Vanessa Houlder has a tax article on the front page of the FT today. In it she reports that one third of the UK's 700 largest companies do not pay tax.

I'm not surprised. I drew attention to this in 'Mind the Tax Gap'. There are several reason, some of which I discussed with Vanessa last week.

First, as she notes, making up pension deficits is cutting tax bills even if the money is not solving the problem as its simply being wasted on buying equities of uncertain value.

Second, as she mentions, the UK's generous tax rules on interest mean that many companies headquartered here do not actually pay UK tax, or if they do it is of insignificant amount. BAT and ICI are examples who make almost no UK tax contribution but do elsewhere in the world. Interest bills and tax planning knock out their UK contributions. That's a choice they make. And it shows how effective a tax haven the UK is for such companies.

Third, we have excessive capital allowances meaning that companies can claim tax relief far in excess of the economic cost to them of acquiring capital equipment. The result is massive deferred tax balances, making it seem like tax is paid when it is not. These allowances have been massively exploited for tax planning purposes.

Fourth, as Deloittes notes in the FT article, international opportunities reduce tax paid. Domestic companies do not have this advantage (or opportunity to exploit, to describe it more accurately).

But I come back in the end to some policy questions. If despite one third of them paying no tax at all companies still think the UK rate of corporation tax is too high then what rate do they want? Are they really looking for subsidies? That's the only way you can go when the effective rate for so many is already 0%. Politically this is a key question.

Economically the question is different. Why do we allow a system where so many with obvious wealth contribute so little to the well-being of our society from which they benefit more than most? These companies need to be held to account.

And in accounting terms there is one more point - if we had country-by-country reporting we'd know this sort of information. The fact that knowing it gets the issue on the front page of the FT shows just how important that reporting is, and explains why companies really don't want it.