UK Businesses Already Pay Enough Tax

April 23, 2012 Offshore TaxationTaxation in UK

CBI Releases report on UK TaxLONDON – UK registered businesses are paying nearly one third of all taxes collected in the country and are perfectly entitled to use low tax jurisdictions as part of their corporate structures, according to the Confederation of British Industry.

Late last week the UK business lobbying organization the Confederation of British Industry (CBI) released a new report showing the magnitude of taxes collected by the HM Revenue and Customs from businesses operating in the UK. The time of publication of the report coincides with the launch of a new campaign, aimed at fighting the spreading sentiment amongst the media and public that businesses in the UK are not paying their fair share of taxes.

According to the CBI’s research, during the 2010 – 2011 fiscal year the total tax collections in the UK reached GBP 551.4 billion, and businesses operated in the UK paid a cumulative GBP 162.6 billion of the taxes, or more than 29 percent of the total national tax collections. Analysis conducted by the CBI indicates that UK businesses paid enough taxes in the mentioned period to fully fund the Department of Health, the Department of Education and the police force together for at least one year.

Commenting on the findings in the report, the director-general of the CBI John Cridland said that businesses are also charged with collecting PAYE and VAT payments, claiming that this leads to significant savings in administrative costs for the government, further adding to the positive impact of businesses on the country.

John Cridland also said that the UK needs to lower its rates of taxation on businesses and create a tax system which can successfully compete on the international market. He conceded that slashing corporate rates will “…not always win it popularity prizes, but it could do more to secure lasting prosperity. “ He commended the current coalition government for its efforts to lower tax rates and to encourage more businesses to invest in the UK.

The CBI report suggested that the long term goal of the UK should be to reduce the corporate tax rate to 18 percent, as “…pound for pound, the economic impact of reducing corporation tax far exceeds increasing personal allowances, cutting VAT or raising government spending.”

The report struck out against recent sentiments in the public regarding businesses using low tax jurisdictions in their corporate structures, noting that “…UK businesses need to be competitive on the world stage and are perfectly entitled to operate in low-tax jurisdictions for legitimate business purposes.”

John Cridland elaborated on the report, saying that tax evasion is illegal, immoral and damages the economy, however, making use of low tax jurisdictions with high degrees of tax transparency is not tantamount to tax evasion. He stressed that in the eyes of the public even the legitimate use of government offered tax breaks and incentives by businesses, is often perceived by the as tax evasion and an immoral practice.

Photo by The CBI