Tax Overhaul Silver Lining in Trump Cloud: U.K.'s Grid CFO

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By Penny Sukhraj

The finance chief of one of the world’s largest power companies expects the U.S. to move ahead with plans allowing multinationals to repatriate their profits, following last month’s presidential elections.

“The one silver lining in the Trump cloud is corporation tax reform in the U.S., which will be a huge benefit because everyone only hears about the trillions of dollars sitting outside the U.S.,” Andrew Bonfield, National Grid Plc finance director, told Bloomberg BNA in a Dec. 14 phone interview.

Bonfield, who chairs the 100 Group, the U.K.’s largest 100 companies listed on the London Stock Exchange, was commenting on a report published by PricewaterhouseCoopers LLP showing the tax paid by the 100 Group has risen to 82.3 billion pounds ($103.99 billion), up from 80.5 billion pounds in 2015. The group also contributed 13.3 percent of the U.K. government’s total tax receipts.

The report sets out that over half of the value distributed by the 100 Group goes to the government in taxes, at 50.5 percent. Employees receive 31.8 percent in wages, leaving 12.0 percent of profit available for shareholders or for reinvestment and 5.7 percent to go to creditors in the form of interest on financing.

Bonfield said Britain’s biggest companies also supported the activities and employment of many smaller companies in their supply chains.

The figures come amid an increasing pace in the demand for companies to be more transparent about what they pay in various jurisdictions in which they make profits, as increasing numbers of voters across the world’s oldest democracies are indicating a swing away from governments seen to be supportive of big business.

“It’s not helped by the U.S. tax system which does create a distortion, by really saying to companies, ‘Don’t remit money back to the U.S.,’” Bonfield said.

Referring to possible plans for repatriation, Bonfield said the U.S. will “probably do the same thing again and then reduce the corporation tax.”

Public Disclosure Challenge

The report notes that tough economic conditions since the financial crisis have led to governments focusing on fiscal discipline, along with more intense scrutiny of fair taxation and tax collection. The increased scrutiny has led to greater demand for disclosure of tax figures.

Country-by-country reporting, in particular, has been criticized for its “narrow focus on corporate income tax and other profit related taxes.”

“This provides an incomplete picture of the full extent of taxes that companies pay,” the report states, leading to concern among companies that such public disclosures will fail to provide clarity around tax contributions that government institutions and a range of other stakeholders are seeking.

Bonfield said the National Grid, which is listed both in the U.S. and U.K. and is among the largest power companies in the world—with a market capitalization of 34 billion pounds ($43.16 billion)—publishes its total tax contribution in its annual accounts.

“The challenge is for multinational companies around the world, who can spend time with huge amounts of data, explaining stuff that is almost immaterial. This comes back to the bigger debate—the perception out there that, one way or another, there are large sums of corporate money that never get taxed and that the governments and whole world’s problems can be solved if everyone paid their fair share,” said Bonfield.

Brexit

According to the report, the 100 Group also employs 2.1 million people, accounting for 6.6 percent of the total workforce in the U.K. and 14.5 percent of business investment in the U.K.

The crucial statistics could change, however, in light of the U.K.’s pending exit from the European Union, set to begin with the trigger of Article 50 in March 2017.

“The good news from a company perspective is that the Autumn Statement indicated stability. That is key for the government, going forward,” he said, adding that value-added tax was the one area that could have changes going forward, since tax is “very much a U.K.-determined item.”

“The big issue is what trading arrangements there are, the uncertainty on day one. It’s very difficult to make investment decisions,” Bonfield said.

He added that large businesses engaged in cross-border trading are currently uncertain about how to proceed due the uncertainty around their financial outcome with taxes, the cost of labor and business rates.

“It’s important for us to continue to have as stable an environment as possible. Whatever the government can do to help with that will be a good thing,” Bonfield told Bloomberg BNA.

Different sectors will be impacted differently when the U.K. leaves the EU, he said, adding that “large multinationals with headquarters in the U.K. will also be impacted.”

“I think the government will take the right soundings,” he said. “They do, at the end of the day, require business to provide contributions which trickle down” to the economy.

Bonfield said business “may be perceived as being distant, but at end of day we need to make people understand that our taxes pay for a lot of doctors and nurses and school places.”

To contact the reporter on this story: Penny Sukhraj in Washington at psukhraj@bna.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bna.com

For More Information

An embargoed version of the report is at http://src.bna.com/kKC.

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