Cost of FIDs reaches pounds 120m

Click to follow
The Independent Online
The cost to the Government over its proposals to abolish foreign income dividends (FIDs) continued to mount yesterday after four more companies joined the growing list of UK multinationals rushing to take advantage of FIDs before they are scrapped in 1999.

Since the Budget a fortnight ago, nine companies have announced they are either paying FIDs for the first time or are extending their FID schemes. Already the cost exceeds pounds 120m to the Inland Revenue in uncollected taxes, suggesting its estimates that it will lose just pounds 200m over the two-year loophole period are far too low.

Companies affected by the abolition, which will mean double taxation of overseas earnings, again called for the Government to scrap corporate taxes on dividends. A CBI committee, which met with the Government a week ago, was told there would be a shift in the proposals but companies "should stop complaining to the media about the implications," said an involved party.

Tomkins, the guns to buns conglomerate, yesterday revealed it may pay its entire dividend as a FID following the Budget proposals. Ian Duncan, finance director, said the move could save the company at least pounds 10m in extra taxation. "If this two-year window is going to exist, then clearly we should maximise our use of FIDs," he said.

Burmah Castrol, the oil giant, said yesterday it would extend its FID payouts if the Government did not amend Budget proposals detailed in the forthcoming Finance Bill. "Abolishing FIDs will raise our taxes by pounds 6m a year," said a spokesman.

Both Grand Metropolitan and Scapa, the UK chemicals group, announced yesterday they would pay FIDs for the first time. GrandMet said the move would save around pounds 33m a year. On Wednesday Siebe and drugs group Medeva joined the list.

UK companies which have extensive overseas earnings have been lobbying for a change in the proposals, with some threatening to leave the UK and others pleading they would become more attractive to foreign predators. Most, like Tomkin's Mr Duncan, believe the best solution is an abolition of ACT, the dividend tax, and a change to an instalment system of paying mainstream tax.