When David Cameron chose to put global measures to halt cross-border tax avoidance at the top of tomorrow’s G8 agenda, instead of thinking just of Google and Starbucks he should perhaps have been concentrating on a scandal much nearer home – the peculiar game now being played by much of Britain’s largely foreign-owned water industry.
Two events last week lifted part of the veil on this lucrative racket. First was an extraordinary article in the business pages of The Daily Telegraph by Jonson Cox, chairman of Ofwat, the water-industry regulator, which recognised that the industry’s “excessive profits” and tax-avoidance schemes, with water charges rising by up to 11 per cent a year, were “morally questionable in a vital public service”. Then came the annual report of Thames, our largest water company, showing that, on profits of £550 million, it had paid no corporation tax at all, while giving its chief executive more than £1 million. Thames insists that its tax is only deferred, not avoided, because it invested £1billion on capital projects, although its critics point out that this did not include mending leaks, for which it has a notoriously poor record.
This is far from untypical of an industry now averaging profits of 30 per cent a year, and much of which in recent years has been bought up by an array of mysterious private owners registered in overseas tax havens. One firm, Northumbrian, for instance, is indirectly owned by a Chinese businessman said to be the ninth-richest person in the world, whose holding company is registered in Bermuda. Others are owned by financial interests based in Singapore, Malaysia, Canada and across the world. Four of their CEOs earn £1 million or more a year. Yet, despite their colossal profits, many firms contrive to pay little or no tax.
Cash draining away – how the water industry avoids tax