A powerful group of MPs has said it could investigate Vodafone as public anger mounted after the British-based company revealed it will pay no UK tax on its £84 billion ($130bn,€99bn) proceeds from the sale of its stake in US telecoms giant Verizon.
Chancellor George Osborne has come under increasing pressure to find a way to collect tax on Vodafone's profits, as public spending watchdogs claimed Vodafone had a moral obligation to hand over some of its windfall following one of the biggest deals in corporate history.
The company has said it plans to give about 70% of its proceeds to investors, with British shareholders - who hold about 41% of Vodafone stock - likely to earn around £24bn in dividends.
Banks working for Verizon are expected to earn around £80m in fees, while advisors to Vodafone could get a £76m dividend, according to the New York research group Freeman & Co.
Margaret Hodge, Labour chairman of the Public Accounts Committee, said she may investigate Vodafone's US deal.
"If Vodafone has, as it has done before, played the system, then it has an obligation to UK consumers to do the right thing," Hodge told the Independent.
"It is a British company with British customers. It takes advantage of services provided by the public purse and should pay its rightful dues.
"We need assurances that HM Revenue & Customs have crawled over this deal and done its damnest to make sure taxpayers receive the highest amount of this sudden windfall.
"If there is a flaw in the legislation, Treasury ministers should look at it urgently."
The committee has previously criticised companies including Google, Amazon and Starbucks for their aggressive tax avoidance policies.
It has also criticised former HMRC boss Dave Hartnett for letting Vodafone off the hook after Vodafone was allowed to forgo £6.75bn in taxes following its takeover of Mannesmann in 2000.
Former Lib Dem Treasury spokesman Lord Oakeshott said: "Vodafone is right up there with Google and Amazon in the world tax-dodgers' league. What possible commercial justification is there for pretending that Newbury-based Vodafone made their investment in Verizon through Holland?
"They led HMRC a merry dance in the unlamented reign of Dave Hartnett - the new HMRC management and the Government must make every effort now to collect some tax at least on this profit."
Vodafone argued that its 45% stake in Verizon was owned by a holding company based in the Netherlands, and so is not liable for tax in Britain. The company said it will pay £3.2bn in tax in the United States.
Had its US shareholding been held in the UK, the firm said it would still not have paid a penny in tax, under rules on shares sell-offs introduced by the then Chancellor Gordon Brown in 2002.
Labour's 2002 Finance Act introduced an exemption from tax on capital gains from "substantial shareholdings" held by companies.
Osborne is thought to favour the current system, despite the loss to taxpayers. Treasury officials argue the current law boosts Britain's competitiveness and encourages multinationals to be based in the UK.
Vodafone sources said the UK economy still stood to benefit, with the scale of the windfall for UK investors likened to the Bank of England's quantitative easing programme. Investors would be expected to pay tax on their increased income.
Vodafone's £84bn windfall is equivalent to the GDP of Hungary. An astonishing £60bn is likely to go to investors, which include 500,000 private shareholders in the UK who each own up to £10,000 of shares.