Revealed: Murdoch's tax holiday

Rupert Murdoch's News International has paid virtually no tax in the past 10 years, despite racking up net profits of nearly pounds 1bn since 1986.

The publisher of four national titles, including the Times and the Sun, earned pounds 779m in the year to the end of last June alone, but paid only pounds 8.3m tax.

In the 10 years since 1986, NI has made accumulated pre-tax profits of pounds 979.4m (net of losses) but paid just pounds 11.74m in net tax, a rate of under 1.2 per cent. Corporation tax in the UK is set at 33 per cent, and most firms pay tax of between 20 and 30 per cent of their profits.

NI's national newspaper competitors all paid between 20 per cent and 29 per cent in tax on their 1994 earnings.

The extent of the tax avoidance - which accountants confirmed is completely legal - is revealed in an Independent investigation published today, and is bound to stir controversy on the eve of the Budget.

Behind this unprecedented tax holiday lies a chain of financial transactions of Byzantine complexity, sometimes involving letter- box companies in offshore tax havens. NI's published accounts contain a list of 28 subsidiaries, of which 10 are labelled "finance" companies.

Profits and losses are moved around the group. The end result, together with the entirely normal use of past tax losses, is to reduce the parent company's tax liability to nil. NI is able to decide where to pay tax and when.

Labour's spokesman for City matters, Alastair Darling, said his party was looking at ways to reform the rules governing corporate taxation, particularly the use of group tax relief by large corporations.

At the Labour Party Conference, Gordon Brown, the shadow Chancellor, criticised companies which did not pay their fair share of tax.

Some of the company's tax avoidance can be explained by the entirely normal use of tax losses from previous years. The high costs of building up BSkyB, the company's satellite broadcaster, as well as the move of Mr Murdoch's titles to Wapping, created losses that can be applied to current and future profits.

But these tax losses do not fully explain the extent of the tax holiday NI enjoys.

According to accountants consulted by the Independent, some of the transactions listed in NI's many subsidiary accounts are directly related to tax minimalisation. A burgeoning and lucrative industry has grown up around corporate tax avoidance.

Accountants stress that the use of tax minimalisation techniques is not illegal. NI itself would not comment directly, but issued the following statement: "It is our policy not to comment on financial or tax matters outside the normal course of publishing the company's accounts. For the record, the company has complied fully with its obligations under all tax laws to which it is subject. including those of the UK."

Paper chase, page 3

Leading article, page 17