The Confederation of British Industry (CBI) recently launched a major new report titled, 'Tax and British business: Making the case' in which it declares it a myth that large corporations are not paying their fair share of tax and are contributing next to nothing to government coffers.
John Cridland, Director-General of the CBI, makes the point that British businesses paid in the region of £163 billion in taxes to HMRC in the 2010/11 year which constitutes more than a quarter of total tax revenues (£551 billion). This was roughly equivalent to the combined 2010 budgets for the Department of Health, the Department of Education and the police force.
The report attempts to highlight the major contribution that business makes to the UK economy and to break through the veil of misunderstanding and, at times, misinformation, that has shrouded the debate.
Whilst the principal tax contribution by businesses is by way of corporation tax, other taxes enter the equation. In 2010/11 businesses total contribution was comprised as follows:
- Corporation tax; £42 billion (26%);
- Employers NIC; £56 billion (34%);
- Business rates; £24 billion (15%);
- Fuel duties; £14 billion (8%); and
- Other taxes; £27 billion (17%).
The measure of a business’s contribution should not therefore be based on its corporation tax bill alone but must also reflect the role of a business as employer, property owner, consumer of goods and services and its environmental impact.
The document goes on to say that UK business pays more corporation tax than their counterparts in the US, France and Germany and sets out three key facts about the tax itself:
- The top 1% of companies pay 81% of all corporation tax.
- 60% of small companies pay no corporation tax.
- Over 55% of all companies claim capital allowances, 10% claim group relief and only 1.8% claim double tax relief.
A chapter of the report is devoted to explaining why tax management is neither abuse nor evasion, reaffirming the core legal principle that everyone is entitled to organise their tax affairs so as to reduce their liability as far as is legally permissible.
Mr Cridland believes that it is millionaires and not companies who are the culprits when it comes to using abusive tax avoidance schemes.
During a panel discussion that took place at the launch of the report, John Whiting, tax director at the Office of Tax Simplification, warned that the forthcoming General Anti-Abuse Rule (GAAR) may also be perceived by the public as being ineffective. To counter this, Mr Whiting suggested it would be necessary to explain to the public that what it believes is avoidance and being held out as illegal may not necessarily be the case.
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