Market leading insight for tax experts
View online issue

PwC defends tax contribution report as Gauke urges companies to 'engage'

printer Mail

Businesses should be more transparent about the tax they pay and open themselves to greater scrutiny, David Gauke, the Exchequer Secretary to the Treasury, said in a speech to the Centre for Business Taxation at Oxford University.

A week earlier, in a speech to finance directors of some of the UK’s largest companies, Gauke claimed that there were ‘poisonous elements’ of the current debate about HMRC’s handling of tax disputes that were ‘simply motivated by anti-business sentiment’. But the government was ‘wholly and completely committed’ to protecting taxpayer confidentiality.

PwC's report suggested that the ‘total tax contribution’ of the UK’s largest companies rose to £67.7bn in 2011. That figure included £42.7bn of taxes collected but not borne by the companies themselves.

‘In some ways it’s because of that commitment that current debate on tax in the UK has become so distorted and detached from reality,’ he said. But in the same speech Gauke praised PwC’s work in producing a report suggesting that the ‘total tax contribution’ (TTC) of the UK’s largest companies rose to £67.7bn in 2011. That figure included £42.7bn of taxes collected but not borne by the companies themselves.

Critics have argued that the TTC methodology is flawed because a significant proportion of the total ‘tax take’ is borne by the companies’ employees and others.

Gauke told the Hundred Group of finance directors that he was ‘grateful’ for work undertaken by PwC to ‘shine a light on the complex, and as we’ve seen over the last year, contentious issue of business taxation’. He noted that ‘the Hundred Group alone employs over 2m people across the UK, paying or collecting almost £70bn in total tax receipts for the Exchequer’.

PwC said: ‘For every £1 paid in corporation tax in 2011, firms paid a further £1.53 in other taxes borne, and helped generate an additional £4.16 through taxes they collect and administer such as PAYE.

‘Taxes borne are the company’s immediate cost and will impact their results, such as business rates, corporation tax, employers' NICs and irrecoverable VAT. Taxes collected are those generated and administered by firms such as income tax under PAYE and NICs from employees, general VAT and excise duties.’

The report’s executive summary pointed out that ‘employment taxes are a good indicator of the direct benefit to the Exchequer of jobs created and maintained by companies’.

A PwC spokesperson told Tax Journal that the thinking behind the TTC framework was that ‘the wider contribution’ could be overlooked, as people focused on the corporation tax paid on profits rather than the contribution larger companies made ‘in terms of employing people, among other things’.

‘Myths and confusion’

Addressing the Centre for Business Taxation on 8 March, Gauke said a competitive business tax regime was at the heart of the government’s commitment ‘to build a pro-business culture in Britain’.

He called on businesses to ‘lead from the front’ and engage in the debate about the ‘benefits of a more competitive tax system’. It was up to businesses ‘to be more transparent in setting out the tax they pay, to open themselves to greater scrutiny, and to demonstrate how critical business success is to the prosperity of individuals and families across the economy’.

He added: ‘It’s only through engagement and transparency that we can address some of the myths and confusion on tax, and build a more informed debate.’

The Hundred Group represents the views of finance directors of FTSE 100 companies and several large private companies. The Centre for Business Taxation was ‘founded using generous funding from companies from the Hundred Group’, according to its website. ‘Subsequently, other companies have also offered us their support.’ The CBT’s current sponsors include Reed Elsevier plc, the parent company of Tax Journal’s publisher LexisNexis.