Outlook: Time up for an antiquated tax
Friday 03 October 1997
FIDs are the only way UK companies can avoid paying tax twice on dividends paid out of overseas earnings. No where else in the world do companies have to worry about where they get their profits from to pay their dividends. Without FIDs, UK companies like BAT, RioTinto and Glaxo Wellcome which make most of their money outside the UK would face a soaring ACT bill which they cannot offset against mainstream tax.
As things stand, UK companies face an uncomfortable choice from 1999 onwards; either curb their foreign expansion or pay the penalty. That rather flies in the face of Labour's desire to boost Britain's interests abroad. Abolishing ACT would allow British companies to invest overseas on rational financial criteria without the fear of keeping enough business in the UK to satisfy the tax system. It would also make the UK market more transparent and attractive to foreign companies.
The problem is that scrapping ACT has other attractions that Labour will be less inclined to encourage. Water companies with large capital investment programmes will do very nicely out of the abolition of ACT, thankyou very much. Lossmakers will also benefit. Losses mean no mainstream tax bill, so there is nothing to offset ACT against. Scrapping ACT will also undoubtedly result in more share buy backs. Companies like Reuters, which want to pay out capital, incur ACT if they initiate a normal buy back. Corporate financiers are feverishly attempting to find ways around the problem, but nothing has yet adequately replaced the ACT liable share buy back.
Regardless of these politically less palatable side effects, however, it would be madness for the Government to persist with this antiquated form of taxation. The sooner it is replaced with a phased system of corporation tax payments, the better.
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for Jennifer Lawrence naked photo leak
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now'
4Chan 'nude photo hacker' claims there are hundreds more celebrity images to be published
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Ariana Grande nude photos leak: 'These are completely fake' say singer's representatives
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
iJobs Money & Business
£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...
£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...
£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...
£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...