Windfall Tax (United Kingdom)

Windfall Tax (United Kingdom)

The Windfall Tax was a tax on what were claimed to be "the excess profits of the privatised utilities" [http://archive.treasury.gov.uk/pub/html/budget97/ir1.html] introduced by the Labour government in 1997. It followed from their manifesto commitment made during the 1997 general election campaign to impose a "windfall levy" on the privatised utilities. [http://www.psr.keele.ac.uk/area/uk/man/lab97.htm Labour election manifesto 1997 - New Labour, Because Britain Deserves Better] The tax came after 18 years of Conservative government, which had seen the privatization of many state-owned assets, at prices which many considered too low. It aimed to "put right the bad deal which customers and taxpayers got from the privatisation of the utilities". [http://www.parliament.the-stationery-office.co.uk/pa/cm199798/cmhansrd/vo970710/text/70710w22.htm] The tax produced an estimated one off income to the government of £5 billion, which was used to fund the New Deal, a welfare-to-work program that sought to tackle long term unemployment, as well as providing capital investment for schools and the University for Industry (Learndirect).

The tax

The tax was calculated by means of a 9 times P/E ratio, whereby the average post-tax profit in the four years after privatization was multiplied by 9 to give the value for the purposes of the tax. The difference between this value and the the total market capitalization based on the company's flotation price was subject to a 23% 'windfall tax'. The tax was charged to the company, and was payable in two instalments on 1 December 1997 and 1 December 1998.

The companies affected were those privatized by the Telecommunications Act 1984, the Airports Act 1986, the Gas Act 1986, the Water Act 1989, the Electricity Act 1989 (and the Electricity (Northern Ireland) Order 1992) and the Railways Act 1993. The firms affected were "BAA, British Energy, British Gas (now BG plc and Centrica), British Telecom, National Power, Northern Ireland Electricity, Powergen, Scottish Hydro, Scottish Power and Railtrack, the regional electricity companies and the privatized water and sewerage companies (including such companies now forming part of Hyder, United Utilities and Scottish Power).

Since 1997, no further windfall taxes have been levied in the UK. However, calls have been made for new windfall taxes. The Financial Times reported in January 2008 that the government was considering ways of maximising returns to the treasury from the sale of the troubled Northern Rock bank, which could include a windfall tax or the government taking an equity stake. [http://us.ft.com/ftgateway/superpage.ft?news_id=fto012020081805161152&page=2] In the event, the bank was not sold on to private investors, but instead came under UK government ownership.

Windfall tax on energy companies

Calls have also been made for a windfall tax on energy companies. [http://www.guardian.co.uk/business/2008/jul/31/bggroupbusiness.utilities] [http://www.independent.co.uk/news/business/news/campaigners-call-for-windfall-tax-on-north-sea-oil-firms-421302.html] Notable supporters of these calls have included the Guardian columnist Polly Toynbee [http://www.guardian.co.uk/commentisfree/2008/jul/26/gordonbrown.glasgoweast1] and the left wing pressure group Compass. The latter's windfall tax campaign has attracted the support of over 120 (correct of 6th September 2008) MPs. [http://news.bbc.co.uk/1/hi/uk_politics/7600899.stm] Some media reports have suggested that the government is interested in levying such a windfall tax [ [http://news.bbc.co.uk/1/hi/uk_politics/7536814.stm Ministers 'Consider' Windfall Tax] BBC News] , while others have suggested that government ministers are opposed to the idea. [http://www.thisislondon.co.uk/standard/article-23546119-details/Windfall+tax+won't+avert+fuel+crisis+says+minister/article.do] The BBC reported on the 6th of September that such a windfall tax was "still an option". [http://news.bbc.co.uk/1/hi/uk_politics/7595960.stm]

References

ee also

Windfall tax

External Links

* [http://www.psr.keele.ac.uk/area/uk/man/lab97.htm Labour election manifesto 1997 - New Labour, Because Britain Deserves Better]
* [http://www.finance-glossary.com/terms/windfall-tax.htm?id=1540&ginPtrCode=00000&PopupMode= Windfall Tax (UK) in the Global Investor Finance Glossary]
* [http://www.creditwritedowns.com/2008/04/windfall-profit-tax-bad-idea.html Detailed criticism of proposed windfall tax on oil company profits]


Wikimedia Foundation. 2010.

Игры ⚽ Поможем сделать НИР

Look at other dictionaries:

  • United Kingdom — a kingdom in NW Europe, consisting of Great Britain and Northern Ireland: formerly comprising Great Britain and Ireland 1801 1922. 58,610,182; 94,242 sq. mi. (244,100 sq. km). Cap.: London. Abbr.: U.K. Official name, United Kingdom of Great… …   Universalium

  • Windfall tax — In the United Kingdom, the Windfall Tax was a tax levied on privatised utility companies.In Australia, windfall tax may refer to either: * Commonwealth places windfall tax, imposed under the Commonwealth Places Windfall Tax (Collection) Act 1998… …   Wikipedia

  • New Deal (United Kingdom) — The New Deal (renamed Flexible New Deal from October 2009) is a programme of active labour market policies introduced in the United Kingdom by the Labour government in 1998, initially funded by a one off £5bn windfall tax on privatised utility… …   Wikipedia

  • May 1922 in the United Kingdom — See also: April 1922 in the United Kingdom, June 1922 in the United Kingdom, and the Timeline of British history. Contents 1 The Budget introduced 2 Debate 3 Sir Eric Geddes on the Budget …   Wikipedia

  • Tax — Taxation An aspect of fiscal policy …   Wikipedia

  • Tax noncompliance — Taxation An aspect of fiscal policy …   Wikipedia

  • Tax treaty — Taxation An aspect of fiscal policy …   Wikipedia

  • Tax rates around the world — Taxation An aspect of fiscal policy …   Wikipedia

  • Tax deduction — This article is about the deduction of expenses for the purpose of calculating taxable income. For tax deducted at source, see Withholding tax. Taxation An aspect of fiscal policy …   Wikipedia

  • Tax rate — For a type of taxation system in the United Kingdom and elsewhere, see Rates (tax). Taxation An aspect of fiscal policy …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”