Why does Vodafone pay little or no UK corporation tax?
Governments seek to adjust their tax regimes to stimulate investment and encourage job creation. The UK is no different in this regard.
Vodafone makes large investments in the UK. We spent over €1.2 billion during 2020 building and upgrading the networks and services relied upon by our 18.8 million customers. In addition, since 2000 we have paid the UK government more than €10 billion for our 3G and 4G radio spectrum licences. We raised the money for those licences from UK banks and capital markets; together with capital borrowed for other Group purposes, and as a result, we pay more than €500 million a year in interest costs to UK banks and financial institutions.
We invested €1.2 billion in building and upgrading our UK network and services
The UK government allows companies to claim tax relief on the capital investments they make in their UK operations. These capital allowances are a standard feature of the tax regime in many countries as they provide an incentive for private capital to fund the development of infrastructure that would otherwise have to be built by the state with funding sourced through public borrowing.
We invested €1.2 billion in building and upgrading our UK network and services
The UK government allows companies to claim tax relief on the capital investments they make in their UK operations. These capital allowances are a standard feature of the tax regime in many countries as they provide an incentive for private capital to fund the development of infrastructure that would otherwise have to be built by the state with funding sourced through public borrowing.
The UK government also provides tax relief to all businesses to reflect the interest costs paid on the debt a business raises to fund investment. Debt interest relief has the important effect of stimulating investment by businesses in the UK; it also supports growth and job creation within the UK banks and financial institutions that provide the funding.
Capital allowances and debt interest relief are long-established cornerstones of UK government policy on corporate taxation. If a company chooses to invest – and borrow – heavily in the UK, those allowances and relief have the effect of reducing considerably its typical UK Corporation Tax payments. This consequence has been fully understood by successive UK governments over many years. It is also worth noting that these governments have reduced the UK Corporation Tax rate to 19% in recent years.
We have paid more than €10 billion to the UK government for spectrum licences since 2000
These are political choices, made by UK governments of varied political persuasions over generations. The intention is to support business growth, encourage skills creation and bring greater employment opportunities to millions of people. Governments work on the assumption that while Corporation Tax receipts will be lower as a result of the allowances and reliefs available, incentivising corporate investment will increase the total tax take over time as more people enter the workforce and productivity increases.
Corporation Tax is charged on profits, not revenues. For Vodafone, the UK remains an expensive and highly competitive country in which to do business; it is also one of our least-profitable markets anywhere in the world. Vodafone UK made a loss of €110 million in 2020. This arises before we deduct the interest costs on our UK debt (in excess of €500 million in 2020) and the full capital allowances from our UK capital investment programme (more than €1.2 billion spent in 2020). It is also worth reiterating that our overseas financing subsidiaries have no bearing on our UK Corporation Tax position; as we state in our Tax Principles, we do not artificially transfer profits to minimise tax payments to the UK Exchequer.
As explained earlier in this Report, UK Corporation Tax accounts for around 11.3% of the total taxes paid by UK businesses. In 2020, we paid the UK government €243 million, in cash, in direct taxes of all kinds. We also paid the UK government €59 million in cash for non-tax items including spectrum and collected €861 million in indirect taxes on the government’s behalf.
We paid €243 million in 2020 in direct tax contributions
UK economic contributions over the last six years
Learn more about our contribution to economics
Tax and emerging markets
Employment and skills development and are widely recognised as a positive force for good by governments and civil society alike.
Vodafone's tax principles and strategy
Vodafone operates within a clearly defined governance framework on tax that is designed to provide certainty for all stakeholders.
Vodafone, Luxembourg and tax havens
Many governments choose to develop tax regimes that offer multinational companies some form of competitive advantage in order to attract inward investment.