POLITICS
18/09/2013 09:50 BST | Updated 18/09/2013 10:43 BST

Margaret Hodge Warns Tories 'Lose Credibility' Taking Money From Tax 'Offender' Lycamobile

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Margaret Hodge attacks the Tories for taking money from Lycamobile

Margaret Hodge has launched a fierce attack on the Tories for accepting nearly half a million pounds of support from telecoms giant Lycamobile, which has not paid corporation tax since 2007 in the UK, despite making millions each year.

Hodge, the high-profile chair of the influential Public Accounts Committee, told the Huffington Post UK: "No political party should accept donations from a company that avoids paying its fair contribution to the common good. The Government loses credibility if it says it condemns tax avoidance and then accepts money from obvious offenders."

Lycamobile are one of the Tories' biggest corporate donors, having given the party over £420,000 since 2011. Chancellor George Osborne called for reform of international tax rules in February, singling out the practise of 'profit shifting' by multinational giants, through which a firm uses tax loopholes to artificially shift profits so they are declared in a territory with a lower tax rate.

Earlier this week, LibDem PAC member Ian Swales told HuffPostUK: "I believe Lycamobile is one of the many companies who export the profits from their UK activities to tax havens via interest payments and so forth."

"I feel that a company that makes no UK profit should not be donating to a UK political party."

Executives explained to the Huffington Post UK that the firm, which made more than £120 million in the UK last year, does not pay corporation tax as it reinvests any profits back into the group in order to grow the business.

Michael Landau, Lycamobile's chief financial officer, told HuffPostUK: "Every cent that this business earns goes back into growing this business into making it a more valuable proposition."

Landau suggested that the firm would not start paying corporation tax in the UK for at least a year, when it is deemed sufficiently "mature".

Despite the PAC's scrutiny of the tax affairs of international firms like Google, Starbucks and Amazon, Hodge dismissed any prospect of Lycamobile being called before MPs for questioning.

The PAC chairwoman told HuffPostUK that the committee was focusing on the usage of certain tax arrangements, like the use of tax reliefs by mobile phone networks, rather than individual firms' arrangements.

"We are now trying to be more strategic, so we are looking at things like the use of tax reliefs, otherwise we would spend all of our time seeing big corporations," she said.

Tory MP Henry Smith hit back at Hodge over her remarks, writing on Twitter: "Does Margaret Hodge really care about tax avoidance, why hasn't she investigated @unitetheunion who haven’t paid tax in 2 years?

"@LycamobileUK are investing their profits in British jobs. This is a good thing. Margaret Hodge must stop talking our economy down."

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