Margaret Hodge: Gatwick runway appeal ‘is hypocritical when it avoids corporation tax’
Date added: October 15, 2014
Gatwick has been accused of “hypocrisy” for avoiding corporation tax while campaigning to build a new runway, allegedly for the benefit of the UK economy. Margaret Hodge, head of Parliament’s Public Accounts Committee, said the airport should pay its “fair share” if it wants its runway campaign to be credible. She also criticised Heathrow which has not paid corporation tax for several years. But she particularly criticised Gatwick. Its Guernsey-based parent company Ivy Mid Co LP has invested in a £437 million “Eurobond” which charges the airport 12% interest, thus avoiding tax. Gatwick says this sort of bond is often used by other infrastructure companies. Companies in the UK should pay 21% corporation tax on profits, but by spending £1 billion on upgrading the airport, Gatwick has made no profit recently. Despite pre-tax loses in recent years, it has paid dividends to its overseas shareholders of £436 million. Heathrow has also avoided profits by investing in new buildings etc. Mrs Hodge said the companies “made a fortune” from their UK activities, which relied on public services, adding: “For them to pretend they are only in it for the benefit of the UK economy is a touch hypocritical.”
Gatwick runway appeal ‘is hypocritical when it avoids corporation tax’
Margaret Hodge, head of the powerful Public Accounts Committee, said Gatwick should pay its “fair share” of corporation tax
Gatwick bosses were today accused of “hypocrisy” for avoiding corporation tax while campaigning to build a new runway for the benefit of the UK economy.
Margaret Hodge, head of the powerful Public Accounts Committee, said the airport should pay its “fair share” if it wants its campaign to be credible.
She also criticised Heathrow airport which has not paid corporation tax, levied at 21 per cent on company profits, for several years.
But it is the tax affairs of the Sussex airport that have caused the most controversy following an investigation by the Standard. Gatwick’s Guernsey-based parent company Ivy Mid Co LP has invested in a £437 million “Eurobond” which charges the airport 12 per cent interest and which critics say is designed to avoid tax.
Gatwick said tax authorities were “wholly aware” of their funding structure, and the Eurobond was commonly used by other infrastructure companies. The scheme had not helped the airport avoid tax as it was not in a profitable situation due to the cost of a £1 billion upgrade to the airport under its new owners, Gatwick said.
Accounts for the past four years for Gatwick Airport Limited (GAL) show pre-tax losses of £322 million and a tax credit of £192 million, but despite these losses it has paid dividends to its overseas shareholders of £436 million.
The Standard has also learnt that Heathrow has not paid corporation tax for several years, offsetting the cost of a new terminal to build a tax credit of £234 million despite pre-tax profits of £429 million.
But the airport, which says it is key to the UK’s economic growth, said it “looked forward to” paying corporation tax later this year and did not “route funds through tax havens”.
Ms Hodge, a potential London mayoral candidate, said that ministers should put airports under pressure to pay corporation tax as the bidding process for airport expansion reaches its conclusion next spring.
She said the companies “made a fortune” from their UK activities, which relied on public services, adding: “For them to pretend they are only in it for the benefit of the UK economy is a touch hypocritical.”
A Gatwick spokesman said: “Gatwick Airport is fully compliant with UK tax law and HMRC are wholly aware of our funding structure.”
A Heathrow spokesman said it complies with all tax rules, does not operate tax avoidance measures, and is “entirely UK based for tax purposes”.
Gatwick airport announces first profits for years and returns for its investors … UK tax?
Gatwick Airport paid no Corporation Tax in three years
Irish clampdown on tax avoidance will be followed by the UK
By Kamal Ahmed (BBC)
oday the Irish government announced something very significant. The closure of the notorious “Double Irish” tax loophole.
The reason it’s important is not because it is changing Ireland’s tax regime, which it is.
It is important because the double Irish is the method by which global companies reduce taxes on the businesses they run around the world.
And the Treasury is following developments closely and is poised to launch its own crackdown on “diverted profits”, which is what the double Irish allows companies to do.
Google and Facebook have both been fingered for using the scheme – as have a number of pharmaceutical firms.
It enables businesses – via a complex system of royalty payments – to move revenues to locations which are described as “tax efficient” – such as low-tax Ireland and no-tax the Bahamas.
Campaigners argue that tax efficient should be more suitably described as tax avoiding.
The companies say that they are simply following the rules.
It wasn’t Eric Schmidt, the chairman of Google, who decided that Ireland would allow a system to develop where corporations were effectively “stateless” for tax purposes, and could therefore move payments to tax havens like the Bahamas whilst still creating huge revenues in Europe via a company based in Dublin.
The use of the double Irish has had the effect of reducing the available taxes paid to countries where Google and Facebook operate, including the UK.
George Osborne raised the issue in his Conservative Party conference speech last month.
“While we offer some of the lowest business taxes in the world, we expect those taxes to be paid – not avoided,” he said.
“Some technology companies go to extraordinary lengths to pay little or no tax here. If you abuse our tax system, you abuse the trust of the British people.
“And my message to those companies is clear – we will put a stop to it.”
I am told that Treasury officials are now busy constructing new rules that will stop the diverting of profits made in the UK via intellectual property payments to company subsidiaries.
One source told me that profits made in Britain would be taxed in Britain.
This could make a significant difference to companies like Google and Facebook, which generate large amounts of revenue in the UK but do not pay significant amounts of tax.
The chancellor wants to make the move part of his “fairer markets” agenda.
He will need to convince campaigners that this is not just window dressing.
And his message on not avoiding taxes can become confused given that Mr Osborne also trumpets policies like the patent box. This makes it tax efficient to complete research and development in technology and pharmaceuticals in Britain.
Interestingly, whilst abolishing the “double Irish”, the finance minister, Michael Noonan, did announce the creation of Ireland’s equivalent of the patent box – the knowledge development box.
Tax competition will always exist. Governments want to encourage investment in certain sectors in their own countries and jealously guard their right to do so.
The most egregious might be limited. But don’t imagine that companies searching the globe for the best, most tax efficient, place to do business is going to end any time soon.