What’s the net effect here?

They point to Diageo, which agreed in July to pay an extra £190 million in conventional corporation tax in order for HM Revenue & Customs to return £107 million it had paid previously in diverted profits tax.

Other as yet unidentified multinationals are also agreeing larger corporation tax payments to avoid the embarrassment and reputational damage of being seen as paying DPT, a tax introduced in 2015 to crack down on the most egregious forms of tax avoidance.

Last year Diageo, which operates in 180 countries and makes Guinness and Gordon’s Gin, was one of the first companies to admit that it was being asked to pay diverted profits tax, revealing that it had paid up despite challenging the demand.

The sum will now be paid back by the taxman, but in exchange Diageo has agreed to pay an extra £143 million of corporation tax in respect of the three years to June 2017 and, using the same approach, has earmarked an extra £47 million that it will pay for this year.

DPT paid over how many years? Corporation tax paid over how many years?

Is this a net gain to the Treasury or not?

9 thoughts on “What’s the net effect here?”

  1. It is a net gain compared to Treasury receipts in the absence of DPT.

    There is supposed to be a stigma attached to DPT so that some companies may be willing to pay slightly more CT than the DPT in order to avoid paying and reporting DPT. Wimps.

  2. Agreed, Alex.

    ‘Companies pay millions to avoid shame of Google tax’

    Shame?

    Perhaps Diageo is using this as a marketing opportunity.

  3. ‘a tax introduced in 2015 to crack down on the most egregious forms of tax avoidance.’

    Patrick Hosking, Financial Editor, thinks following the law can be egregious.

    I think I’ll join the protest by buying some of their gin.

  4. It looks like they’re making a large back-payment of Corporation Tax to avoid a future on-going liability for Diverted Profits Tax. Agreed that the article doesn’t explain the numbers well, and makes it sound like they’re spending £83m on not being associated with a bad word. I can’t imagine the average Diageo customer gives a flying monkey’s about how much CT is paid, and cares rather a lot more about the eye-watering levels of alcohol duty.

  5. “What’s the net effect here?”

    “Corporation tax of 190 was not collected when due and tax already paid of 104m is to be repaid. The justification for this repayment is not given. I suspect HMRC have not investigated whether it is properly due. Using simple arithmetic and logic, Diageo’s contribution to the tax gap in relation to this single matter is 190m + 107m, nearly 300m.”

    Richard Murphy

  6. Small point. Corporations really don’t pay much tax at all. They collect and hand over lots of tax, but actually pay it, no. The bulk of CT is incident on some combination of customers, employees and owners.

  7. Bloke in Costa Rica

    That’s pushing on an open door round these parts, MrQuiteQcross.

    There is no such thing as tax avoidance. There is such a thing as arranging one’s affairs so as to minimise one’s tax exposure, but one cannot avoid something that was never aimed at one in the first place, and if the law says you don’t owe the money then you don’t owe the money, tant pis to Spud, Philip Hammond, Jon Thompson, and Uncle Tom fucking Cobleigh.

  8. I see Richard Murphy is on one of his periodic rants because the Revenue isn’t listening to him. Hence a near-£200m settlement means “HMRC have not investigated whether it is properly due.”

    P.S. “have”? Is there more than one HMRC?

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