Vodafone Earns £5bn But Pays No Corporation Tax

Mobile phone giant Vodafone paid no UK corporation tax for the second year running, despite earning more than £5bn of revenues in Britain.

The Berkshire-based group said investment in its UK network and interest payments more than wiped out corporation tax liabilities during the year to the end of March, although it paid around £3bn of tax overseas.

Its annual report also revealed chief executive Vittorio Colao's total pay fell 30% to £11m due to lower share incentive rewards.

The company insisted it was committed to "integrity in all tax matters", adding it paid £882m in other UK taxes and contributions during the year.

Mr Colao was interviewed by Jeff Randall Live's Dharshini David last November, during which he defended his company's accounting arrangements.

He said: "We have not done any tax arrangements as others might have done. It is very simple - Vodafone in the UK makes a certain profit.

We have bought years ago spectrum for £6bn ... you amortise over time and we are investing hundreds of millions in technology in the UK.

"Which in every market you depreciate year after year and we pay interest on our debt and in any other market you can claim against profit."

Vodafone's UK operating profits fell to £294m during the year from £402m a year earlier amid slumping voice and service revenues.

Underlying earnings in the UK fell to £1.2bn from £1.3bn during the year.

However, the tax revelation is likely to add fuel to a debate about multinationals' tax contributions, which has seen bosses from Google and Starbucks called before MPs to explain their tax affairs.

Vodafone also paid no UK corporation tax in its 2011/12 financial year, and the company said the UK contributed just 2.5% to its overall profits.

Vodafone's group operating profits were 3.7% higher at just under £12bn during the year, despite sales falling 4.2% to £44.4bn - its first drop in annual revenues for seven years.

In a new report on tax, published alongside its annual report, it said: "Individuals and companies have legal obligations to pay tax; but those obligations do not extend to paying more than the amount legally required."

A spokesman said the company paid £300m of interest during the year on loans to fund its £6bn purchase of 3G spectrum or airwaves in 2000 - which it offset against last year's profits.

It also recently paid the Government £802m for 4G spectrum which it will use to launch superfast mobile internet, and is increasing UK network spending to more than £900m this year to prepare for the launch.

He added: "We believe the UK tax debate should be wider than just merely looking at corporation tax, because different industries make their - in our case significant - contributions in a variety of ways."

Mr Colao's pay packet dropped from £15.8m a year earlier, largely down to a fall in long-term share awards vesting during the year.

These decreased to £7.5m from £11.3m a year earlier. His pay packet included a £1.1m salary.

Chief financial officer Andy Halford's total pay dropped 37% to £6.5m as his long-term share incentives also plunged.

The company also froze executives' basic pay during the year and said their salaries will not rise in its new financial year.

Vodafone employs around 14,000 of its 91,000 staff in the UK.