Big businesses' tax contribution stable – despite avoidance anger

by Calum Fuller

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22 Jan 2013

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THE UK'S LARGEST BUSINESSES have maintained their contribution to the public purse, despite unfavourable economic conditions and public outcry over multinationals' use of complex tax avoidance strategies.

International companies including Amazon, Google and Starbucks have attracted public ire over their corporation tax bills, but a study by PwC has found the amount of tax paid by big businesses in the UK has remained stable.  

The total tax contribution by businesses constituting The Hundred Group for 2012 stands at £77.1bn, equating to 14.2% of total government receipts. This is stable compared to 2011 when the figure was £77.2bn.

According to the report taxes borne by The Hundred Group – which is made up of FTSE100 FDs – have risen 19% since 2005, when the study began.

The proportion of taxes companies pay has shifted. Business now fork out twice as much propotionally in other taxes, compared to corporation tax, than they did in 2005. As it stands today, businesses now contribute £2 towards other taxes for every £1 paid in corporation.

Andrew Bonfield (pictured), chairman of Hundred Group's tax committee, said despite the political and public emphasis on the headline corporation tax figures, businesses are increasingly being hit through other levies.

"The changing composition of taxes on businesses reflects the policy of successive governments looking for stable tax revenues and economic growth," he said.

"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.

"These other taxes tend to be easier to collect and less volatile since they're not dependent on profits."

The study puts paid to the perception companies do not pay their taxes, highlighting that corporation tax is one of 24 levies on businesses, while accepting that steps had been taken to benefit business and improve the UK's competitiveness. The group did, however, call for a "moratorium on further changes to the tax system now that the government's corporate tax reform programme has been delivered".

Mary Monfries, head of tax policy and regulation at PwC, added: "There's unprecedented interest in the amount of corporation tax businesses pay. 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."

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