Campaigners have issued fresh calls for a windfall tax on companies that prospered during the pandemic, after research highlighted six firms that increased their profits by a total of £16bn.
The outsourcing firm Serco and online clothes retailer Asos were among the companies that saw their global profits more than double over the last financial year, while one investment trust, Scottish Mortgage, saw its returns grow to nine times the average of preceding years.
The report, from Tax Justice UK, highlights six companies who it says made “excess profits” during the pandemic and argues that they exemplify trends under Covid, where some firms and individuals increased their wealth while others suffered.
The case studies also include the mining giant Rio Tinto, real estate firm Tritax Big Box, and the pharmaceutical firm and vaccine manufacturer AstraZeneca. The report argues the companies either benefited from state pandemic spending, or were able to profit from economic changes that were accelerated by Covid.
The UK government borrowed a record near-£300bn last year to fund extra spending, including on health and public services as well as more than £100bn on job support such as the furlough scheme.
Boris Johnson is now hiking employees’ national insurance to raise £12bn for the NHS and social care. The report argues that a windfall tax on “excess profits” would be a fairer way to refill Treasury coffers. Tax Justice UK’s executive director, Robert Palmer, said the chancellor, Rishi Sunak, should consider such taxes alongside hiking corporation tax and capital gains tax rates in the forthcoming budget.
He said: “We need a tax system that supports a fair recovery and keeps up with the economic changes accelerated by the pandemic. Many people have been hammered by Covid; it is only fair to expect those who have prospered to contribute more to the economic recovery. A windfall tax should be part of the mix.”
The report calls for a one-off tax on profits made during the pandemic, an increase in the main rate of corporation tax to 25%, and equalising the taxation of capital gains and income. A windfall tax or “pandemic profit levy” on the global profits of the six highlighted firms alone could raise up to £1.6bn, it estimates.
The Resolution Foundation thinktank last year also mooted a windfall tax, while a report commissioned by Sunak himself to restore the government’s battered finances suggested capital gains tax should be reformed.
Several of the companies named by the Tax Justice UK report said they did not recognise the figures, and most argued that their relative profits last year were not mainly influenced by patterns of spending in the pandemic.
A Serco spokesperson said that 60% of the group’s profits were from outside the UK and had increased for reasons including a period of turnaround and recovery, and acquisitions. “Additionally, the Covid-19 pandemic has had a significant negative impact on a number of parts of Serco’s business,” they added. They said the net benefit of Covid for 2020 was £2m, or 1% of total profits.
In a statement, Tritax said: “The increase in our profitability during 2020 is a direct consequence of our long-term strategy and the funds we have raised and invested to expand the business. We are continuing to invest to profitably expand further our business, supported by long-term structural changes within the UK’s logistics market that have been ongoing for many years before Covid-19, rather than the direct effects of the pandemic.”
A Scottish Mortgage Investment Trust spokesperson said the trust did not make a profit but provides returns for investors: “There is no windfall, pot of money or profit sitting there or being shared out.
“Whilst Scottish Mortgage invests in companies for five to 10 years or more, some of those businesses saw faster-than-expected growth during the pandemic due to early adoption by people of new technology and online services. That rate of growth is unlikely to be repeated in normal conditions.”
AstraZeneca and Asos declined to comment. Rio Tinto did not respond to requests for comment.