The FT notes this morning that:
The amount of cash held on the balance sheets of the UK's largest companies by market value has reached an all-time high to stand at £166bn, according to analysis by Capita Asset Services.
The research suggests that gross cash balances for FTSE 100 companies have risen by one-third from £123.8bn since 2008, highlighting caution in the wake of the financial crisis.
The increase in net cash — gross cash minus short-term debt — is even more striking than the change in gross cash. It rose from £12.2bn in 2008 to £73.9bn. That reflects not only companies' decisions to stockpile cash but also reductions in their short-term debt, which has fallen by £19.6bn since 2008.
The study raises the question of whether the government might consider a one-off tax on the cash — even though that would be extremely unpopular with investors — if it stays on the balance sheets and is not used to invest in growth, or returned to shareholders in higher dividend payments.“They [the cash piles] are an easy target,” it says. “If the cash is not being invested to expand the economy . . . the government may even consider a windfall tax.”
At this point I wondered why the FT even bothered to print such nonsense. We have a government that is doing all it can to gift cash to big business. One reason why there is so much money on so many businesses balance sheets is that cash requirements to pay corporation tax are tumbling as rates are slashed on taxes on overseas profits abolished. The simple fact is that we already have an entirely appropriate tax available that can collect the excess cash business clearly does not need. It's called corporation tax, and this government is doing all it can to undermine it. That's where the action is needed; not with windfall taxes.
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the cash has already been taxed once (ie this is post tax cash). Do we really want the cash moved out of the UK (which is surely all that will happen if these rules look like being executed – ie incorporate a french subsidiary and capitalise it with equity)
I am arguing it has not been taxed enough once
I am not arguing to tax it again
Others seem to be doing that
apologies RM, my comments werent aimed at you, but rather the article itself.
re the comment below – they arent going to move out of the UK, its far easier to just move the cash !
It sounds like others are using your argument from July 2012.
http://www.taxresearch.org.uk/Blog/2012/07/19/what-we-really-need-is-a-tax-on-companies-sitting-on-cash-piles/
At the time you couldn’t see why holding the cash shouldn’t be a taxable event and suggested that it probably hadn’t been taxed in many cases. Do you have a different view now?
I think that the opportunity to deem a distribution is fair – but that was inherent in CT law with wirhholding required
If you tax the companies more, they will move out of the UK. Taking with them jobs. Not just their employees. Jobs from the services ranging from shops to people helping around their houses.
Or you get a second problem. They will have overseas companies. Many of the big companies do. They just wont bring the money home. They will leave it offshore either in tax havens or worse only invest offshore.
Whilst we need the UK companies to invest in the UK. We need to encourage them, one way is to provide good education systems. This is something that didn’t happen under Labour. Just look at either hotel companies trying to get staff or even JLR who are recruiting at the moment.
The government aren’t gifting money to the companies. It is the companies money that belong to them. They haven’t been given it by anyone in the cabinet.
Oh dear, yawn
This argument is always rolled out
It has always been and always will be wrong
Now please go away and peddle your myths elsewhere
“If you tax the companies more, they will move out of the UK. Taking with them jobs. Not just their employees.”
Only if we let them.
Don’t forget we are an island.
Why are you yawning. Just look at America. Money sat offshore waiting to come back into the country. Its not a myth, you seem to be looking into this though rose tinted glasses.
At least you know one company storing money in an offshore country that you seem not to like. If you can see it happening with them, why would any other company not do the same?
Please explain
I’m not yawning
I am saying let’s have a proper corporation tax
OK, fair enough.
And what exactly is the rate of CT you would recommend.
30% worked
Effective rate would then be low 20s
That is above both the European average of 20.6% and the EU average of 22.85%.
Is the good practice or just taxing for tax sake?
Years ago many countries had an Undistributed Profit Tax to encourage companies to distribute profits to shareholders.
Those averages are not weighted for size of state and so are deliberately wrong
A large amount of this cash will be within the UK banks too. Let’s make a start by taking the cash from them as we already know they don’t pay enough UK corporate taxes. Then when we start a new banking crisis as they will be further under-capitalised we can recapitalise the black hole thus created. That will teach ’em.
Read the article and you’ll note that this is specifically addressed – by excluding them, from the sample
But please feel free to be crass if you wish
Sorry, I am very busy and just read the headline points and then made some assumption on what I believed the article may have said. I am sure you will understand my mistake.
Regrettably, the silliness of the FT article is only matched by the myopia of the neoliberal/neocon contributors to this blog!
Agreed, as usual right wingers seem to think that big business, far from paying a fair share towards the physical and legal infrastructure it uses to do business here, is being unfairly treated by being obliged to pay tax at all.
Stephen, you complain about the last government not educating the UK workforce properly, yet you don’t want government to collect the tax it needs to pay for schools and teachers.
Governments should not be kowtowing to the whining of corporations and indulging in a race to the bottom for CT rates, as Richard has pointed out numerous times. To do so is an abnegation of democracy as it gives undeserved favours to a minority of the population at the expense of the rest of us.
Yes the proper enforcement of Corporation Tax – and equality of treatment for all sizes of companies -note Large companies have a nice cosy Large firms Unit at HMRC-
is paramount.
Slight variation though, are we talking about free cash? Or do these companies also
have significant Creditors as well? In which case it is the large companies taking time to pay smaller ones. Is it not time that we moved to a (far stronger) system of legally enforced prompt payment term regime – like Germany say.
I’ve long felt that