War On Want Goes Doolally Over Alliance Boots
WAR on Want has decided to show its gross ignorance by complaining about the tax affairs of Alliance Boots. It’s their new big campaign, they’ve even gone off and complained to the OECD about it all. But the problem is that they’ve not actually shown that any tax has been avoided: not even shown that less tax has been paid overall.
New research shows that Alliance Boots, the high street chemist and pharmaceutical giant, has avoided more than £1 billion in tax since it went private six years ago through taking on excessive debts, profit shifting and corporate restructuring. This report, Alliance Boots & The Tax Gap, published by War on Want, Unite the Union and Change to Win, exposes the full scale of Boots’ tax avoidance for the first time.
There’s a problem with this though.
OK, their complaint is that Boots used to be funded largely through equity. That means that profits were made, corporation tax charged to those profits and that’s just lovely. Along came the corporate raiders who borrowed $9 billion and bought the company. The company now has to pay the interest on that $9 billion. That interest is tax deductible to the company because it is an expense of the business. Thus corporation tax revenues fall and that is not lovely.
And that is their case: that’s what they’re complaining about. But they miss the very important point that the interest paid, while it is not taxed at the level of the company, is taxed at the level of the recipient. Someone holding those bonds will pay income tax on the interest. A company holding the bonds will pay corporation tax on such interest. There isn’t necessarily any reduction in tax being paid here. Indeed, it’s possible (especially if the bonds are held by high income people) that the total tax bill will be higher as a result of the paying of interest rather than corporation tax.
Which is something of a problem for this little campaign really. There’s no evidence at all that the tax bill is lower. So what the hell are they complaining about?
Posted: 18th, December 2013 | In: Money Comment (1) | TrackBack | Permalink
