BAA\’s Tax Bill

Oh good grief, what is the Taxpayers\’ Alliance doing here?

Even after adjusting for technical accounting issues, however, ADI would not have paid any tax for 2007.

That is because it has geared up BAA with so much debt that its interest bill wipes out any taxable profit.

The ADI accounts show net debt of £16.8bn and net finance costs of £874m. ADI had operating profits of £571m, after "certain remeasurements" – such as property revaluations – leaving a £297m loss before tax.

ADI is attempting to refinance £10bn of debt but BAA sources confirmed that even if the much-delayed refinancing succeeds, the holding company is unlikely to pay any UK tax for at least the next two years. A spokesman for the TaxPayers\’ Alliance said: "It\’s shocking that BAA is raking in cash from the British taxpayer, despite doing such a bad job.

"How on earth can the Government justify this when they are claiming there isn\’t enough money to provide essential drugs on the NHS or to give hard-pressed taxpayers some relief? T5\’s passengers were let down badly by BAA, so it\’s insulting that they have been forced to subsidise the company as well."

Look, we all know that debt financing (or the interest upon it) is tax deductible. Bouncing around and claiming outrage at this is the sort of thing that the financial illiterates over at The Guardian do. What on earth is the TPA doing fueling that fire?

BTW, if you want to get rid of that particular problem, that bias towards debt financing in hte tax structure, you doit by abolishing corporation tax. Tax the distribution, as we tax the interest paid, of the dividends and capital gains at the level of the recipients, not the corporate level.

4 thoughts on “BAA\’s Tax Bill”

  1. Nope. You do it by treating interest payments as non-allowable expenses and not taxing them as income in the hands of the recipient. It’s called the ‘thin capitalisation’ rule, if you’re interested.

  2. Also, where do the crack-addled baboons get off on saying “BAA is raking in cash from the British taxpayer”? It isn’t – it just isn’t having large amounts of tax extracted from it by the British state, which is the sort of thing one might expect an anti-tax pressure group to approve of.

  3. Bouncing around and claiming outrage at this is the sort of thing that the financial illiterates … do. What on earth is the TPA doing fueling that fire?

    That kind of answers itself.

    But certainly this is more evidene that tax is secondary to Conservative party politcs for it.

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