Vodafone admits moving for tax regime

Vodafone has admitted that the main reason it located its brand and marketing arm in Ireland was to benefit from the attractive tax regime.

The mobile phone company, who reclaimed €67m from the Revenue Commissioners that should have been paid in the UK, had originally identified Ireland specifically to collect revenue.

“In 2001, Dublin was identified as a location for this activity on a number of grounds including the commercial, regulatory and tax environment in Ireland at that time and Vodafone began to use a Dublin-based subsidiary to collect royalties and brand management fees from operating companies and partners to fund the development of the Vodafone brand around the world,” a spokesperson said.

It appears that Vodafone attempted to move staff to Ireland to try and take advantage of the lower rate of tax of 12.5% but failed to do so.

A spokesperson for the Revenue Commissioners said that Ireland maintains a high level of tax for companies that set up offices and do not take on staff here, known as brass-plate companies.

“Ireland does not encourage the establishment of brass-plate entities and our tax rules require that companies have substance in Ireland in order to qualify for the 12.5% rate of corporation tax.

“A higher 25% rate of corporation tax applies to passive/non-trading income.

“Multinational companies in Ireland employ more than 100,000 people directly with a further 250,000 indirect jobs,” the spokesperson said.

Vodafone was paying the higher 25% tax rate in Ireland despite reports that the company moved a number of staff to Ireland to show that they had employment here.

“The settlement with HMRC related to a number of technical factors regarding inter-group transfer pricing arrangements.

“Notably, throughout the period covered by the settlement, the profits of VIML had been taxed by the Irish authorities at the rate of 25%.

“In accordance with the treaty between the UK and Ireland which prevents double taxation on the same income, the Irish government credited taxes previously paid by Vodafone and these were then paid to the UK Treasury as part of the overall settlement,” the spokesperson for Vodafone said.

The company is still trading in Ireland and sending payments to subsidiaries. In the four-year period, the royalty payments collected from most countries, excluding the UK and Italy, have helped Vodafone send more than €1bn to the low tax jurisdiction of Luxembourg from Dublin.

The dividends are set to continue this year with €142m due to be delivered from profits made after taking advantage of the corporation tax regime.