Friday, February 15, 2013

Water companies: Tax cheats

The Independent exposes the latest group of UK companies engaged in wide-scale tax-cheating: privatised water utilities:

British water companies are avoiding millions of pounds in tax by loading themselves up with debt listed on an offshore stock exchange, an investigation has revealed.

The disclosure is likely to reignite the public outcry about legal tax avoidance by big firms at a time when Britain is drowning in debt and suffering painful public spending cuts. It comes only a week after industry regulator Ofwat announced that water bills would rise by an average of 3.5 per cent to £388 a year. Corporate Watch found six UK water companies took high-interest loans from their owners through the Channel Islands stock exchange. Interest payments on the loans reduce taxable profits in the UK and, thanks to a regulatory loophole, go to the owners tax free.

So, the wealthy owners of those companies laugh all the way to the bank with their tax-free profits, while the people paying for them see their public services fall apart. But it doesn't just cost the government:
The huge levels of debt used by the industry overall to finance its operations are also costing UK consumers £2bn a year more than if it was publicly financed – equating to nearly £80 per household.

Think about that for a moment. Privatisation is supposed to provide cheaper, more efficient services. But it turns out that in the case of water in the UK, its significantly more expensive than if the government did it themselves. Once you include dividends, almost a third of people's water bills is vig for the offshore owners. That's 33% people wouldn't have to pay if their water supply was run by the government at cost, rather than by foreign bloodsuckers seeking a profit.

Its a perfect example of the failure of privatisation. Government services can borrow money cheaper, and they don't have to make a profit. They should therefore always be cheaper than an equally well-run private provider (plus, they don't cheat on their taxes). The only people who benefit from privatisation are the buyers and the corrupt politicians who sell to them.