TRANSPORT COMPANIES IN TAX DODGE

RMTnews :: november 2007 :: www.rmt.org.uk 12 The private rail industry is profiteering on £1.3 billion in unpaid tax and is using a deferred-tax loophole intended to encourage investment to fund massive increases in dividend payouts to shareholders. Nearly half of the £1.5 billion in dividends paid out in the last five years by nine private train and bus operators and rolling- stock companies has been funded by unpaid tax, according to a detailed analysis for RMT, Tax paid by Railway Companies, by tax expert Richard Murphy* of Tax Research. The companies whose accounts are analysed in the report are: First Group PLC, Go- Ahead Group PLC, Stagecoach Group PLC, Arriva PLC, National Express Group PLC, Virgin Rail Group PLC, Porterbrook Leasing Company Limited, HSBC Rail (UK) Limited and Angel Trains Limited. Almost £1.3 billion of deferred tax is owed by the biggest six train-operating companies (TOCs) and the three rolling-stock leasing companies (Roscos) – but this is tax that will most likely never be paid, and is effectively a hidden subsidy that dramatically increases cash profit levels. The report shows that the nine companies’ declared profits almost doubled from £435 million in 2002 to £810 million in 2006, but their declared tax charges remained almost constant at about £190 million a year throughout the period. The declared percentage rate fell from 43 per cent in 2002 to 24 per cent in 2006. SUBSIDY This though hides the real story. Tax is not paid on accounting profits. The accounts charge for goodwill is not, for example, allowed for tax. And the charge for tax in accounts includes ‘deferred tax’ – which this survey shows is never likely to be paid, as well as the current tax bill the company expects to settle in cash. Comparing pre-goodwill profits and current tax charges that will actually be paid shows that these companies’ profits TRANSPORT COMPA Private transport operators profit from £1.3 billion in unpaid tax using a deferred- tax loophole