I’d say profiting from the provision of water in and of itself is bad enough – not paying taxes when those profits are as exorbitant as this is outrageous.
Via The Guardian:
The UK’s largest water company is accused of “ripping off the taxpayer” after revealing it paid no corporation tax and pocketed a £5m credit from the Treasury in a year when it made £550m in profits.
Thames Water, which serves more than a quarter of the population and had a turnover of £1.8bn, saw pre-tax profits slide 9% from £604m the previous year.
At the same time bills went up 6.7%, 646m litres of water a day were lost through leaky pipes and hundreds of ratepayers saw their homes flooded with sewage.
In a year when the utility admitted that its customer service was “still far from desirable”, chief executive Martin Baggs was awarded a pay rise of 5.9%, taking his basic salary to £450,000.
Baggs also scooped a bonus of £274,000 as part of a scheme to “reward significant improvement in the group’s financial and corporate performance” and next month will pick up a further £366,000 in shares under the company’s long-term incentive plan.
Thames Water said in its annual financial statement on Monday that it had not paid any corporation tax in the year to the end of March 2013. During this period, turnover rose 6% to £1.8bn.
The company said it paid £150m in business rates, national insurance and other taxes. It is currently seeking government support for the planned £4.1bn “super sewer” under the Thames.
The tax disclosure came as Jonson Cox, chairman of regulator Ofwat, wrote in an article in the Daily Telegraph that the high profits and tax-reducing strategies of some water companies were “morally questionable”.
Simon Hughes, deputy leader of the Liberal Democrats, as well as the MP for Bermondsey and Old Southwark, described Thames Water’s annual accounts as “another extraordinary chapter” in their recent history. “With Thames Water ratepayers facing a huge and permanent hike in their annual bills to pay for the Thames tunnel, escaping tax liability is not ethically or financially acceptable.”
Dave Prentis, general secretary of the public sector union Unison, said it was time for the government to think again about who owns the water industry. “This is a disgrace. Since privatisation, water companies have been ripping off consumers, pushing bills up much higher than inflation,” he said. “Now we know they are ripping off the taxpayer too.”
According to a Unison report written by the New Policy Institute, water bills have risen by 50% in real terms since the industry was privatised in 1989.
A spokesman for Thames Water said: “We have not paid much corporation tax in recent years because the government’s tax system allows us to delay, not avoid, payment of tax based on how much we invest. Because we are investing £1bn a year from 2010 to 2015, more than any water firm in the UK’s history, we are able to defer a lot of tax payments to future years.”
Thames Water is owned by a consortium of investors led by the European arm of the Australian bank Macquarie Group. Since the group bought the company in 2006, Thames Water has paid out £1.4bn in dividends.
Last year an investigation by the Observer revealed how Thames Water lowers its tax bill by offsetting interest payments on its debts against its tax liability.
“They have been increasing the debt in the company, reducing the amount of profit liable to tax, but still paying themselves nice high dividends,” said Martin Blaiklock, a former director of utilities at the European Bank for Reconstruction and Development. He warned that Thames Water and other water companies risked “financial collapse” if they came under sudden pressure to repay their debts.
“When the water industry was privatised I don’t think the authorities looked close enough at some of the financial characteristics that might develop in the industry. And over the last ten or fifteen years, the financial markets have used skills and intellect in a way that the regulator has just recently caught up with,” Blaiklock said.
Thames Water recorded 549 incidents during the year when consumers’ homes were flooded with sewage, which the company blamed on record rainfall, compared with 356 the year before.
River pollution also increased, the company said, including a “significant incident” at the river Wandle in south-east London that killed fish.
Tony Smith, chief executive of the Consumer Council for Water, said: “All water companies, like everyone else, should be fulfilling their obligations when it come to paying tax.”
Blaiklock said new regulations on financial probity were needed, which would ensure companies pay their taxes. “The water keeps running on a day to day basis, but if you had some of these probity tests then I think that some of the financial structures you see in the water industry and other private sector service industries today would be somewhat different.”