By Tom Bergin
LONDON, June 7 (Reuters) - Vodafone Group Plc saidit paid no corporation tax in Britain for the year to March2013, prompting fresh criticism from campaigners who have madethe UK mobile telephone group a target in the debate oncorporate tax payments.
Revelations of profit shifting by big companies haveprovoked anger among austerity-weary citizens across Europe andpolitical leaders have pledged to act.
Vodafone's annual report published on Friday said theabsence of a UK income tax bill for the second year runningreflected tough operating conditions at its British operations.
Reported profits at Vodafone's main UK unit have collapsedin the past decade, even as sales rose sharply. The company saidthe cost of buying its third generation (3G) phone licence andfalling profit margins weighed on UK earnings, although bothfactors were also observed at its German unit, which hascontinued to report big profits and tax bills.
UK press including British investigative magazine PrivateEye have noted strong profits at Vodafone's subsidiaries inLuxembourg, where it has few customers or employees but wherecompanies can enjoy tax rates below 1 percent.
Vodafone Procurement Co Sarl, which buys equipment for thegroup, reported profits of 215 million euros ($284.2 million)for the year to March 2012 and paid no income tax, according toaccounts for the period, the most recent for which figures areavailable.
OTHER TAXES
Vodafone Luxembourg 5 Co Sarl, which lends money to othergroup units, reported profits of $2.43 billion for the year toMarch 2012 and reported a tax bill of less than 1 percent, itsaccounts show.
A Vodafone spokesman said the company did not shift profitsout of the UK and that its Luxembourg operations had no impacton its UK tax bill. He said the low Luxembourg tax bill was tiedto the fact the units there can offset income against writedownsin the value of assets held by these companies.
Vodafone said it also paid hundreds of millions of pounds inother taxes in Britain, such as payroll taxes and value addedtax (VAT), a European form of sales tax.
The company added on its website: "Companies have legalobligations to pay tax, but those obligations do not extend topaying more than the amount legally required. Companies alsohave a legal obligation to act in the interests of theirshareholders".
The company has been under scrutiny since a 2010 deal underwhich it paid the UK tax authority, Her Majesty's Revenue andCustoms (HMRC), 1.25 billion pounds ($1.9 billion) to settle aback-tax claim, for which it took a 2.2 billion pounds provisionin its accounts.
Some lawmakers criticised that deal as pointing to atoo-cosy relationship between big business and HMRC. Asubsequent review by a government watchdog said the deal was"reasonable" but criticised processes at HMRC.
Tax campaigner Richard Murphy of Tax Research UK saidVodafone's explanation for its lack of a UK tax bill did notstack up.
"Vodafone would like us to believe that because they paytheir property taxes, VAT and staff's national insurance, thatthey don't have to pay tax on their income," he said. "That'snot the way it works for the rest of us and it's not the way itshould work for Vodafone either."