Tax bill quandary in Vodafone-Verizon deal

[Commentary] The massive $130 billion Verizon/Vodafone deal is a boon for Wall Street, reportedly netting some $600 million in fees for the legions of bankers, attorneys, and accountants who worked (and continue to work) tirelessly to make the deal a reality. But instead of celebrating, there appears to be grave concern on the Street as to whether or not they will ever see a dime of the money they have been promised.

That's because the market is worried that Vodafone may end up backing out of the megadeal if it is forced to pay high taxes on its capital gains. Vodafone confirmed that it would pay $5 billion to the US government but didn't say how much it would pay the UK. This appears to explain why Vodafone's stock fell by as much as 5%, despite the UK wireless provider making off like a bandit in the deal. But it looks like investors and bankers may be worrying too much. A little known provision in the UK tax code could actually end up shielding Vodafone from paying any tax at all. Indeed, the UK Financial Act of 2002 stipulates that corporations selling off subsidiaries don't have to pay any tax on the sale -- zero. As such, Vodafone is saving as much as $15 billion on the sale.