Minimal UK profits and heavy investment in stores and 4G among reasons to justify decision
Vodafone says it will not back down on pressure to pay corporation tax in the UK for a third consecutive year.
Vodafone chief financial officer Nick Read, who was speaking during a recent Vodafone financial results round-table discussion – defended the operators decision, noting its continued investment in the UK, particularly around 4G network, in which it has invested £1.8 billion in the UK over the financial year.
He further backed the decision noting the planned opening of 150 new stores – and claims profits in the UK are “minimal.”
“This is an area where there has been a lot of misunderstanding,” said Read. “Governments around the world, and the UK is no exception, want to encourage investment in infrastructure to encourage investment and what they allow is capital allowances as a deduction against your profits ring.
“They also understand that you have to borrow to be able to invest for the long term, so they allow interest income off your profits.
“The UK market is highly, highly competitive so we have a very small profit that comes out of the UK business and it’s dwarfed by the first two items in terms of deductions.”
“We are opening up 115 new stores and hiring 300 new people in distribution. It is time to muscle up in the UK, to become more similar to our strongest markets, which means network and distribution essentially.”
“My view is that we invest heavily in the UK, we are a major investor and also, as a group, we pay a lot of tax,” he added. “Our effective tax rate is going up to 27 per cent – £1 in every four we are paying in tax on our global profits around the world.”