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MPs grill big six energy suppliers over tax contributions MPs grill big six energy suppliers over tax contributions
(6 months later)
Members of the big six group of energy suppliers are paying very low or even no corporation tax despite reaping significant profits from high domestic bills, new research shows, prompting outrage from MPs and calls for reform of the way the industry is regulated.Members of the big six group of energy suppliers are paying very low or even no corporation tax despite reaping significant profits from high domestic bills, new research shows, prompting outrage from MPs and calls for reform of the way the industry is regulated.
RWE npower, with 6.6 million customers, paid no corporation tax between 2009 and 2011, while Scottish Power paid only £102m in 2012 on profits of £1.2bn – even though the lowest corporate tax rate is 20%. German-owned E.ON paid only £532m in corporation tax between 2007 and 2011 on pre-tax profits of nearly £5bn. French-owned EDF paid "over £200m" last year on pre-tax profits of £1.7bn.RWE npower, with 6.6 million customers, paid no corporation tax between 2009 and 2011, while Scottish Power paid only £102m in 2012 on profits of £1.2bn – even though the lowest corporate tax rate is 20%. German-owned E.ON paid only £532m in corporation tax between 2007 and 2011 on pre-tax profits of nearly £5bn. French-owned EDF paid "over £200m" last year on pre-tax profits of £1.7bn.
The figures are difficult to obtain as most of the companies are subsidiaries of foreign multinationals, and only emerged when Labour's Caroline Flint, the shadow energy secretary, approached each company directly. They have inflamed the public debate on fuel prices at a time when public trust in energy suppliers is at rock bottom.The figures are difficult to obtain as most of the companies are subsidiaries of foreign multinationals, and only emerged when Labour's Caroline Flint, the shadow energy secretary, approached each company directly. They have inflamed the public debate on fuel prices at a time when public trust in energy suppliers is at rock bottom.
The revelations drew outrage from MPs yesterday, who gave senior executives from the companies an intense and sometimes bad-tempered grilling at a select committee hearing.The revelations drew outrage from MPs yesterday, who gave senior executives from the companies an intense and sometimes bad-tempered grilling at a select committee hearing.
Ian Lavery, a Labour MP, singled out German-owned RWE npower. "In the last three years [it has] reported profits totalling £766m – yet today they admitted they have not paid a single penny of corporation tax over that period," he said.Ian Lavery, a Labour MP, singled out German-owned RWE npower. "In the last three years [it has] reported profits totalling £766m – yet today they admitted they have not paid a single penny of corporation tax over that period," he said.
"People who pay their taxes unquestioningly are sick and tired of seeing hugely profitable companies use every trick in the book to get out of contributing their fair share. Hard-pressed families struggling with sky-high energy bills will be absolutely astonished that an energy company which makes hundreds of millions in profits doesn't appear to be paying its fair share in tax.""People who pay their taxes unquestioningly are sick and tired of seeing hugely profitable companies use every trick in the book to get out of contributing their fair share. Hard-pressed families struggling with sky-high energy bills will be absolutely astonished that an energy company which makes hundreds of millions in profits doesn't appear to be paying its fair share in tax."
Tim Yeo, chairman of the committee, said: "I don't think [these companies] grasp the extent of public disgust towards them." He said they should have been "more abject" in their apologies for mis-selling of products, which resulted in tens of thousands of consumers paying more than they needed to. "Any consumer watching the proceedings today will not feel those companies have learned their lessons yet."Tim Yeo, chairman of the committee, said: "I don't think [these companies] grasp the extent of public disgust towards them." He said they should have been "more abject" in their apologies for mis-selling of products, which resulted in tens of thousands of consumers paying more than they needed to. "Any consumer watching the proceedings today will not feel those companies have learned their lessons yet."
The hearing at some points threatened to descend into farce, as the executives became tetchy under increasingly exasperated questioning from MPs, who focused on how public confidence in the industry has been destroyed by soaring prices, over-complex billing and tariffs, the mis-selling of some products that most recently resulted in a record £10m fine for SSE, and accusations of profiteering, as well as the issues of tax.The hearing at some points threatened to descend into farce, as the executives became tetchy under increasingly exasperated questioning from MPs, who focused on how public confidence in the industry has been destroyed by soaring prices, over-complex billing and tariffs, the mis-selling of some products that most recently resulted in a record £10m fine for SSE, and accusations of profiteering, as well as the issues of tax.
At one point, Labour MP John Robertson, referring to the mis-selling scandals, asked E.ON chief executive Tony Cocker: "Are you squeaky clean?" Cocker replied: "It's too early to say."At one point, Labour MP John Robertson, referring to the mis-selling scandals, asked E.ON chief executive Tony Cocker: "Are you squeaky clean?" Cocker replied: "It's too early to say."
The companies, however, responded that they were investing billions in new UK infrastructure - including new wind farms and other power plants - and that the law allows these to be offset these against tax liabilities.The companies, however, responded that they were investing billions in new UK infrastructure - including new wind farms and other power plants - and that the law allows these to be offset these against tax liabilities.
Paul Massara, RWE npower chief executive, said: "There is a very simple reason why [we have not paid corporation tax for three years] because effectively we have invested £5bn in the last five years building power plants, creating jobs, creating employment, and helping to keep the lights on. If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule."Paul Massara, RWE npower chief executive, said: "There is a very simple reason why [we have not paid corporation tax for three years] because effectively we have invested £5bn in the last five years building power plants, creating jobs, creating employment, and helping to keep the lights on. If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule."
Angela Knight, chief executive of Energy UK, pointed to an Ernst & Young report that found the sector paid proportionately more tax than other sectors compared to its contribution to GDP. She said: "The energy industry well recognises the role it plays in the economy, investing more, insulating people's homes and by international industry paying its taxes locally."Angela Knight, chief executive of Energy UK, pointed to an Ernst & Young report that found the sector paid proportionately more tax than other sectors compared to its contribution to GDP. She said: "The energy industry well recognises the role it plays in the economy, investing more, insulating people's homes and by international industry paying its taxes locally."
Flint said: "Many of these companies are investing heavily in new generation, which I welcome, and which will enable them to legitimately claim capital allowances to offset against their tax liabilities. Nonetheless I was surprised and concerned to learn that out of Britain's six energy companies, three have effective tax rates significantly less than would be expected, and one appears to have paid no corporation tax at all."Flint said: "Many of these companies are investing heavily in new generation, which I welcome, and which will enable them to legitimately claim capital allowances to offset against their tax liabilities. Nonetheless I was surprised and concerned to learn that out of Britain's six energy companies, three have effective tax rates significantly less than would be expected, and one appears to have paid no corporation tax at all."
Part of the problem of working out how much tax energy companies should pay is that the businesses are complex in their organisation. Selling energy to consumers – the retail market – is separate from the business of energy generation, and all the major players also have energy trading arms that buy and sell power daily in the "spot" and futures markets. Yeo said: "They can't get away from the concern that they are manipulating these businesses in order to conceal their margins from the consumer. We need more transparency if they are going to win public confidence."Part of the problem of working out how much tax energy companies should pay is that the businesses are complex in their organisation. Selling energy to consumers – the retail market – is separate from the business of energy generation, and all the major players also have energy trading arms that buy and sell power daily in the "spot" and futures markets. Yeo said: "They can't get away from the concern that they are manipulating these businesses in order to conceal their margins from the consumer. We need more transparency if they are going to win public confidence."
E.ON said it invested £5.9bn between 2007 and 2011 – more than it made in profit - and £885m in PAYE and National Insurance, plus nearly £500m in climate change levy and £213m in value added tax. EDF Energy said it invested £1.3bn in 2012, more than its operating profit of £801m.E.ON said it invested £5.9bn between 2007 and 2011 – more than it made in profit - and £885m in PAYE and National Insurance, plus nearly £500m in climate change levy and £213m in value added tax. EDF Energy said it invested £1.3bn in 2012, more than its operating profit of £801m.
Centrica, owner of British Gas, has been paying higher tax rates than its foreign-owned rivals: £651m corporation tax in 2011 on adjusted operating profits of just over £2bn. It paid nearly £500m of tax in 2010 and over £400m in 2009 and investing in new infrastructure. SSE, also UK-owned, paid over £200m corporation tax on profits of £1.3bn.Centrica, owner of British Gas, has been paying higher tax rates than its foreign-owned rivals: £651m corporation tax in 2011 on adjusted operating profits of just over £2bn. It paid nearly £500m of tax in 2010 and over £400m in 2009 and investing in new infrastructure. SSE, also UK-owned, paid over £200m corporation tax on profits of £1.3bn.
The big six energy suppliers were accused last week of "cold-blooded profiteering" after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills. The industry regulator Ofgem, which produced the estimates, said profits per household would reach £100 over the next 12 months.The big six energy suppliers were accused last week of "cold-blooded profiteering" after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills. The industry regulator Ofgem, which produced the estimates, said profits per household would reach £100 over the next 12 months.
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