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FTSE100 Tax Burden Grows

Thursday, March 4, 2010

The UK total amount of tax collected by the UK's largest listed companies on behalf of the country's government has grown significantly as a proportion of total corporate earnings since 2007, a new survey has found.

The survey, conducted by PricewaterhouseCoopers for The Hundred Group of FTSE 100 Finance Directors, found that, despite the depressed economic environment, the total tax rate for FTSE100 firms - the 100 largest firms listed on the London Stock Exchange - increased from an average of 38.2% of total earnings in 2008 to 41.6% in 2009. This represents a year-on-year increase of 9% in FTSE 100 companies’ average total tax rate.

The UK’s largest companies paid or collected GBP66.6bn (USD100bn) in taxes during the 2008/2009 tax year, the survey found. While corporation tax payments fell 6.4% to GBP10.3bn over the period, other taxes did not reduce in line with declining profitability and therefore account for a higher proportion of overall earnings.

Taxes on employment represent a significant and growing proportion of the total tax burden: The Hundred Group FTSE 100 companies now pay employment taxes to the UK Exchequer which equate to an average of GBP17,721 per employee.

Ashley Almanza, chairman of The Hundred Group of Finance Directors, said: “FTSE 100 businesses play an integral role in the UK economy, providing employment to 1.7 million people – many of them in highly skilled roles – and generating almost 13% of the government’s total tax receipts.”

While Treasury minister Stephen Timms claimed in a recent speech that the UK's corporate tax rate, at 28%, is the "most competitive corporation tax rate of the major economies," the results of the survey are likely to merely confirm fears in the world of enterprise that the UK is becoming an increasingly uncompetitive place in which to do business.

“The Hundred Group survey reveals that total UK tax contributions are absorbing an increasing proportion of the value generated by FTSE 100 companies," Almanza continued.

"This presents a growing challenge for the UK’s largest firms. To be competitive, companies need to ensure that their capital and investment in people, skills and innovation are targeted at countries whose business environments and tax systems are internationally competitive,” he concluded.