Big businesses – paying as much tax as they've always done

There has been a lot of wailing about the amount of corporation tax multinational businesses pay. But according to their accountants, they pay as much tax as they’ve always done, says Merryn Somerset Webb.


Big businesses such as Amazon pay plenty of tax, says PwC

There has been endless complaining over the last few years about just how little tax big companies operating in the UK pay here.

At first glance, those complaints are completely valid. It is clearly absurd that Facebook paid only just over £4,000 in tax in the UK in 2014, or that a company the size of Amazon somehow managed to cut its tax bill to under £12m in the year. Ryanair has apparently been avoiding tax by classifying its crew as "independent subcontractors"; Cadbury's owner Mondelez International paid not a penny of corporation tax last year; and Mappin & Webb hasn't paid any for five years.

It also seems wrong (if not exactly a surprise) that thanksto the low rate of corporation tax in the UK and the various wheezes companies use to avoid paying even that corporation tax as a whole makes up less of our tax take than it did a few years ago.

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In 2008, says the Sunday Times, it was 10% of the take. It is forecast to come in at around 7% this year. Look at how the corporate world has evolved and you can see how it has happened: companies have got bigger and more powerful and more able to hire huge teams of lawyers to exploit any and all loopholes. Irritating isn't it?

But a letter to the FT this week made a much missed point on the matter. Corporation tax receipts says PwC's head of tax, Kevin Nicholson,"provides a misleading picture of the value added to the UK by multinational companies".

UK governments have long been aware that collecting corporation tax is tough (and therefore inefficient). They know they can't easily stop multinational companies shifting intellectual property and debt around the globe (although they are trying note Osborne's Google tax). So they have focused their efforts elsewhere: steadily reducing the dependence on corporation tax by "cutting the tax rate while increasing taxes on employment and property".

The result is that, whereas ten years ago the corporation tax take from the UK's 100 biggest firms was about equal to the take from business rates and employer's National Insurance, today, for every £1 of the former the state takes in about £3.27 of the latter and the "overall tax borne by big business has been sustained".

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.