Britain Plans To Levy ‘Windfall’ Tax U.S.-Owned Companies To Pay

The new Labor government’s first budget cuts corporate tax rates by 2 percentage points, leaves personal income tax rates unchanged and imposes a “windfall” tax on recently privatized companies - many of them owned by Americans.

Treasury chief Gordon Brown pledged Wednesday to spend billions on the health system and to help young people and single parents get off welfare, but there were plenty of losers as Labor gave the strongest indication yet of how it will run Britain.

Pension plans will see taxes rise on stock dividends and some recently privatized companies face a “windfall” tax bill of some $8.6 billion, payable in just two installments.

Labor had long promised the windfall tax on “excessive profits” at companies privatized by the previous government, but the names of the companies and the size of the tax had been secret until Wednesday.

The targets of the tax include privatized water companies; Britain’s privatized electric utilities, eight of them either owned or soon to be owned by U.S. companies; the airport operator BAA PLC, which runs London’s Heathrow and Gatwick and five others; British Telecommunications PLC; and the two companies formed by the breakup of British Gas PLC.

British Telecom said its tax bill would come to $825 million. Railtrack PLC, which runs the tracks of Britain’s now privatized railroads but is still subsidized by the government, can expect to pay about $272 million.

Other privatized companies were trying to calculate what they would owe, under the government’s complicated formula that would apply a 23 percent tax on a combination of profits and the rise in each company’s market value over the four years of private ownership.

“We need to look at the details,” said Julian Evans, spokesman for East Midlands, a Nottingham-based electric company bought by Dominion Resources, of Richmond, Va.

Brown said the windfall tax would have no effect on prices or jobs, drawing jeers in the Commons from opposition lawmakers.

Brown repeatedly referred to his tax and spending plans as a “new deal,” one that would improve schools, hospitals and housing, and “create the new welfare state for the 21st century.”

But the chancellor of the exchequer also pledged fiscal responsibility, saying he would lower this year’s budget deficit to $22 billion from the $31.5 billion that had been projected under the previous Conservative government.

“For too long the United Kingdom has been united only in name,” Brown said, sipping water rather than the chancellor’s traditional glass of Scotch whisky as he read his budget statement to the House of Commons.

“From today ours is a country where everyone has a contribution to make,” Brown said.

Though corporations will see their tax rate fall to 31 percent from 33 percent, and small businesses will get similar cuts, Brown said he will increase revenues by a total of $17 billion over the next two fiscal years.

Taxes will rise $9.1 billion this year and $7.8 billion next year.

Brown raised taxes on gasoline, cigarettes and home sales - but said taxes on alcohol would go up only in line with inflation.

“This is a tax-raising budget,’ said William Hague, the new leader of the opposition Conservative Party.