Company tax take up despite recession
Large companies have seen their overall taxes go up by 19% since 2005 despite the double-dip recession and a drop in corporation tax, according to a new report from PwC.
Contrary to the media attention multinationals have garnered in recent weeks, the total tax contribution of FTSE 100 companies surveyed revealed that despite a 17% fall in CT between 2005 and 2012, other taxes had risen by 58%.
In particular business taxes such as VAT, NICs and business rates had all gone up. The report said that last year, for every £1 of CT paid, the Hundred Group participants paid another £2 in other business taxes.
In total companies paid £77.1bn in tax last year, which equated to 14.2% of total tax receipts.
Andrew Bonfield, chairman of the tax committee of the Hundred Group said: “We're in the middle of a well-trailed programme for reducing the rate of corporation tax while other business taxes such as NI and VAT have risen.
“These other taxes tend to be easier and less volatile since they're not dependent on profits. These latest results show the continued significant contribution of Hundred Group companies despite the double-dip recession,” he said.
The ICAEW Tax Faculty said there was now a considerable amount of evidence as to how the tax system has changed and of the contribution that these companies continue to make.
On whether the largest companies are making an appropriate contribution to public finances, the faculty said: “On the evidence put forward in this latest survey the answer seems to be an unequivocal yes. It is also helpful to have data on the whole range of taxes that business pays and not merely tax on profits, corporation tax, which is the part of their contribution that has been in the public spotlight in recent months.”
Another interesting change was that while tax on company profits represented 50% of total taxes paid in 2005, it has now come down to one third.
“This reflects the reduction in the headline rate of tax over the period and this trend will continue as the headline rate comes down further to 21% from April 2014,” the faculty said.
The parliamentary Public Accounts Committee (PAC) will later this week examine the role of the Big Four accounting firms in helping firms minimise their tax bills.