back to article Vodafone's small, controversial tax bill validated by

The National Audit Office, asked to look into Vodafone's negotiated tax bill of £1.25bn, has decided it was a reasonable deal considering the cost of taking legal action against the company. Back in 2010 Vodafone was accused of owing £6bn in tax, and the company had reserved £2.2bn to meet it's UK tax obligations, but George …


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  1. Anonymous Coward
    Anonymous Coward

    Vodafone, of course, can barely conceal its glee at the report

    In the current climate, Vodafone should consider being a little bit diplomatic and remember a closed mouth gathers no foot.

    AC for reasons I'd rather not give.

    1. Anonymous Coward
      Anonymous Coward

      Re: Vodafone, of course, can barely conceal its glee at the report

      So which department do you work in?

      I'm placing my bet on aquisitions.

    2. LinkOfHyrule
      Paris Hilton

      Re: Vodafone, of course, can barely conceal its glee at the report

      You're not that bird who phoned me up the other week to ask if I fancied upgrading my contract are you? I bet it is you! I thought you sounded quite MILFy I must admit! But no, I don't want a new phone thanks!

      1. Hardcastle the ancient

        Re: Vodafone, of course, can barely conceal its glee at the report

        can one "sound MILFy"? I will have to carefully monitor the wife.

        1. LinkOfHyrule
          Paris Hilton

          can one "sound MILFy"?

          Oh yes! They do down at Vodaphone at least - probably the MILFiest telecommunications company of them all - BT on the other hand... It's more of a dominating matron-ish vibe they give off! As for Virgin Media - well let's just say the name's a bit misleading!

  2. Crisp

    We can negotiate for a lower tax bill!?

    I'm writing my letter to George Osborne now! :D

    1. Steve Evans

      Re: We can negotiate for a lower tax bill!?

      Looks like it.

      And judging by the "it was a reasonable deal considering the cost of taking legal action against the company." though process, all I have to do is offer them my tax bill minus expected legal cost + £1.

      Given a lawyer costs a few grand per hour, and that my paperwork is a mess, I have recalculated my current tax bill to be -£127K. I shall be writing to Mr Osborne shortly.

    2. This post has been deleted by its author

    3. Ian Yates

      Re: We can negotiate for a lower tax bill!?

      I think the rule is that you have to owe A LOT of tax. So consider refusing to pay for a few years and then writing to HMRC.

      Equality for all.

  3. John G Imrie

    I have decided ...

    to offshore all my business interests to Mars in order to reduce my tax exposure. I will be opening an earth side office in that bastion of fiscal expediency, the British Virgin Islands.

    It that doesn't work I'll be moving to Bagshot Row, Hobbiton, The Shire, Middle Earth.

    PS does anyone have contact details for the chief research accountant of Disaster Area, I want to talk to hie about his General and Special Theories of Disaster Area Tax Returns.

    1. Anonymous Coward
      Anonymous Coward

      Re: I have decided ...

      Funny thing is though - if you want to go an live in the Caymans or Jersey and pay no / less tax - you can. Not really sure why we are bitching at Vodafone for doing what they are legally allowed to do - indeed the directors have a responsibility to the shareholders to minimise tax etc.

      Also remember at least they are a UK company paying (some) UK tax and UK dividends - next time you use your Orange / T-Mobile, O2 or Three phone just consider how much of the profits or dividends are paid into the UK. Answer = probably very little / none.

      1. Anonymous Coward
        Anonymous Coward

        Re: I have decided ...

        "the directors have a responsibility to the shareholders to minimise tax etc."

        Actually, they don't. They have a legal responsibility to run the company in the way that the shareholders want it to be run. If that involves giving money away in the street then that's what they have to do. The whole "legal responsibility to shareholders" routine is regularly rolled out to defend all sorts of dishonest and underhanded activities by retarded supporters of the Free Market fairytale but the reality is that the picture is much more complex.

        As to living in the Caymans etc. this is a company we're talking about, not a real person. A real person encounters certain difficulties with living in one place while working in another; a company does not.

        1. Mark 65

          Re: I have decided ...

          I think you'll find it's not "in the way the shareholders want it run" it is "for the benefit of the shareholders". More precisely...


          The Companies Act 2006 confirms previous case law and requires company directors to act in a way most likely to promote the success of the business.

          You must exercise a degree of skill and care. You must:

          show the skill expected of a person with your knowledge and experience

          act as a reasonable person would do looking after their own business

          You must act in good faith in the interests of the company as a whole. This includes:

          treating all shareholders equally

          avoiding conflicts of interest

          declaring any conflicts of interest

          not making personal profits at the company's expense

          not accepting benefits from third parties

          You must obey the law:

          company law requires you to produce proper accounts and send various documents to Companies House

          other laws include areas such as health and safety, employment law and tax

          you may be responsible for the actions of company employees


          I would therefore conclude that minimising (legally) the tax bill will promote the success of the business by lowering the outgoings.

  4. James 51

    Funny thing that, you don't hear the Tories saying they can't afford to keep child benefits or pay public sector workers because big 'job creators' are doding tax. If I tried to do the same thing I'd probably end up in jail.

    1. Anonymous Coward
      Anonymous Coward

      If you've ever bought duty free or had childcare vouchers or a bicycle on the salary sacrifice schemes then you've dodged tax.

      1. John Brookes


        If I buy duty-free etc, then I am not liable for tax on that purchase. Voda *were* liable for £6bn, but unilaterally decided not to pay it. The tax office then just let them off for the vast majority of it.

        Despite their claims that their tax bill should've been zero, they'd set aside £2.2bn to pay it, so they knew - or strongly suspected - they'd lose if it went to litigation.

        I can understand the tax office being wary of a fight with Voda, given the latter's willingness and ability to fight the claim, but we didn't even ask for the £2.2bn they'd set aside.

        "Give me that £60 quid you owe me!"

        "Or else what?"

        "Er, call it a tenner, then..."

        "Oh, go on. Got change of a twenty?"

        1. Anonymous Coward
          Anonymous Coward

          Re: Nonsense!

          They have to set the money aside incase they lose - that is standard - it is not an admission that they owe it. In India the government claimed they owed tax there - they also had to put the money aside - it went to court and they won - so the government decided to retrospectively change the rules (moving the goal posts).

        2. Sigfried

          Re: Nonsense!

          It's just a Private Eye stuff-up/balls-up anyway. Vodafone quite legally (under EU rules as well) doesn't have to pay UK tax on business conducted out of Britain. So there was no "6 billion" owing in the first place, except in the greedy little minds of Private Eye and all the other socialists who, being unable to garner enough money from there own feeble efforts, want to thieve anyone elses so they can continue to live as they think they deserve.

          It seems that most of those commenting seem to think along the lines "Vodafone is "rich" therefore we should be able to steal as much money from them as we like"

          As for putting aside money in case, remember you're dealing with a government whose basic approach is to rip you off each way including sideways. Would you entirely trust the judiciary that is paid by such a rapacious pack of thieves ?

          1. Chris Parsons

            Re: Nonsense!

            It seems that most of those commenting seem to think along the lines "Vodafone is "rich" therefore we should be able to steal as much money from them as we like" -

            Not really. For a start, I'm not a socialist, far from it. I do, however, believe that it isgood to have a fair tax system to put money in the kitty in order to make the country a decent place to live. By 'fair', I mean just that. If you owe the money, and you know you owe the money, you should pay it. People who manage to wangle their way around paying their dues should not be regarded as heroes, but pariahs.

  5. batfastad

    I might ask

    Lucky megabillionbiznesses! It pays to be inside the gov's trousers.

    Many of us mere mortals have to pay assumptive tax before we've even earnt the money (self assessment payments on account).

    1. Anonymous Coward
      Anonymous Coward

      Re: I might ask

      That's why you should become a contractor if you aren't now - it's your only avenue for playing the same game but on a limited scale.

  6. Ragarath

    To big?

    From reading that article the only thought it left in my mind was that the National Audit office decided Vodafone were to big to argue with and so would cost them more to get more. In my mind that is all kinds of wrong.

    Ii am a Voda customer, if they don't pay strip them of their licence. Stop being bullied, or dare I say it paid off by the corporate big boys.

  7. Anonymous Coward
    Thumb Down

    So how

    Incompitent would any government legal case have to be to cost more than the at lesat 1bn you would recover?


    "So if the guidelines were broken then it's because they aren't very good guidelines, obviously"

    No, if the guidelines are broken, its the fault of the officials involved not following it up, not the guidelines themselves.

  8. Ambivalous Crowboard

    Last year's corporation tax for me was £1200

    I've not paid it yet so I'm going to negotiate it down to £240 (20%) using The Vodafone Ratio™.

  9. Mike Brown

    too costly

    They got 1.25bn from them. They reckon 6bn was owed. So clearly they think the court fight would cost 4.75bn! Dear god, they need cheaper lawyers. Or more backbone.....

    1. Steven Jones

      Re: too costly

      You're rather assuming that there was a reasonable chance of actually winning the case. If, winning the case was unlikely (or it being found to be much less than £6.7bn), then your calculations don't work.

    2. James Micallef Silver badge

      Re: too costly

      It's not that the legal action would have cost £4.75 bln. The way I read it, they factored in the possibility of losing the case, in which case I guess Vodafone would have paid what Vodafone claimed was due (i.e. £0). Still, the Inland Revenue must have been not at all confident in their possibility of winning the case considering those ratios.

      One more thing - in general, tax breaks and complications are added to incentivise certain behaviours, and usually they are added because it's thought they increase fairness. What happens in practice is that those who can afford to pay teh best lawyers and accountants, restructure their businesses offshore in multiple layers and tangled webs etc get most of the benefit, and the shortfall to government revenue is taken from those who have no chance of escaping, ie salaried workers who have their tax deducted at source (ie the vast majority of the middle class).

      It might not seem so 'fair' on paper, but in reality it would be fairer if (a) all activity was taxed at the same rate, whether it's capital gains, employment income, dividends, whatever. (b) no loopholes, no credits, no deductions, no allowances for offshore activity, nada, and at the same time lower the rates so that it's 0% on the first £X, 15% on the next £Y and 30% on anything else. X and Y would be different for individuals and businesses, and that's as complex as it gets. If it can't be worked out by a 10-year old child, it's going to get abused.

      And added bonus, it gets rid of a bunch of tax lawyers.

      1. Gio Ciampa
        Thumb Up

        Re: too costly

        Hear! Hear!

      2. John G Imrie

        Re: too costly

        It's not that the legal action would have cost £4.75 bln. The way I read it, they factored in the possibility of losing the case, in which case I guess Vodafone would have paid what Vodafone claimed was due (i.e. £0). Still, the Inland Revenue must have been not at all confident in their possibility of winning the case considering those ratios.

        Actually HMRC where all geared up to prosecute, then Vodaphone took the boss of HMRC out to lunch, after which he *personally* pulled the plug on the case.

  10. Benjamin 4

    "It was decided it would cost too much to take legal action" So if everyone underpays their tax, just because it would cost a lot to get the rest of it would the government still not get it? And if the government has done nothing this year what's to stop Vodafone underpaying next year?

    1. Richard 12 Silver badge

      Just like Greece

      It worked beautifully oevr there, didn't it?

    2. Sigfried

      Christ, people just don't get it ! Vodafone legally never owed the money in the first place.

      Same applies to your personal tax, if you legally don't owe it, don't pay ! (although it may cost you more than you can afford to contest it). Why this love affair for government all of a sudden, is it because everyone likes to see other peoples money being stolen ?

  11. Ketlan

    Rich get richer etc

    'If I tried to do the same thing I'd probably end up in jail.'

    You probably would, too.

    Note that the bloody shareholders got a fabulous dividend payout while the taxman had to fight to get anything at all. Time to close all the tax dodges/loopholes that exist and FORCE companies that make a profit in the UK to pay the appropriate taxes? Oh, yes.

    1. Anonymous Coward
      Anonymous Coward

      If only it were that easy

      Well, it technically could be, if they taxed business the same way they do our paychecks (pre-emptively)

      The most stupid thing is, if all the corperations stopping being asshats and actually ponied up the cash for their taxes, then the tax could be lowered to a reasonable amount.

      But its one of those cycles, they can't lower it because they aren't making enough money, they aren't making enough money because big business won't pay, and big business won't pay because tax is too high. So it continues

      Its the same in a lot of other areas, like music / video. Don't sell? Jack up prices, people pirate because they refuse to pay, music / video etc doesn't sell. And once again cycle continues.

      What they need is for some company, or government, or business to break said cycle and things might not be as bad, they'll never be good People are too greedy for that, but they could be better.

      Just look at things like itunes / netflix. I'll admit I used to watch stuff online via youtube / megavideo now and then, honestly I didn't see anything wrong with it. Most of the shows weren't even out in the UK. Now I just use netflix (although I really wish we had access to the US library)

      1. Rabbit80

        Re: If only it were that easy

        "Now I just use netflix (although I really wish we had access to the US library)"

        Have a look at - costs around £4/mnth

      2. Anonymous Coward
        Anonymous Coward

        Re: If only it were that easy

        The biggest problem is the oft talked about but seldom acted upon desire to simplify the tax system. The simpler it is the less loopholes you create. The less loopholes you create the less scope for avoidance/minimalisation. The added bonus is it also costs less to administer and collect.

        Then you have the concept of flat-rate taxation for people whereby entire swathes of low earners can be taken out of the system with a flat rate levied on others above the threshold. I see no reason why someone earning £2m/yr should pay a higher rate of tax than me other than envy. If we both paid a flat 35%, say, then they will be contributing a massive amount more than I. Not to mention the fact that they would generally be less likely to avoid tax like they would if you said you were taking 50%. To me, the size of the avoidance industry tells me all I need to know. That, and having to work to halfway through the week before I've finished paying the Government.

    2. Ambivalous Crowboard

      Probably NOT end up in jail.

      No, nobody would go to jail as it's a company and not a sole trader. Nobody is legally responsible for the company. If the Directors of Vodafone Limited are found to have misappropriated the funds then potentially there's a fraud charge to be had, but if everything is squeaky clean and they are just refusing to pay what UK think they should pay and offering what Vodafone think they should pay, they can do with a company is wind it up and send the bailiffs in to collect assets (if any), which would effectively close the UK branch/Limited company and allow the company to continue trading in any other country, just not the UK.

      Admittedly the bailiffs could get a lot of money from the infrastructure as effectively that's what they'd get if they did wind the company up (providing there's a buyer, that is), but then if the company goes belly up, the jobs shedding would be in the press more than the tax bill, and nasty would have caused the problem.

      So vodafone are, basically, being the bully and saying "we don't want to pay that much tax, we'll pay you this much and you'll like it or we'll just close our operation and haemorrhage jobs."

      But yes. Basically, George Osborne is a spineless cunt. While the ConDems are in, the rich will continue getting richer.

    3. Anonymous Coward
      Anonymous Coward

      Re: Rich get richer etc

      Short sighted comment. Surely you realise dividends are taxable - so company makes more profits - gives more dividends - taxman gets more tax. Whether you tax the company of the dividends you still get tax in.

      Vodafone is not a UK business - it is a global business - but a lot of it's shareholders are UK so ultimately a lot of profits earned in the US, Europe etc. DO come back to the UK and even if not more directly via corporation tax they come back as dividend income tax.

      Whinge about O2 and Three etc. before you moan about Vodafone - how much UK tax or UK dividends do they pay??

      1. James Micallef Silver badge
        Thumb Down

        Re: Rich get richer etc

        @AC - If Vodafone pay their tax bill as calculated by Inland Revenue (approx £6bn), then Inland Revenue get £6bn. If Inland Revenue get it's agreed-upon £1.25 bn and the remaining £4.75 bn are distributed as dividends, the Inland Revenue gets £1.25bn + x% of £4.75 bn. I don't know what the 'x' is, but sure as hell that's a lot of money not going to the Inland Revenue. And that shortfall will be taken from other taxpayers' taxes, i.e. in this case all taxpayers who are non-Vodafone shareholders are subsidising Vodafone shareholders.

        1. Anonymous Coward
          Anonymous Coward

          Re: Rich get richer etc

          Dividends are classed as income - so the X will typically be 20-50%. Some shareholders are pension funds so of course that 'extra' dividend goes to help your and my pension as well.

          But then you also forget that money is spent, saves, re-invested - all of which are taxed again and again. So they do not 'directly' get all the money back - but indirectly they will get a lot of it back.

          My point being it's still a lot of benefit for the UK - if the IR said they were owed 6bn but agreed on 1.25bn they can't have been all that sure they would win (and get nothing!).

          I'd bet over the last 5-10 years Vodafone have paid a shed load more tax from corporation tax and dividend income than O2, Three, T-Mobile and Orange combined.

        2. jonathanb Silver badge

          Re: Rich get richer etc

          For basic rate tax payers, the % is effectively 0%, for higher rate tax payers it is effectively 25% and for additional rate tax payers it is effectively 36.111111111...%

          The dividend tax rates are 10%, 32.5% and 42.5%.

          Dividends are treated as being paid net of a notional tax of 10%, which is not refundable. You have to pay the balance due if any. A basic rate tax payer will have no further tax to pay. The company doesn't actually pay this notional tax.

          If you are a higher rate tax payer, and receive a dividend of £90, it is treated as being a £100 dividend with £10 tax deducted. Your tax liability on that is £32.50, of which £10 has already been paid, leaving £22.50 left to pay. £22.50 is 25% of £90, hence the 25% effective tax rate.

          This was Gordon Brown's invention, it used to be much simpler.

      2. Gio Ciampa

        Re: Rich get richer etc

        And how much of Vodafone is owned by giant pension funds...

        ...who most likely pull the exact same stunts to get out of their tax burden?

        End result - tax take? what tax take?

    4. Captain DaFt

      Re: Rich get richer etc

      And then, none of them make a profit in the UK. (At least on paper.)

  12. wowfood


    They paid out 6.5b was it to shareholders?

    Who wants to place bets that most members of parliment are shareholders.

    Also the government shouldn't be viewing it that way, yes they'd risk getting less money if they took vodaphone to court, but vodaphone would lose more. One way vodaphone pay 1.2bn and the government gets 1.2bn. The other vodaphone pay 5bn + legal, and the government get 5bn - legal.

    I stand by my theory that, while in office MPs should have their assets frozen. (shares, bonds, stock etc)

    1. JetSetJim
      Thumb Up

      Re: bah

      Go one step further - have their assets pooled into the treasury. If the economy does well (via some long term measure) then they get it back. If the economy tanks, then those assets are used to boost it.

      Even better, have their returns calculated via electoral results (even if they quit).

    2. Anonymous Coward
      Anonymous Coward

      Re: bah

      The shareholders of Vodafone are you and my pension funds etc. - so (like it or not) you probably (at least indirectly) own shares in Vodafone.

      Vodafone pay huge dividends which generate a lot of UK tax revenue. They also create a lot of jobs in the UK and are expanding overseas - in my mind they should be encouraged not demonised. Guess you would rather some non-UK company made all the money and paid NO taxes in the UK on it's UK profits??

      As for your joke comment about MPs assets being frozen - would you take a job that meant your assets were frozen - so you could not sell shares to buy a new house or plan for your retirement etc.

      1. James Micallef Silver badge

        Re: bah

        So what's your point? That because Vodafone are a big company then they are justified in choosing what amount of tax to pay? (i.e. £0, which is what they claim their liability is). Do you think Vodafone employ people from the goodness of their hearts? Do they bollocks! For every employee they have whom they're paying, say, £20k, they are making at least £25-30k from that person's work, otherwise that person would not have a job.

        On the other hand, I agree with you on freezing MP's assets, that's an absolutely ridiculous idea (if it was serious in the first place and not a smooth bit to trolling!!)

        1. Anonymous Coward
          Anonymous Coward

          Re: bah

          Do any companies or individuals pay more tax than they need. Vodafone directors have a responsibility to their shareholders to maximise value / minimise tax paid - which they do.

          So of course they will look for ways to minimise tax - but do you pay more tax than you need?

          Of course Vodafone employ staff - pay them but expect to earn more from them than they cost - surely that's what everyone does. My point is they are a UK based company employing a lot of people in the UK, paying tax on profits and issuing dividends in the UK (which are taxed). Compare that to how much O2 and the other mobile companies contribute - sure they employ people as well but where do the profits go... UK treasury = no.

      2. JetSetJim

        Re: bah

        I might have a few shares of Vod knocking around in my pension - but I doubt it as I try and avoid the telecoms stuff. Anyway, do these dividends generate tax revenue? If the dividend is paid into a pension, you only pay tax when you draw the pension, and that isn't normally straight away, and unlikely to be at the same taxation rate as that which you are paying now.

        And because a company is large, there is no reason for it to not pay legitimate taxes - admittedly they are probably following perfectly legal procedures (in at least their minds) to "efficiently tax plan and optimise their free cash flow" - or some such excuse, but equally I'm sure HMRC aren't trying to use illegal taxation techniques to get what they think is their due - that was the whole point of the compromise.

        "Freeze MP assets" is a bit tongue-in-cheek, but it might be nice for someone to be in power who doesn't have personal profit motives rather than the best interests of the country at heart.

  13. Anonymous Coward
    Anonymous Coward

    Just wondering

    If a Vodaphone exec was at school with Cameron and Osbourne?

  14. Anonymous Coward
    Anonymous Coward

    settlement ... was lower than the tax liability

    The agreed settlement ... was lower than the tax liability that would have been paid if the Department won in litigation. Given the uncertainties and costs of litigation, it was reasonable for the Department to settle at the amount it did

    win-win for Orange from the start, congrats for coming up with the plan, it worked like a charm! Shame my business isn't big enough, eh?

    1. Soruk

      Re: settlement ... was lower than the tax liability

      How can this possibly be a win for Orange if their main competitor (Vodafone) gets let off about £4bn in tax?

      1. Anonymous Coward
        Anonymous Coward

        Re: settlement ... was lower than the tax liability

        Ask yourself how much tax do Orange pay in the UK either on their profits or dividends - oh they are not a UK company so probably nothing.

  15. Triggerfish

    We are all in it together

    my fecking arse.

  16. Anonymous Coward
    Anonymous Coward

    And I get caned for a £60 underpayment last year

  17. John Riddoch

    Yes, Minister

    I'm reminded of Yes, Minister:

    Sir Humphrey: "Tax fiddles?"

    Sir Desmond: "Well, they placed their own interpretation on Treasury regulations. Someone has to interpret them."

    Sir Humphrey: "What about the Treasury's interpretation?"

    Sir Desmond: "It didn't seem appropriate."

  18. Anonymous Coward
    Anonymous Coward

    Minor correction

    It wasn't George Osborne who brokered the deal, it was Dave Hartnett. Hartnett also did it without oversight and possibly not legally either, and it's undeniable that Vodafone owed the tax. Details can be found in past issues of Private Eye, but in essence, Hartnett is single-handedly responsible for all public sector cuts and the attendant loss of over 200,000 jobs.

    1. Nev
      Thumb Up

      Re: Minor correction

      I bet if any of us were good mates of/ex-colleagues with Mr Hartnett and had a nice cosy lunch with him we could also get massive tax breaks too.

      Although apparently his lunch schedule is very, very full (+100 nice cosy lunches with big businesses in 2 years) so it may be difficult to arrange a date......

    2. Sigfried

      Re: Minor correction

      "Undeniable that Vodafone owed the tax" My ARSE. Vodafone NEVER LEGALLY OWED THE TAX.

      How many times does it need to be said, tax assessment =/= legally owed. The law is quite explicit, and note that this is EU law, that business conducted in Germany (as this was) is taxed in Germany.

      About the only reasonable conclusion one can come to is that something like 95% of those who comment are greedy cunts who don't give a stuff about the legal position but just want the money regardless. I can only hope that for the next tax year you get incorrectly assessed as owing more tax than you think you should, and they force you all to pay.

  19. Anonymous Coward
    Anonymous Coward

    Perhaps you can set up...

    ..offices in Gibraltar, and hope the tax office use iPhones.

  20. Dan 55 Silver badge
    Thumb Down

    What were Vodafone going to do if they didn't get their tax break?

    Storm off in a huff with their cell towers?

  21. Magnus_Pym

    Robbing Peter to pay Vodafone

    The average UK income tax bill is around £5,000 per year. 5bn in tax is equivalent to 1 million tax payers. essentially the government took money from the wage packets of 1 million people and gave it to Vodafone.

  22. Magnus_Pym

    If it's so bloody complex...

    ... that no-one know how it works, It probably isn't working.

  23. John A Blackley

    I don't see why

    so many people are bitching at Vodaphone for paying over a billion pounds in tax. If someone came to any of these individuals and said, "I can show you an entirely legal way to reduce your tax bill." would any of them say, "Oh, no thank you. I am an honest and upstanding citizen and I believe in paying every penny of tax that the government says I should."

    Oh, wait. Bloody hypocrites. Now I see why.

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