Tax: performance 2007/08
We have:
Developed Tax Team Behaviours based on our Tax Code of Conduct
Our Tax Team Behaviours outline our expectations of our tax employees and are used as formal assessment criteria in individuals’ performance reviews within our Group tax function. This helps us ensure everyone in the tax team is accountable for their actions.
Agreed principles for ways of working with tax authorities
Our tax teams have agreed principles for interaction between Vodafone representatives and tax authorities in several countries, including the Netherlands and the UK. The principles will ensure all parties can be held accountable for acting in accordance with the agreed ways of working. This will help to ensure interactions are transparent and build mutual trust.
Contributed to the debate to shape tax policy
Our main focus in 2007/08 was on the UK taxation of foreign profits of companies, following the publication of a discussion document on this subject by the UK Government in 2007. Through the 100 Group, the International Chambers of Commerce, and independently, Vodafone has made representations to the Government on policy in this area. We have engaged with HM Treasury and HM Revenue & Customs to provide commercial perspectives and help mitigate any potential adverse impact on business and shareholders. Vodafone will continue to engage in further consultations on this issue in 2008/09.
Pursued resolution of tax disputes
Disputes with tax administrations and governments as to the interpretation and application of the tax law can and do occur. In such cases Vodafone pursues resolution of the disputes through established legal mechanisms.
In 2007/08, Vodafone was involved in two cases referred to the European Court of Justice (ECJ). The ECJ issued its final decision on the first case, deciding that supplies of 3G licences did not constitute a taxable supply for VAT purposes. All parties have agreed to withdraw their claims and this case is now closed.
The second ECJ case concerns whether the UK rules on the taxation of profits of certain EU (but non-UK) companies are contrary to fundamental EU freedoms. The ECJ gave its opinion in a similar case in 2006 that the rules are incompatible with EU law unless they apply only to wholly artificial arrangements. In July 2007, the UK Special Commissioners decided that the UK rules can be interpreted as applying only to wholly artificial arrangements. We have appealed against the Special Commissioners’ decision and are awaiting the High Court’s ruling on the appeal.
We are also involved in a tax dispute over our acquisition of a controlling financial interest in Vodafone Essar in India. In May 2007, Vodafone acquired a company with indirect interests in Hutchison Essar Limited (now Vodafone Essar) from Hutchison Telecommunications International Limited (HTIL). The Indian tax authorities allege that any taxable profit on the sale by HTIL was subject to tax in India and consequently allege that Vodafone should have deducted withholding tax from the consideration paid to HTIL and paid it to the Indian tax authorities. Initial hearings have been held before the Bombay High Court and the next hearing on the case is scheduled in the Indian courts for June 2008. We believe that no member of the Vodafone Group is liable for such withholding tax and intend to defend this position vigorously.
Discussions with German tax authorities continue regarding the valuation and scale of any write-down in respect of the acquisition costs of Mannesmann in 2000. Potential tax losses of £40,181 million have to date been denied by the German tax authorities.
Developed an internal tax training course
The one-day interactive training course is designed to raise awareness about the financial impact of taxes on Vodafone and the key elements of managing our tax cost. It is available globally within our Finance Academy to employees outside the tax team. Around 100 employees have attended the course since it was introduced in September 2007 and we will provide the training for at least 200 further employees in 2008/09.
Been recognised for our transparent communication on tax
Vodafone won the ACCA award for best CR report in 2006 and for tax and public policy reporting in 2007. We received the 2007 Building Public Trust Reporting award from PricewaterhouseCoopers in recognition of our transparent disclosure of tax strategy, tax performance and the wider impact of tax. The judges noted that tax has clearly risen up the agenda for boards. Vodafone is no exception, with tax issues discussed by the Board regularly in 2007/08.
Paid £3.1 billion in taxes globally
This total includes corporation tax and social security paid in all the countries where we operate. Vodafone makes many other types of tax contributions and also generates taxes (such as those paid by employees on their earnings). See our direct economic impact for more on Vodafone’s wider economic contribution.
We will:
- Provide tax training for a further 200 members of the Vodafone finance community in 2008/09
- Ensure all employees in the Group tax team understand both the content and commitment to the Tax Code of Conduct, the Tax Team Behaviours and principles of engagement agreed with individual tax administrations
- Ensure a clear understanding of tax matters at Board level.
