Major water companies saving millions through tax avoidance
Six water companies in the UK are avoiding millions in tax by exploiting loopholes, an investigation by lobby group Corporate Watch has found.
Out of the 19 water and sewerage companies in England and Wales, Northumbrian, Yorkshire, Anglian, Thames, South Staffordshire and Sutton and East Surrey Water are using tax havens such as Bermuda and the Channel Islands to avoid paying tax.
The revelation comes following an announcement last week from water regulator Ofwat that water bills would rise by 3.5% to an average of £388 a year, promising to “make sure customers get value for money.”
Moreover the CEOs of the 19 water companies were paid almost £10m in salaries and other bonuses in 2012.
Between all 19 water companies, they amassed £49bn in total borrowings and paid more than £3bn in interest payments on these borrowings in 2012 in addition to £884m in dividends to their owners.
The water industry’s total revenue in 2012 was £10bn, meaning almost one third of the money spent by people on water bills in England and Wales went to paying the interest on the companies’ debts or as dividends.
When questioned, the companies all said money borrowed was to fund the much-needed improvements in the system, which leaks almost a quarter of the water supply (3.4 billion litres) every day.
Southern Water, which covers Kent, Sussex, Hampshire and the Isle of Wight, said the ‘right’ combination of debt and equity helps reduce customer bills.
Ofwat said: “As in any sector, investors expect a return on their investment and so interest and dividend payments are necessary to remunerate investors for their £57bn investment in the sector since privatisation.”
However, the investigation also revealed that the public is paying £2bn more a year – or around £80 per household – than they would be if the water and sewerage supply was publicly financed.