BusinessCompany NewsHundred Group and Varney enter tax reporting row

Hundred Group and Varney enter tax reporting row

Accounts fail to show the sums in tax companies really pay

Tax figures in company accounts do not represent the volume of tax companies
pay and are incomprehensible to outsiders, two key people said this week in
moves that could present a compelling case for a change in the way tax is
reported.

Businesses pay twice as much tax as is reported under their corporation tax
disclosures, The Hundred Group of Finance Directors said this week, releasing
eagerly awaited research on companies’ tax burdens.

Its members pay £18bn to the exchequer in taxes, it said, in a counterblast
to accusations that companies are not paying their fair share.

Simultaneously, Sir David Varney, head of HM Revenue & Customs, told MPs
that company accounts did not provide anything like a useful representation of
corporate tax contributions. Having been a chief executive and chairman of
listed companies himself, he said: ‘It is very difficult for outsiders to
understand what is going in the tax books.’

Sir David referred to the Tax Justice Network’s recent reports on the
subject. The anti-avoidance group had argued that companies were significantly
underpaying their tax, and that the tax numbers in accounts did not appear to
add up.

The fact that such diverse groups appear to agree that tax accounting is not
adequate to answer questions about corporate contributions will invite calls for
an overhaul.

Hundred Group chair Philip Broadley declined to comment on whether the
findings would prompt calls for new standards on reporting. The report was just
‘an interesting piece of research’, he said. ‘It then becomes an open question
as to what you might want to do differently.’

Several taxes made up the lion’s share of companies’ extra burden. The
unextrapolated numbers suggested that the 66 companies involved paid £2.3bn in
employers’ national insurance contributions, £1.2bn in irrecoverable VAT and
£1.3bn in business rates. Companies in the survey also paid £612m in petroleum
revenue tax. Respondents had seen a rise in their total tax contribution of
5.8%.

That compared with an overall increase in the corporation tax

take from 2003/04 to 2004/05 of 5.3%, and an overall increase in the tax take
of 6.2%.

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