Post by Focus on Jun 29, 2013 6:05:45 GMT
* Nine water firms paid just £541million in tax on £10billion profits
* Conservative MP Charlie Elphicke reveals tax avoidance in the Commons
* All the ploys revealed to be used by the firms are entirely legal
Britain's privatized water firms have ‘abused’ loopholes in the law to dodge more than £1 billion in tax since the election.
A dossier of shame reveals nine water companies, seven of which are foreign owned, have racked up operating profits totaling £10 billion since 2010 but paid just £541 million in tax.
This equates to a tax rate of just 5.3 per cent. Corporation tax on operating profit is normally 23 per cent.
Down the drain : The Treasury has missed out on £1 billion i tax from utility firms, it has been claimed
At the same time, two of the country’s biggest energy firms, also foreign-owned, made combined profits of £1.7 billion but paid no tax at all.
Meanwhile soaring utility bills have left millions feeling the pinch. Average water bills have gone up by 14.5 per cent, while electricity bills have soared by 24.8 per cent and gas bills by 33.9 per cent.
The average family has seen its annual utility bills rise by £384.
The revelations are embarrassing for David Cameron who has pledged to clamp down on tax avoidance by multinationals.
The details were revealed to the Commons by Tory MP Charlie Elphicke, a tax lawyer, who called on ministers to force water and power firms to cut their bills if they continued to avoid paying tax.
There is no suggestion that the firms involved have broken the law, and they all deny wrongdoing. But Mr Elphicke said the scale of the tax avoidance was staggering.
‘Foreign-owned utility companies, particularly in the water industry, have been engaging in tax schemes using debt interest to avoid tax, which on my calculation over the last three years indicates that the Exchequer has lost £1billion,’ he said.
He went on: ‘They should either be subject to a windfall tax or reduce customers’ bills.’
Friendly fire : The revelations to the Commons by Tory backbench MP Charlie Elphicke, above, a lawyer, are embarrassing for David Cameron, below, who has pledged to clamp down on tax avoidance by multinationals
Mr Elphicke told MPs that the firms were ‘abusing’ generous tax reliefs that allow companies to offset debt interest payments against tax. He said firms were borrowing huge sums off subsidiaries and sister companies, sometimes in tax havens, and then offsetting the interest payments against tax.
He singled out Yorkshire Water as an ‘especially egregious’ example, saying the giant, which is owned by an international consortium, had generated £990 million in operating profits over the last three years, yet managed to bank a net tax credit worth £46.2 million.
Southern Water, which is also owned by an international consortium, paid net tax of £45.9 million on profits totaling £767 million in the last few years. Foreign-owned Anglian Water generated operating profits of £1.4 billion over the period, but paid tax of just under £125 million.
Mr Elphicke accused energy firms of exploiting similar practices. He said EDF, which is owned by the French government, made £268.4 million in interest payments to group companies, potentially avoiding £70 million in tax. And German-owned Npower made £358 million in interest payments, saving a potential £93 million in tax.
Mr Elphicke called for tax relief to be removed from interest payments to group companies to help curb the abuse.
Feeling the pinch : Average water bills have gone up by 14.5 per cent, while electricity bills have soared by 24.8 per cent and gas bills by 33.9 per cent, meaning the average family's utility costs are up £384
Richard Murphy, of Tax Research UK, said lax UK rules meant avoiding tax was ‘as easy as taking candy from a baby’ for multinationals.
‘There are several serious problems with the system which leads it wide open to abuse,’ he said.
Earlier this month it emerged that Australian-owned Thames Water paid no tax last year despite racking up pre-tax profits of £145 million.
Treasury Minister David Gauke insisted ministers were making progress in tackling tax avoidance.
He said HM Revenue and Customs had secured £8 billion of additional revenues from large companies through tax compliance work in 2012/13 and over £23 billion over three years.
The companies involved insisted they had done nothing wrong. Most said they had to borrow large sums in order to fund investment in infrastructure in the UK.
Npower said it ‘has not, and will not, engage in tax avoidance’ and said its corporation tax bill was low because it made losses in its retail business and ‘invested billions into the UK’.
Southern Water said water companies ‘invest significant amounts in maintaining and improving infrastructure’ and this is taken into account when calculating the tax payments.
An EDF spokesman said it pays the corporation tax due each year and makes a significant contribution to the UK economy.
An Anglian Water spokesman said it made a ‘huge contribution’ to the economy and pays more than £150 million a year directly and indirectly in different taxes. ‘Our Corporation Tax bill is reduced by specific government incentives and deferred not avoided.’
Yorkshire Water could not be contacted for comment.
WHO OWNS OUR WATER?
The nine water firms examined by Mr Elphicke were:
SOUTHERN WATER: Owned by an international consortium including JP Morgan and Australia’s Challenger Bank
YORKSHIRE WATER: Owned by a consortium including the government of Singapore and Citi
WESSEX WATER: Owned by Malaysian firm YTL Power International
ANGLIAN WATER: Owned by consortium including a Canadian pension fund and two Australian investment funds
SOUTH EAST WATER: Owned by an Australian consortium
THAMES WATER: Owned by Australia’s Macquarie bank
NORTHUMBRIAN WATER: Owned by Hong Kong tycoon Li Ka-shing
SEVERN TRENT: Listed on the London Stock Exchange
UNITED UTILITIES: Listed on the London Stock Exchange
The nine firms represent most of the major water companies, although a large number of small firms take the total for England and Wales to 27.
An Anglian Water spokesman said [‘Our Corporation Tax bill is reduced by specific government incentives and deferred not avoided’] Yorkshire Water could not be contacted for comment and the majority of the companies left are foreign owned, when is Cameron finally going to put an end to these avaricious b..tards ripping the British people off and adding insult to injury by allowing them to do it virtually tax free??? - Fx
