Wednesday, May 23, 2012
From recent headlines which blur the distinction between legitimate practices and evasion, it would be easy to believe that British business contributes next to nothing to government tax revenue.
This is simply not the case.
In the year 2010-11, business paid around £163bn in taxes, over a quarter of all tax revenue.
To put that into context, it is roughly the equivalent of the combined 2010 budgets for the Department of Health, the Department of Education and the police force.
But this is not the full story.
Looking at the breakdown of that figure, it shows that in addition to paying corporation tax on their profits of £42bn, business also makes a contribution as property owners, employers and consumers of goods and services; £24bn – business rates, £56bn – National Insurance, and £40bn – fuel duty and other, respectively.
So having made the case that British business underpins a vast amount of revenue available to the government, it must also be made clear that the scope and appetite for what is known as abusive tax avoidance has already been severely circumscribed for large companies such that previous abuses have been reduced or eliminated.
It must also be recognised that responsible management of tax issues is a necessary part of business activity, made more important by the complexities of the UK and international tax systems.
It is absolutely right that no business should engage in abusive tax arrangements; however, in running their day- to-day activities, as well as in commercial transactions whether large or small, businesses need to manage their tax affairs.
In this regard it matters not one jot what size the business is as the sums involved are relative.
Most businesses in the UK would never contemplate evading or defrauding the government, but it’s true to say that they have been slow to enter the public debate to defend their record and to advocate pro-growth tax policies.
In the last Budget, the chancellor sent out a very strong signal by announcing his intention to construct the most competitive tax regime in the G20, designed specifically to encourage companies to invest and stay in the UK.
From the business point of view this is extremely encouraging, since in an era of global competition, business places a much larger value on operating within simple and predictable tax environments.
Again this might be seen as natural territory for the ‘big boys’, but we need to remember that these companies sit atop a very large and a very long supply chain which feeds down into the very smallest company, whether by way of direct products or the supply of services of all descriptions.
I don’t expect the issue of ‘tax cheats’ will ever go away – it never has and never will.
But it is time to for the shroud to be lifted so that the misinformation can be dispelled and so that everyone can understand how a competitive tax system can benefit us all.
Richard Tunnicliffe is East of England CBI director.
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