benefits are cut.