Whilst the government is seeking to reduce the financial burden caused by those claiming incapacity benefit, and encouraging everyone to work until they drop to remove the need for pensions, the Corporations are fighting to preserve their 'creative' accounting practices to maintain their profitability.
The CBI is insisting not only that the business tax burden be reduced, but that anti-avoidance taxation measures be abandoned. They claim that these proposed actions are a 'covert means of extending the tax base whilst circumventing previously accepted tax principle and practice.' Similarly they oppose windfall taxes.
Company tax avoidance practices result in a considerable reduction in expected taxation income. This reduction is, on average, nearly 6% (and rising) less corporation tax paid by the UK's top 50 companies than is expected. For the year 2004/5 this amounted to £4.6 billion lost tax revenue, and £20 billion in the last 5 years. When extrapolated to the rest of the UK's companies the tax loss could be as much as £9.2 billion per year.
There are a number of reasons for this expected, but unpaid tax. These include misleading declared tax liabilities, information hidden in the accounts in a manner to prevent interpretation, and deferred tax.
Deferred tax accounts for a large proportion of the missing tax, and has risen by £3 billion a year since 2002. It now stands at £36 billion for the top companies. The tax breaks which have allowed this £36 billion tax subsidy to business are the result of corporate tax allowances given to encourage capital investment. However, they are interest free, and have no specified repayment date. In fact deferred taxation provisions can be used whether or not there is any possibility of the amounts owed being repaid.
The European corporate world is intent on presenting a vision of capitalism with conscience, and have introduced CSR (corporate social responsibility) for its finance sector. The European economy is the second largest in the world with a GDP (gross domestic product) of $8.2 trillion, and therefore has great clout. This voluntary CSR effort has been merely a smokescreen. The finance sector is devoid of any real level of social responsibility, it is unscrupulous, corrupt and unwilling to tackle such issues as climate change, poverty, human rights and sustainable development.
The finance sector:
provides havens for the wealthy minority who siphon off cash at the expense of developing countries;
places economic benefits above the risks of climate change;
provides loans to repressive regimes which fuel bribery and corruption;
provides high interest loans to those least able to repay, thus perpetuating poverty whilst reaping record profits;
finances projects that threaten human rights; and
does not fully assess the environmental impact of the projects it funds.
Additionally competition for investment in developing countries can lead to the lowering of standards.
And so the business world continues its profit quest at will, with little heed for any other consequence. Governments are unable and/or unwilling to exercise any control, and the self regulation of greed is just a joke.
CBI Recommendations For The Autumn 2005 Pre-Budget Report
Mind The Tax Gap
A Big Deal? Corporate Social Responsibility and the Finance Sector in Europe