Sunday, December 20, 2009

A Taxing Time For Media

Reading Murdoch's latest attack on Google, this time for paying just £141k tax on revenues of £1.7bn in the UK, brings a smile to my face. It's worth pointing out that NewsCorp has consistently been a master of tax avoidance, and is currently under pressure in Australia for some of its dubious tax avoidance practices.

The unlevel playing field caused by this is apparent if you look at the tax paid by UK media companies (notwithstanding that our largest media company is, perversely, paid for by a tax).

In its last profitable year (2007), ITV paid £50m in tax on profits of £138m. Beleaguered newspaper operator Johnston Press - perhaps one of the biggest victims of Google's success - paid £27m tax on £99m in revenues in 2008.

The UK tax regime has some benefits, such as the ability to offset losses in one year against future tax bills, but even this is horribly abused, with international companies dumping carried losses into UK subsidiaries.

In effect, Google has a 25-30% advantage over UK based media, and NewsCorp is able to make similar advantageous use of resources. At a time when cash and borrowing are key to the success of any business this goes a long way towards explaining why there are so few world class commercial British media companies.

Now, I'm no fan of protectionism, but hobbling our own media industry and giving away massive tax receipts (which you and I will have to make up for through direct and indirect taxation).

With both Google and Murdoch cosying up to the Conservatives, whose naivety leaves them flattered by the attention, this position is unlikely to change unless the current Government shows the courage of its convictions.