Wednesday 25 February 2015

Why companies DO pay tax and not just pass it on to their customers

Let us take for our example a company with a pre-tax profit of £100m per annum.

At the old UK Corporation Tax rate (of 28%) they would have paid £28m in Corporation Tax.

Now, with the coalition 'business friendly' UK Government, Corporation Tax has been reduced to 21% giving the company directors the happy task of deciding what to do with the windfall £7m spare cash.

This is how I see their options:-

1/ Pay themselves the money as a 'reward' for their inspired business leadership.

2/ Put the money in an offshore account to secure company profitability for subsequent years.

3/ Pay the money out to shareholders.

4/ Invest in expansion of the company.

5/ Give the company workforce a pay rise. (just kidding)

6/ Use some of it to make a large contribution to a political party to reduce Corporation Tax to 15% next year.

7/ Reduce prices for the company's customers.

Now, which option do you think they would choose?
 
As the executives, more than likely, have advantageous tax exile or non-dom status, corporation tax is the ONLY way to gain any tax revenue from them.

Remember - Every penny not paid by companies is paid by the ordinary citizens via P.A.Y.E. and V.A.T.

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