|The HM Treasury courtyard, Whitehall, London.|
Corporate Tax 2014: The UK's corporate tax revenues plunged in 2013 as big
companies paid more in social security (national insurance contributions) than
taxes on profits for the first time. Meanwhile, France is mulling business tax
reforms and the government has been given a study on how to reduce tax evasion
by digital economy companies.
The Financial Times says that a drop in the profits of North Sea energy
companies was the biggest factor driving down the tax paid by The 100 Group of
the largest UK businesses - - both listed and private companies - - which dipped by a
quarter to £6bn in 2013.
A third of the fall in revenues resulted from the 8% tax rate cuts introduced
by George Osborne, the chancellor.
PwC, the Big 4 auditing firm said that for every £1 of corporation tax paid,
the UK’s big firms now pay £2.86 in other taxes. for the first time, employers’
national insurance contributions now make up the largest chunk of businesses’
tax costs at 27.5% compared with corporate taxes at 25.9%.
The major contributors to the
total tax contribution remain the oil and gas and banking sectors, which
contribute nearly half of business taxes. However, this figure has declined
since last year, as the proportion paid by the retail, insurance and telecoms
sector has expanded.
Robin Freestone, chairman of the 100 Group and CFO of
Pearson, owner of the FT, said: “The total tax contribution of Britain’s biggest businesses
increased in the year to March 2013, despite challenging economic conditions at
that time. Government’s rebalancing of business taxes away from corporation tax
appears to have played a role in helping to incentivise increased levels of UK
employment, as well as investment and research and development. These are now
helping to stimulate UK economic activity and growth. The best barometer for
FTSE large cap Business's economic and tax contribution in the UK is this survey
and it's also is an important part of the 100 Group’s commitment to tax
Kevin Nicholson, head of tax at PwC, said: “It's
not a surprise that for the first time corporation tax is not the largest tax
paid by the UK’s bigger employers. Looking at the full picture of tax paid by
business, you see that tax on profits have fallen while taxes on labour and
property have increased."
Separately, the FT reported in
early January, that tax payments by Apple, Microsoft, eBay, Yahoo and
Facebook fell in 2012, while those of Amazon and Google rose. That resulted in a
decline in the seven corporations’ combined tax bill on current year profits
from £45m to £37m.
UK sales jumped nearly 18% to more than $13bn in 2012 for the three
companies, Google, eBay and Amazon, that are required to provide
the information in the parent company’s accounts because of the relative
importance of the UK to their business. Microsoft’s Irish business reported a 9% rise in UK turnover to €2.3bn in 2012.
But the turnover booked in the UK by the internet companies was far smaller - -
a combined total of £1.7bn ($2.8bn) in 2012 - - because it reflects only
commission earned on sales and marketing services they provide to their European
headquarters based in Ireland, Switzerland and Luxembourg.
Reuters reports that the French government began talks on Wednesday to
overhaul its complex corporate tax system as part of President François
Hollande's push to help lighten the burden on companies.
The government is considering lowering the corporate tax rate, which is
currently among the highest in Europe at 33.3% of profits, and widening
the tax base, one source said.
This month the French government received a report on taxing the digital
economy that it had commissioned.
The digital revolution is old news now, yet only lately have most people begun
to get a feel of its full implications. As it becomes mainstream, the digital
economy gets everywhere in our lives. It permeates our days and nights.
Inspiring startups or global corporations disrupt entire industries with their
intensive use of IT, innovative business models, iterative design, and a
powerful leveraging of data originated by user activity.
And yet official statistics utterly fail to measure all this. Multi-sided
business models with a predominance of free services are one reason for this
failure. Our inability to add data as a primary economic category, just like
goods and services, is another. The reality may be that much of the value
generated by the digital economy is not captured by official statistics, and
therefore leaves our countries unnoticed and ends up in the accounts of offshore
The definition of a permanent establishment is gravely out-dated and
completely misses the digital economy...The data-driven economy generates lower
prices for consumers, yet does not translate into net job creation. In our
global economy, the massive consumer surplus generated by free services is
primarily spent on the consumption of imported goods. This is one reason, among
many others, why the digital economy means fewer job creations than the
optimistic views of the nineties led us to expect."
Report (in French)
Recent Finfacts tax reports:
Corporate Tax: Kenny reassures Facebook but Ireland's rate is too high
G-20 Australian presidency focuses on tax "leaking bucket"; Ireland still in
US company profits per Irish
employee at $970,000; Tax paid in Ireland at $25,000
Corporate tax reform and the
biggest tech tax havens
Ireland's new International
Tax Charter: More political kabuki
Ireland's tax man for Silicon