Mobile Network Comparison

An ongoing investigation spearheaded by the Guardian newspaper has revealed the true extent to which the UK’s mobile networks are avoiding their tax liabilities. Despite paying out billions of pounds in dividends to shareholders, the main mobile providers are managing, in some cases, to not pay any corporation tax whatsoever.

The news comes right after Justin King was attacked for doing business with serial tax avoiders Vodafone. The loophole the companies are taking advantage of is based upon tax breaks offered by the government on the purchase of new infrastructure hardware and radio spectrum such as the recent 4G auction.

Formed by the merger of Orange and T-Mobile, EE (or Everything Everywhere) is by far the country’s largest mobile operator. It will therefore come as little surprise that it’s also one of the biggest crooks when it comes to not paying tax.

This massive company is joined owned by German and French telecoms companies and has over 25 million UK customers as well as untold millions in the bank. EE aims to use up nine tenths of its cash flow paying future dividends. So far it has spent over £3 billion on paying shareholders which is a massive 40% more than the current budget for all A&E hospitals on the NHS.

Even though Chancellor George Osborne has already cut corporation tax from 24% to 20% which is the lowest of any global economy, mobile networks can claim back tax credit for a quarter of their outgoings on many items. Professor Sikka who specialises in tax accounting said the following:

“The telecoms industry shows the folly of the current corporate tax regime, which allows companies to structure their affairs in ways that add no economic value but reduce their tax bills.”

And it’s not just EE getting away with this. Three Mobile has paid less than £1 million in tax over the last three years. It is owned by Asian company Hutchison Whampoa and has erected incredibly complicated financial structures constructions in order to maximise its British tax assets so that historical losses can be used to cancel out future tax bills. This is currently perfectly legal for mobile networks but not for us if, for example, we wanted tax credits for taking out a loan or mortgage.

Vodafone is another example of a UK mobile network that has complex arrangements allowing it to avoid paying tax. For example, a series of purposely-uncompetitive loans to other related companies will allow it to save over £3 billion on the amount it recently spent on 4G spectrum.

O₂ currently pays the most tax of any of the big four networks. Its tax bill between 2009 and 2011 was well over £600 million according to its accounts. Because it owns less 3G spectrum it has less to offset against its earnings and O₂ expects to continue paying large amounts of corporation tax in the near future.

Despite this, O₂ has paid about £2.5 billion back in dividends to its owner Telefónica which is more than three and a half times its tax bill over the same timeframe.

Recent reports suggest that, MPs such as Labour’s Margaret Hodge and Parliament as a whole will aim to crack down on these practices though, the effectiveness of such actions remains to be seen. Hodge has accused the government of simply giving away taxpayers’ money.

At the moment the situation is dire – UK network operators have made almost £60 billion in revenue over the last three years with over £10 billion of that being clear profits. Despite this, some operators haven’t paid a penny in tax over the same period.

What do you make of this news? Is it fair that mobile networks can make such large sums of money but give back such a small amount in tax bills? Is anything going to happen about it or will the coalition continue to let them get away with it? What’s your take on the whole situation?

Justin King, the outspoken boss of British supermarket chain Sainsbury’s has come under fire after launching his new mobile network in partnership with Vodafone.

Only a few days ago, we reported on the new mobile network being launched under the brand Mobile By Sainsbury’s. Justin King, who is the chief executive of the supermarket, has consistently challenged business leaders regarding their aggressive tax arrangements and has even gone as far to say that the issue is simply one of morality.

At the British Retail Consortium symposium just a few weeks previously, he made a speech asserting that businesses should stand behind their tax arrangements and that they have an ethical obligation to pay a fair amount back to the state. Mr King he even warned other businesses that they might face consumer boycotts if they can continue to use tax avoidance schemes.

Some quotations from Justin King include the following:

By the last count we were the 12th biggest taxpayer in the UK and we are proud of our taxpaying record.

If companies believe what they do is moral, they should be very happy to lay bare what they are doing, and open it to consumer scrutiny, and we are quite happy to do that, not just on the issue of tax.

However, recently his words have been called into question and accusations of hypocrisy have been flying in from left, right and centre. The principal reason for this is that Vodafone have long been lambasted for their aggressive tax avoidance measures.

Tax campaigners have pointed out the contradiction between his claims about tax being a moral issue and his business relationship with Vodafone which is a company well known to be a prolific tax avoider. Despite taking in over £40 billion in revenue, Vodafone haven’t paid any tax at all in the last financial year. Nor did they pay any the year before that.

Meanwhile, the Vodafone CEO has a paycheque of over £10 million and shareholders received almost £5 billion in dividends over the last 12 months. Vodafone were publicly accused in Parliament of paying just over a sixth of the tax bill owed to HMRC.

The whole time Vodafone have been vigorously defending their tax records and in fact published a lengthy document making it clear that they would only go as far as necessary to just meet their legal requirements and certainly would not consider issue of morality regarding their tax avoidance schemes.

It’s hard to see how Sainsbury’s can justify this business relationship even if the other mobile networks may be just as bad as Vodafone. Tax avoidance campaigners have called on Sainsbury’s to reconsider this partnership in light of what is known about Vodafone’s tax arrangements. And it will certainly be a significant blemish to Sainsbury’s reputation as a company that pays more tax than other organisations with a similar amount of profit.

This news comes only a few weeks after the revelation that Sainsbury’s has several overseas subsidiaries including ones based well-known tax havens such as Jersey, Guernsey, the Isle of Man and the Cayman Islands. The Fair Tax Mark – a civil society campaign concerned with promoting transparency and fairness in the tax affairs of companies – also showed that they had a shortfall in the amount of tax actually paid.

In response, Justin King has defended the Vodafone deal by describing Vodafone as a “first-class” operator and the “perfect” choice for his supermarket. However he’s refused to be drawn into a direct comment on Vodafone’s tax affairs or whether the moral obligation to businesses and their tax liabilities extend to other organisations they have business partnerships with.

What is your take on Mobile By Sainsbury’s working with Vodafone? Are they being hypocritical with this business relationship? Or has Justin King got a lot to answer for by dealing with these tax avoiders?

Sainsbury’s has finally joined the UK’s other major supermarkets in offering a mobile provider service. It had to happen eventually. We’d been expecting it would be just round the corner every year but it never was. Until now. Bowing to the inevitable, and just a tad tardy, Sainsbury’s has joined the party. Introducing … Mobile By Sainsbury’s.

Tesco Mobile was the big pioneer starting out way back in 2003. And after that, ASDA Mobile was launched in April 2007 and revolutionised the virtual network market with industry leading rates. In fact, they were the first truly budget mobile network as previously even virtual mobile networks were barely much cheaper than standard high street PAYG tariff offerings. And now, just ten years behind Tesco and with a bit of a mouthful for a brand name, Sainsbury’s has stuck its oar in.

The rates are pretty competitive especially compared to Tesco Mobile and ASDA Mobile. The basic PAYG plan is just 8p/minute for calls and 4p each for texts. Unfortunately data is pretty expensive unless you are a very low user coming in at 50p per day up to a maximum of just 25MB. If you need to check your emails every weekday, it will set you back about a tenner a month just on data. And that won’t even give you enough allowance to download apps and music or stream video.

However, there are some 30-day rolling bundles on offer. Just like SIM-only contracts or bundles offered by other virtual networks, these give you an allowance and can be changed every 30 days. They all come with unlimited texts (subject to a fair use policy) and the cheapest is £10 and provides 200 minutes as well as 250MB of mobile data. If you spend £15 you’ll get 300 minutes as well as 500MB data. And finally, £20 will get you a more hefty 800 minutes as well as 1GB of internet usage.

While these are decent value, you can certainly get much better deals if you’re willing to look elsewhere. So what else has Sainsbury’s got up its sleeve to persuade you to switch over?

It seems that the service is aimed people in their 30s and 40s, particularly mums and families who need to keep in touch with their kids but maybe don’t have enough time to be glued to internet apps and games on their phones. If you just need to make infrequent calls and texts, it’s good value. And even better, there are lots of Nectar points bonuses available for Mobile By Sainsbury’s users.

First of all, all top-ups quality for double Nectar points effectively meaning you get 2% back every time you add credit to your phone. And if you are using one of the 30-day bundles, you also get double Nectar points on Sainsbury’s shopping and fuel station purchases. While this certainly won’t make you rich, many people will definitely appreciate the extra pennies at the end of each month. Be aware, Mobile By Sainsbury’s customers have to opt-in to this scheme and link their Nectar card number by texting it to 40774.

Sainsbury’s previously only used to offer basic mobile accessories like USB cables but they’ve now started cross-marketing into mobile handsets too. They are mainly targeting the aforementioned mums here as well with budget phones ranging from just over a tenner up to a bit more than £100. Unfortunately the prices aren’t so good that it’s worth buying a locked handset and you can get much better deals buying SIM-free phones online. For example, not only is the Nokia Lumia 520 cheaper on Amazon but it also comes unlocked to any network and with free delivery.

It’s still early days but it’s a little concerning that the Mobile By Sainsbury’s website seems a little under construction still even though it’s fully launched. For example, take a look at the FAQ page – many answers are simply incomplete and just plain useless at present. Hopefully this will get sorted soon.

Mobile By Sainsbury’s have chosen to use Vodafone as their partner network. This is the same choice as ASDA Mobile made so coverage should be exactly the same on both providers. They also offer BlackBerry plans for an additional subscription of £5 every 30 days. Stay tuned for our full review coming soon…

What do you make of this move by Sainsbury’s? Why do you think it took them so long to launch their own network? Are they plans cheap enough to persuade you to change over? And will they be as successful as Tesco and ASDA?