Yes, Murphy Again

But the strangest comment was by BAT, which paid no tax in the UK in 2007:

A spokeswoman for BAT, the twelfth-biggest company in the UK by market value and the owner of the cigarette brands Lucky Strike and Pall Mall, said that its head office operated at a loss and that 99 per cent of its profits were earned overseas.

There is only one commercial response to this. If a head office loses money it cannot add value. In that case the group is not worthwhile mainatining and should be broken up on commercial grounds. Shareholder value must be increased in this case if it were.

Snigger.

Bit odd for an accountant to miss that making a profit and adding value are not quite the same thing, isn\’t it? Fire stations don\’t make a profit but we accept that they add value, Parliament doesn\’t make a profit but we accept that (sometimes) it adds value, the courts system doesn\’t make a profit but definitely adds value.

Head Offices are a cost to a business, one that (may) add value to said business, but there\’s no reason on earth to compare that to whether the head office makes a profit or not.

To take it a little futher, does he accept that audting adds value to a company? But does it make a profit? Human Resources? The canteen?

Would the canteen being subsidised (ie, making a loss) mean that the company was therefore ripe for breaking up? Anyone want to tell that to Google?

What worries me is that this man actually has public influence!

6 thoughts on “Yes, Murphy Again”

  1. “What worries me is that this man actually has public influence!”

    Nah, he has Guardianista influence. And soon the natural order will be restored: the Guardianistas will go back to Islington and prepare for opposition. You can already head a future-echo of the wailing and gnashing of teeth.

  2. Paid no tax? None at all? No Business Rates, Employer’s NIC, no tobacco duty or VAT on cigarettes (total revenues £12 bn, heck knows what BAT’s share is)?

  3. I suppose he had to move into being a purveyor of agitprop as no sane person would ever employ him as their accountant. Square peg… round hole.

  4. Guardianistas editing the Times? Hmm. I’m fairly sure that anyone who believes economic illiteracy and populism are qualities confined to the left is An Idiot.

    Mark, while Murphy is only talking about corporation tax, in BAT’s case that is actually going to be pretty trivial (they don’t have manufacturing operations in the UK, and their share of the cig market is well below 5% – Lucky Strikes and Dunhills only, IIRC).

    Also, I’ve left the comment below on Murphy’s site, I wonder if it’ll appear? –

    If the parent company is UK registered, it can only pay dividends to shareholders out of its post-tax income (whether that’s 30% UK corporation tax, 20% foreign tax plus 10% UK corporation tax, 30% foreign tax and no UK tax, or 40% foreign tax and no UK tax).

    So in the long run, BAT can’t get away with paying less than 30% tax on its global earnings – or at least, it can’t actually pass that money onto its shareholders. Taking one year’s figures and saying “ooh, bad, evil” based on that is a complete joke…

    [companies like Shire, which relocate the parent company to low-tax jurisdictions from which they can directly pay out dividends to shareholders, are completely different – in that case, it is indeed possible to avoid UK tax]

  5. I have, for reasons I shan’t bore you with, seen a couple of BAT presentations about their business recently. The amount of tobacco duty that they pay out of their gross income dwarfs their Corporation Tax bill by, from memory, an order of magnitude or more. That is one tax that it DOES pay in the UK.

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