Imperial Tobacco settles UK tax dispute
LONDON Dec 19 (Reuters) - Imperial Tobacco said it paid around 170 million pounds ($279 million) in UK corporation tax in its 2013 financial year, more than its total UK tax bill for the previous seven years, after settling a dispute with the tax authority.
Public frustration at government austerity measures and revelations of corporate tax avoidance in the past two years have led to pressure on the tax authority, Her Majesty's Revenue and Customs (HMRC), to take a tougher line with big companies
Imperial Tobacco, the world's fifth-largest tobacco company by market capitalisation, declined to give details of what it described as "a confidential and closed matter."
"Imperial Tobacco Plc pays UK corporation tax in accordance with UK taxation rules," a spokesman said.
HMRC declined to comment on the deal, citing rules on taxpayer confidentiality.
Corporation tax is the UK version of corporate income tax. Imperial Tobacco referred to tax settlements in its annual report but had not previously revealed the HMRC deal.
Eddy Hargreaves, analyst at Canaccord Genuity who covers tobacco and consumer goods producers said Imperial Tobacco's tax arrangements were unlikely to be very different to its rivals and said all companies seek to minimise their tax bill.
Imperial would not confirm the period that the settlement related to, nor its size. The settlement could be less than the 170 million pounds paid, because that figure may include the company's 6 million pound tax charge for its 2013 financial year to September.
The value of the settlement could also be much higher than 170 million pounds, if it was partly offset by utilising some of the large tax credits the company built up in previous years.
Between 2008 and 2012, Imperial reported a net tax credit of 115 million pounds.
In contrast, between 2003 and 2007, Imperial Tobacco reported annual UK tax payments of between 100 to 150 million pounds. However following the acquisition of Spanish cigarette maker Altadis in 2008, the company's UK tax payments dried up.
The company borrowed billions of pounds to pay for Altadis. Most of this was borrowed in Britain and the interest is deductible for UK tax purposes, the Imperial Tobacco spokesman said.
Many countries have strict limits on the amount by which a company's taxable income can be reduced by interest payments but Britain has almost no limit.