Vodafone has borne the brunt of public anger over government public sector and welfare cuts in the past fortnight. The company has been involved in a long-running legal battle with HM Revenue and Customs (HMRC), which accused the company of breaking tax regulations when it used a Luxembourg company, Vodafone Investments Luxembourg (VIL), to dispose of its shares in Mannesman. The regulations seek to ensure that UK companies with subsidiaries in 'tax havens' pay at no less than the UK tax rate.
In May 2009, the Court of Appeal overturned a decision by the High Court in 2008 that Vodafone did not have to pay UK corporation tax on income attributed to VIL. Vodafone's appeal against the decision was later dismissed. In July 2010, Vodafone agreed to pay HMRC £1.2bn to settle the dispute. The settlement also cleared up several other matters relating to Vodafone's tax avoidance.
The generosity of the £1.25bn HMRC offer to Vodafone is illustrated by the fact that the company had originally set aside £2.2bn to cover the settlement. One insider at HMRC described the settlement as an “unbelievable cave-in.”
Campaigners, angry that the government has seen fit to settle the Vodafone case in the company's favour to the tune of billions, while, at the same time, slashing public services, staged a series of sit-in actions and blockades over the weekend of 30th October 2010 and managed to close down at least 21 Vodafone stores across the UK. Stores were picketed or blockaded in York, Leicester, Birmingham, Bristol, Brighton, Liverpool, Hastings, London, Leeds, Portsmouth and Oxford. In a second wave of actions the following week, stores were picketed in Cambridge, Brighton, Birmingham, Newcastle and Glasgow.
Vodafone's strategy in response to the nationwide protests has been one of obfuscation, claiming that the allegations against it are an “urban myth”, disputing the amounts of money involved and claiming that it is paying all its dues to HMRC. This is technically true as HMRC has now settled the case. However, the real issue is that the government has made an advantageous settlement to Vodafone, effectively writing off its tax bill, while the cutting child and housing benefits and taking money away from public services.
The widespread autonomous actions against Vodafone signal "what could be the beginning of a new creative and targeted resistance to the government's cuts." In a piece on The Guardian's 'Comment is Free', a participant in the Vodafone actions said: “The Coalition of Resistance (the anticipated national coalition being set up to resist the cuts) hasn't even had its first meeting yet, but already we worry that the movement is beginning to resemble the anti-war campaigns of the early 2000s. Characterised by large, unwieldy, centralised organisations, the anti-war movement became complacent, overly reliant on rallies and petitions. We can't spend the next five years marching on Whitehall to hear Tony Benn speak – it's uninspiring, disempowering and largely ineffective... Don't wait for the unions, don't wait for the next march, don't wait for the politicians and don't wait for us – take the initiative yourself. Get out on the streets and take action.”
The story of Vodafone's tax write-off is one of revolving doors between HMRC, Vodafone and parliament. The negotiations between Vodafone and HMRC must have been aided a lot by the fact that Vodafone's Head of Tax, John Connors, had worked for HMRC up until 2007. The wheels may well have been further greased by the fact that Sir Christopher Gent, Vodafone's CEO until his resignation in 2006, sat on the 'Tax Reform Commission', convened by George Osborne, and now sits on the 'Economic Recovery Committee', a team formed to guide the Conservative Party's policy through the financial crisis.
Just after HMRC settled the Vodafone case, George Osborne travelled to India to promote the company's business there, launching a new line of solar mobile phones at a store in Mumbai. Osborne also tried to sort out another dispute with the Indian income tax department over Vodafone's acquisition of Hutchison Whampoa, which it (suprise, suprise!) said was tax-exempt as it took place between two 'offshore entities'.