UK biggest firms pay lower tax rate
LONDON: The biggest UK companies paid taxes at a lower rate for the fourth consecutive year, in part by garnering more profit overseas even as Starbucks Corp and Google Inc caused public outcry by avoiding levies in Britain.
The effective tax rate for FTSE 100 companies, the largest traded on the London Stock Exchange, fell to 24.5% from 35.8% in 2009, according to UHY Hacker Young, a London- based accounting company.
“Reductions in corporate taxes around the world – including tax cuts in the UK – have helped multinational companies reduce their tax payments,” the firm said in an emailed statement.
UK business secretary Vince Cable said in December that governments should coordinate across borders to make companies pay more tax. Cable’s recommendation came after members of Parliament lambasted the world’s largest coffee-shop operator, as well as Amazon.com Inc and Google Inc for using complex accounting methods to reduce tax liabilities in the country.
“It’s called capitalism,” responded Google chairman Eric Schmidt, while London mayor Boris Johnson challenged the government to change the rules rather than blame the businesses. Starbucks, based in Seattle, volunteered to pay more taxes in Britain.
Part of the issue is that companies are being “given a hand by governments around the world,” according to Roy Maugham, head of taxes for UHY Hacker Young in London.
Google cut its 2011 rate almost in half, avoiding about US$2bil in worldwide income taxes, by shifting US$9.8bil in revenue into a Bermuda shell company, according to its filings. “International competition to attract corporate tax revenues is as fierce as ever, with countries offering new enticements to businesses in the form of allowances, reliefs or tax cuts,” Maugham said in the statement. – Bloomberg