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Big firms pay lower rate of tax than before the recession

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Issue 2595
Chancellor Philip Hammond wont tax the rich
Chancellor Philip Hammond won’t tax the rich (Pic: Foreign and Commonwealth Office/Flickr)

Major multinationals are paying significantly lower tax rates than before the 2008 financial crisis. Yet taxes on workers have increased.

When Tory chancellor Philip Hammond makes his spring statement on Tuesday we can guarantee he will do nothing to shift this situation. He has boasted, “We have launched a ten-year plan to unlock £20 billion of financing for innovative British firms. We have progressively reduced corporation tax rates for companies of all sizes to the lowest level in the G20.”

Analysis by the Financial Times newspaper shows that “a decade of government efforts to cut deficits and reform taxes has left the corporate world largely unscathed.

“Companies’ effective tax rates—the proportion of profits that they expect to pay, as stated in their accounts—have fallen 9 percent (two percentage points) since the financial crisis.”

Every government across the world says it wants to cut tax avoidance and evasion by big business. But they have simultaneously slashed the amounts they have to pay.

The longer-term trend is even sharper with effective reported corporate tax rates falling nearly one-third since 2000, from 34 percent to 24 percent.

And it should be remembered that depending on how you do the sums, up to 15 percent of total global wealth is stored in tax havens.


None of this should come as a great surprise. In Britain the main rate of corporation tax, the tax on bosses’ profits, is just 19 percent. It’s set to drop to 17 percent by 2020. In 2008 it was 30 percent and under Tory prime minister Margaret Thatcher it was 52 percent.

Offshore Treasure Island
Offshore Treasure Island
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Last year the Institute for Fiscal Studies (IFS) think tank said that cuts announced between 2010 and 2016 would hand bosses £16.5 billion a year. “Changes to corporation tax have represented some of the largest giveaways in both parliaments since 2010,” it said.

It said corporation tax was set to make up just 2.3 percent of national income by 2021-22, compared to a “pre-recession high” of 3.2 percent.

Yet another IFS report last year showed that over 4 percent of national income came from corporation tax in the mid-1980s.

It said corporation tax as a share of national income had dropped “substantially” by around 25 percent since the start of the financial crash in 2007-08.

Meanwhile in the major Orgaisation for Economic Cooperation and Development (OECD) group of countries, governments on average have increased personal taxes by 6 percent

We should tax the rich and big business to pay for health, education and all the services we need.  

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