So here\’s a statistical question about tax

What I want to know is the following:

What is the number for foreign corporation tax paid for \”large companies\”.

Here\’s the background.

Reuters has an analysis up arguing that large corporations (as HMRC defines them) are paying less tax than they used to while large corporation profits have risen over the past decade.

I want to test the assumption that this is about globalisation. Meaning that those large UK domiciled companies are making more of their profits abroad than they used to. Which are being taxed outside the UK as they often will be.

I would assume, but don\’t know, that there would be a figure somewhere that would let us check this. Something like, \”deductions claimed for foreign corporation tax paid\”….and we\’d like that number for large corporates. If that\’s not available, then for all would be fine.

My assumption is that this number will have risen substantially. For the past decade has indeed seen large corporates making much more of their profits outside the UK. A quick glance at the top ten FTSE for example shows only one company which I recognise as having substantial UK operations.

So, anyone know HMRC\’s stats well enough to find that number, if it exists? As a time series, back to 2000?

Crop tax paid to HMRC is down, profits are up. But what\’s the amount of foreign corporation tax that has been paid on those same profits?

6 thoughts on “So here\’s a statistical question about tax”

  1. Top work. I seem to recall that Ritchie’s report on the tax gap had a series of figures for double tax relief, which he proceeded to misinterpret. I’ll dig that out and see where he got it from.

  2. HMRC’s statistical release that includes information on double tax relief is Table 11-3. At first glance it seems to highlight that picking two years and comparing them, as Reuters have done, exposes you to horrible economic artefacts depending on which particular years you pick at each end of the scale.

  3. This may be a red herring, but is there also a factor of increased capital expenditure? If large firms are getting more capital intensive in the UK (replacing increasingly expensive people with machinery and moving labour intensive activities abroad) would the tax relief on capital investment mean a lower overall tax bill?

  4. Good luck! However, I think you may be looking in the wrong place to test the weaknesses of the Reuters piece. They used a measure of profitability which is closer to gross profit than net taxable profit. I.e. it measures profit before deduction of overheads, interest etc. it would be interesting to understand whether net profitability has varied according to the same trend as gross, would it not?

    You might also consider that few companies outside the banking and mining sectors will derive significant profits from overseas branches. Most will use subsidiaries overseas, and will extract their profits in the form of dividends and interest etc. As I understand it, those profits will not be included in the data series used by Reuters.

    I should also mention that tax legislation has recently changed, such that both foreign dividends and branch profits may now be exempted from UK corporation tax altogether, rather than taxed with relief given for foreign taxes suffered.

    One other point which may also help to explain the reduction in corporation tax: since around 2002, capital gains on disposals of trading companies are largely exempt from corporation tax. You may recall that Guardian Media Group benefited a few years ago when selling part of its stake in Autotrader.

  5. you should also remember that there are some large companies that have declared substantial losses in the last 10 years – including BT and the various banks. Eg for 2012, BT declared a tax charge of £442m on profits of £2445m – 18%. It is a very complicated area to look into because the tax actually paid can only be deduced from any set of financial statements. And BT still has £3430m of operational tax losses to utilise.

  6. I suspect that the number you are looking for is not stored by HMRC. It exists in the tx notes to each company’s accounts and will require digging.

    RTZ produced a separate tax analysis for 2011:
    http://www.riotinto.com/sustainabledevelopment2011/pdf/taxes_paid_in_2011.pdf

    amongst other things it shows that it paid $4903m Corporate income tax in Australia, $407m in Canada, $491m in USA, $337m in Chile, and $1m in the UK – out of a total of $6506.

    For this company, they seem to pay the taxes where the bulk of the operations are.

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