The anatomy of corporation tax in the UK
Posted by Christie Malry on March 2, 2011 at 9:19 am
The Oxford University Centre for Business Taxation has issued a report on the UK corporation tax, entitled Corporation Tax in the United Kingdom. It's written by our old friend, and Ritchie's nemesis, Michael Devereux.
The report has some interesting findings. In 2010, the UK had the 7th lowest corporation tax rate in the G20 and the lowest in the G7. Despite, or more likely because of, this UK corporation tax revenue has generally been above the G7 average.
And, of particular interest to UKuncut, the top 1% of corporate taxpayers pay 81% of all corporation tax. Indeed, they note that the concentration might be even greater, because their data are based on unconsolidated company information. So, while the chance of any particular taxpayer leaving the UK might be small, the impact on our tax revenues could be disastrous if they do.
They note that a significant (13 – 15%) proportion of companies with a positive accounting profit do not show a positive tax charge. This will no doubt be used by the Ritchies of this world as evidence of gross tax avoidance. In fact it shows nothing of the sort. Tax and accounting profits are different for a number of good reasons. You can't immediately infer things about one from the other. If anything, this demonstrates the limitations of country by country reporting and why those who resist it have good reasons for doing so.
Overall, this is a vital contribution to the UK tax literature.
Written on my Android mobile phone. Article may be edited later.
"This will no doubt be used by the Ritchies of this world as evidence of gross tax avoidance. In fact it shows nothing of the sort. "
Absolutely correct - but it doesn't allow you conclude the opposite either.
"If anything, this demonstrates the limitations of country by country reporting and why those who resist it have good reasons for doing so."
This doesn't follow I'm afraid - yes country by country reporting of just the tax and profit figures (remember we should have revenue figures already for those under IFRS
wouldn't tell you much. But country by country tax reconciliations (already required for the overall tax charge) would be quite revealing wouldn't they - especially if they were to be split by current and deferred tax, especially if the requirements were included in IFRSs. Don't those who believe in free markets now recognise that financial transparency is important precondition e.g. investors might wish to invest in those companies that are best at avoiding tax??
IFRS 8 isn't country by country, quite deliberately.
But we've seen what an appalling mess stupid reporters like Jill Treanor can do with a little information. The solution is to tell her she's an idiot, not to give her more information. You'll only multiply the problem by a thousand. Even slightly more intelligent people like Ritchie won't tell the whole truth, preferring to make political capital out of it.
Transparency has its limits. That's why we have managers and financial accounts.