Large UK firms paying less tax, data reveals

LONDON (ShareCast) - Major UK firms are paying less tax than they did 12 years ago, according to a Reuters analysis of official data.

This decline comes despite a rise in profits from companies. The gross operating surplus for all UK companies has risen 65% to £329bn and the economy has grown by 55% over the same period.

Big companies in Britain paid a total of £21bn in corporate income tax in 2011/12 - down £5bn or 21% since 2000/01 when the government moved towards a more business-friendly strategy, figures from the UK tax authority Her Majesty's Revenue and Customs (HMRC) revealed.

Tax campaigners believe the figures indicate tax avoidance under a collaborative approach to large organisations under the HMRC.

However HMRC and finance ministry refuted claims that the results pointed towards a rise in tax avoidance, instead citing recent economic weakness and lower corporation taxes.

The UK's official corporation tax rate was steady at 30% from 2000 to 2007. The tax has been cut back progressively with last year's at 26%.

Reuters calculated that lower tax rates and the weak economy accounted for about half the decline. However, there is £2.6bn unaccounted for in the difference between the corporate tax paid between 2000/01 and 2011/12.

John Christensen of Tax Justice Network told the news wire service that the figures revealed the government's attempts to help businesses. The government's policy, known as "enhanced relationship", based on mutual trust have encouraged companies to use such strategies.

"These figures tell a more powerful story than any figures I have seen so far," he said.

He added that senior HMRC employees had said in recent years that they were "alarmed" at the drop in payments from large companies - firms with annual profit of more than £1.5m.

The finance ministry declined to comment.

RD