Public feeling towards big businesses when it comes to tax avoidance is suspicious at best and apoplectic at worst. The latest culprit to get the British public’s blood boiling was Cadbury’s owner Mondelez International, which paid a grand total of £0 in corporation tax in the UK last year – on more than £2bn in revenues.
But while public perception of the snack firm isn’t so sweet, the FTSE 100 is doing its utmost to show not all big firms should be tarred with the same brush. So to prove a point, the 100 Group, which represents the FTSE 100 along with some other large private and multinational companies, has announced its members paid a total of £80.5bn in tax last year.
That's up from £80bn in the previous year, but it's worth noting that a great big chunk of that is coming from employees. To calculate the total tax contribution paid, the 100 Group and PwC included the income tax and national insurance paid by staff on their salaries, which totalled £57.6bn Taxes borne as a direct cost to firms dropped by 1.8% to £22.9bn this year due to the reduced rate of corporation tax and lower profits.
‘It’s said that companies aren’t paying their fair share,’ said Simon Dingemans, the finance director of pharmaceuticals group GSK and chairman of the 100 Group. ‘It’s the opposite. We are paying our fair share while making a significant contribution to the economy.’
You can see why some firms might be feeling sore, but while it’s certainly good to see companies outwardly playing nice, there’s something to be said when this itself is news rather than the perceived norm.
While much has been made of Britain boasting the joint lowest corporation tax rate in the G20 (and set to drop further still by 2020), spare a thought for the British businesses not only shelling out their fair share of tax, but also bracing themselves for the incoming living wage.
A report from the Regulatory Policy Committee, which advises the government, has estimated the change in April, when workers aged over 25 will begin receiving a minimum of £7.20 per hour, will mean UK businesses face more than £1bn in costs from introducing the national living wage.
That includes £804.4m in extra wages and staff costs, while a further £234.3m of ‘spillover’ costs from maintaining pay differentials will take it over £1bn. The amount rises further still when the public sector is included, as more workers are already paid over the living wage.
With that eye-watering total on the horizon (along with the apprenticeship levy which has been met with a mixed response from businesses), the 100 Group dropping this announcement might also be a gentle reminder to George Osborne to keep his promise on fewer regulatory hurdles and lower tax.