January 22, 2013 12:16 am

Corporate tax take ‘has risen’

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

A group of top finance directors has joined the fray as big business seeks to confront intense public scrutiny of corporate tax planning, saying companies’ tax treatment has undergone a “dramatic change” in recent years and that the overall burden they face has increased.

Corporation tax made up just a third of big companies’ tax bills in 2012, down from half in 2005, according to a report by finance directors from the Hundred Group, which represents most of the FTSE 100 and some large private and foreign-owned companies.

Its annual study of its members’ total tax contribution showed their overall tax payments rose by 19 per cent between 2005 and 2012, they said.

Although the amount of corporation tax paid had fallen by 17 per cent, other tax payments had increased by 58 per cent over the same period.

Andrew Bonfield, chairman of the tax committee of the Hundred Group, said the changes reflected the policy of successive governments looking for stable tax revenues and economic growth.

“We’re in the middle of a well trailed programme for reducing the rate of corporation tax while other business taxes, such as employer’s national insurance contributions and irrecoverable VAT, have risen,” he said. “These other taxes tend to be easier to collect and less volatile since they’re not dependent on profits.”

The intense public interest in corporate tax, fuelled by accusations by MPs about the tax planning undertaken by multinationals such as Amazon, Google and Starbucks, was at times ill-informed and risked sending a negative message that would undermine the government’s efforts to attract business to the UK, the committee said in its report.

Mary Monfries, head of tax policy and regulation at PwC, the professional services group that collaborated on the study, said: “The current debate sometimes confuses compliance with the rules with tax policy itself. Government policy has changed and our study shows the picture of tax paid has changed as businesses comply with the rules.”

The taxes paid by business fell by 3.1 per cent in the year to 2012, because of the decline in the corporate tax rate and the end of a one-off bank payroll tax, the report said. This was partly offset by an increase in irrecoverable value added tax, employer NI contributions and the introduction of a new bank levy.

Business rates increased by 6.3 per cent in the year following an increase in ratable values in 2010 and a rate increase in January 2011. The retail sector paid 43 per cent of the business rates borne by the Hundred Group.

The oil and gas sector was the largest tax contributor overall, as it has been since 2006, followed by banking and insurance.

The taxes collected on the government’s behalf by business increased by 1 per cent in the year to 2012, driven by increases in pay as you earn and VAT. The total tax contribution of the companies – including taxes collected as well as paid by them – was £77.1bn, which represented 14 .2 per cent of total government receipts. The figure was marginally down on the £77.2bn reported for 2011.

“These latest results show the continued significant contribution of Hundred Group companies to the UK economy, despite the double-dip recession,” said Mr Bonfield.

The report emphasised the Hundred Group’s its importance as a source of well paid jobs, saying its members employed 7 per cent of the UK workforce, a fall of 0.8 per cent on the previous year. The average salary paid by Hundred Group companies was £30,000, compared with the average national UK wage of £27,000.

Big business increasingly views tax as a matter of reputation, not just as a cost, according to the Hundred Group of top finance directors, with many now citing their total tax contribution as part of their public relations activities.

But the debate is too narrowly focused on corporation tax, according to the study. “The data have consistently shown that the contribution made by member companies to the public finances is much wider. There are many more taxes to take into account and to be aware of,” it says.

Companies are becoming more transparent over their tax affairs, according to the survey, which reported a 10 per cent rise in companies outlining their total tax contribution. Andrew Packman of PwC said: “Much more effort is being made to explain what drives their tax rates. There is much more interest than a couple of years ago”.

The report said that an “anti business message” had crept into the debate, ignoring the contribution made by big companies to employment, capital investment and research and development.

“We are in an age of austerity where people are concerned about whether business is making a fair contribution,” said Andrew Bonfield, chairman of the Hundred Group’s tax committee. “As companies we recognise the importance of that debate. We have to be part of it.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments


Sign up to UK Politics, the FT's daily briefing on Britain.

Sign up now


Sign up for email briefings to stay up to date on topics you are interested in