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The tax rate paid by the top UK-listed companies fell in 2012 for the fourth year running, according to UHY Hacker Young.
Research by the national accountancy group shows that the average effective tax rate of FTSE 100 businesses – the value of global taxes charged as a percentage of global profits – is currently 24.5%, compared to 26% this time last year and 35.8% in 2009.
The increasingly international nature of the FTSE 100 Index means multinationals are generating greater profits overseas, allowing them to take advantage of lower prevailing tax rates.
They have also been able to reduce their liabilities as a result of reductions in levies against big firms in countries including the UK.
Canada, Finland, Greece, and New Zealand all recently trimmed their headline corporation tax rates, while Italy increased the generosity of its business tax reliefs.
“International competition to attract corporate tax revenues is as fierce as ever, with countries offering new enticements to businesses in the form of allowances, reliefs, or tax cuts,” said UHY Hacker Young’s London head of tax, Roy Maugham. “This means the overall FTSE 100 effective tax rate is pushed lower and lower.”
His comments follow the news last week that FTSE 100 chairpeople believe the public is justified in its anger at how well-known multinationals are able to minimise their tax bills.
Maugham expressed sympathy for the likes of Google, Amazon and Starbucks, which continue draw criticism in the UK in spite of having contravened no local tax laws.
“Multinational companies are in a difficult position… as there’s a lot of confusion in public discussions about the ‘right’ level of tax. It can be perfectly legitimate for UK companies to pay parts of their tax bill in overseas jurisdictions with lower rates,” said the UHY Hacker Young boss.
“The rules on the taxation of multinationals are very clear, though, and if companies did cross the line with the movement of profits overseas, HMRC would be on them like a flash.”
