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Big business makes more money but pays less tax as small firms are hit harderCorporation tax payments by UK's largest firms have fallen by more than a fifth since 2000A report warned cash payments could cost families over 200 each yearInvestigation found profits of big businesses have risen by 65% to 329bn
00:07 GMT, 28 December 2012
Strong criticism: Lord Oakeshott slammed the 'culture of collusion' between large companies and HMRC
The full extent of tax avoidance by big business was laid bare yesterday on a ‘black day’ for taxpayers.
Despite soaring profits, corporation tax payments by the UK’s largest firms have fallen by more than a fifth since 2000.
In the same period, the amount contributed by small businesses has almost trebled.
And a report on illegal tax evasion warned cash payments hidden from the taxman could cost families more than 200 each a year.
Critics last night slammed the ‘culture of collusion’ between large companies and Her Majesty’s Revenue and Customs.
‘It’s a black day for hard-pressed families and small businessmen who can’t afford millionaire lawyers and accountants to bamboozle the taxman,’ said former LibDem treasury spokesman Lord Oakeshott.
‘HMRC cosied up to the big tax dodgers under Labour and the coalition Government must stamp out this culture of collusion.’
In 1999 then-chancellor Gordon Brown abandoned plans for a crackdown on tax avoidance. Two years later he began telling tax officials to work on the basis of ‘mutual trust’ with large firms.
But an investigation by financial news service Reuters discovered that, since 2000, the profits of big businesses have risen by 65 per cent to 329billion last year.
In the same period the amount of corporation tax paid to the Exchequer has slumped by 5billion, falling 21 per cent from 26billion to less than 21billion in 2012. Tax experts decried the figures as ‘paradoxical’. ‘How are they managing to reconcile higher profits with lower taxes’ said Prem Sikka, professor of accounting at Essex University.
‘It can’t be done, unless they are booking these profits somewhere else. Corporate profits have risen, so you would have expected corporation tax payments to rise.’
Lord Oakeshott added that HMRC (headquarters pictured) cosied up to the big tax dodgers under Labour. An investigation discovered that, since 2000, the profits of big businesses have risen by 65 per cent
Any company making 1.5million or more in profits is counted as ‘big’ by HMRC, because they qualify for the full rate of corporation tax. In 2000 there were 38,000 such firms, rising to almost 40,000 last year.
In the same period, HMRC figures show the amount of corporation tax paid by small companies rose from 4.4billion to 12.1billion.
Tax accountant Richard Murphy said: ‘This is a game of two completely different halves. Large companies have had a great time, making more profit and yet seeing their taxes fall.
‘Small companies have had a much harder time, growing by number but with the tax system not doing them any favours.’ Multinationals such as Google, Starbucks, Amazon and Facebook have been lambasted for their ‘immoral’ tax avoidance policies.
Multinationals such as Starbucks have been lambasted for their 'immoral' policies
On sales of 2.6billion last year in the UK, Google paid just 6million in corporation tax. HMRC said the fall in big business payments was due to lower corporation tax rates.
A spokesman said: ‘HMRC ensures multinationals pay the tax due in accordance with UK tax law. We have been very successful in reducing tax avoidance by large businesses in recent years.’
From 2000 to 2007, the rate of corporation tax was 30 per cent. It was reduced to 26 per cent last year.
But Reuters said this only amounts to half the difference – leaving 2.6billion unaccounted for.
Another factor was overseas takeovers of firms, such as Cadburys and Boots, where the tax base is moved to more lenient regimes.
Meanwhile, a study by the TaxPayers’ Alliance showed illegal tax evasion could cost the UK more than 6billion a year, the equivalent of 219 for every household.
The report found the level of ‘direct tax’, such as income tax and capital gains tax, led to the loss of 3.6billion in 2010 as it was so high that people chose to risk not paying it.