TaxPersonal TaxVodafone plan to take Mannesmann offshore

Vodafone plan to take Mannesmann offshore

The row between Vodafone and chancellor Gordon Brown is reported to be over a complex tax avoidance scheme involving the transfer of its German telecoms arm Mannesmann to an offshore tax haven.

The mobile phone giant appears to have been relying on a controversial mechanism to gain tax breaks running into hundreds of millions of pounds per year, according to a report in today’s Guardian newspaper. It is reported to have been using controlled foreign companies – CFCs – a tax loophole which was closed in the last Budget.

It was previously considered that the threat by chief executive Chris Gent to move Vodafone abroad was sparked by the Budget changes affecting the operation of mixer companies, used by multinationals to smooth the flow of profits from their international operations before the money enters Britain and is taxed.

The report indicates that Vodafone was aiming to hold the German company in an offshore haven rather than keep it as a direct subsidiary in order to save tax payments.

Vodafone enters multinational tax row

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