A third of UKʼs big business pays no tax
- From: Robin T Cox <nomail@xxxxxxxxxx>
- Date: Tue, 28 Aug 2007 16:53:43 GMT
A third of UK’s big business pays no tax
By Vanessa Houlder in London
Published: August 27 2007 22:02 | Last updated: August 27 2007 22:02
FT.com
http://www.ft.com/cms/s/0/e42282d6-54ea-11dc-890c-0000779fd2ac.html
Almost a third of the UK’s 700 biggest businesses paid no corporation tax
in the 2005-06 financial year while another 30 per cent paid less than
£10m each, an official study has found.
Of the tax paid by these businesses, two-thirds came from just three
industries – banking, insurance and oil and gas – while the alcohol,
tobacco, car and real estate sectors contributed only a few hundred
million pounds.
Altogether, these large public and private companies paid £24.4bn in
2005-06, or just more than half of all the corporation tax paid, according
to a National Audit Office analysis of the tax raised from the 700
companies handled by the large business service of Revenue & Customs.
It found that 50 businesses, or 7 per cent of the 700, paid 67 per cent of
the tax while about 220 paid none and another 210 each paid less than
£10m.
Some tax experts were taken aback by the small amount of tax many of the
companies paid. Michael Devereux of the Oxford University Centre for
Business Taxation, said: ”It is certainly surprising.”
While a low tax bill does not necessarily mean a company is avoiding tax
deliberately, the data raise questions about the strategies large
companies use to reduce their bills, and whether the Treasury relies too
heavily on too few industries for its overall take.
Bill Dodwell of Deloitte, the professional services firm, said: “That 700
of the largest companies and groups are only paying 54 per cent of
corporation tax shows the giant contribution of small companies. It is
probably because many are less international and so have different
planning opportunities.”
The analysis by the spending watchdog could fuel the debate surrounding
the UK’s generous tax treatment of interest costs, which allow highly
geared companies to cut their bills.
This aspect of the tax regime has come under scrutiny when used by private
equity-backed companies but is also used widely by multinationals with
intra-group loans, which allow them to concentrate debt in countries where
they can make the most use of the tax relief on interest costs.
John Cullinane of Deloitte said it was significant the three industries
that paid the most were unable, for different reasons, to use high gearing
to reduce their bills. The dominance of these three sectors also suggests
the Exchequer would be vulnerable to a downturn in their revenues.
Explanations for the low tax bills of many large companies include low
profitability, the availability of tax losses from previous years, high
financing costs and the impact of capital investment and pension fund
contributions.
J Sainsbury, the supermarket group, for example, put £110m into its
pension fund in 2005-06, which meant that instead of paying corporation
tax it received a credit of £3m. In 2006-07, it paid £240m into its
pension fund, resulting in a £9m tax credit.
.
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