UK Government Fails To Mine Tax Seam


By Global Tax Weekly

There is a New Year tradition in Scotland known as “first footing.” First footers (being the first to visit after the midnight bells have rung) bring gifts, one perhaps being a lump of coal to signify keeping the house warm. Nowadays, that lump of coal will much less likely come from a British mine.

On December 18, the United Kingdom’s last deep seam coal mine closed. Is this closure due to a reduction in UK coal power stations to support Government greener fuel policies? The short answer: No. According to the mine manager, it cost GBP43 to dig out a tonne of coal at the mine, as compared with around GBP30 a tonne in Russia and Colombia. Consequently, it is more economical to import coal from across thousands of miles to fuel the coal power station just seven miles by rail from the closed mine.

I’m all in favor of the global economy and the competition it brings; however, I do question just how logical – and ecologically damaging, in terms of additional shipping emissions – this closure really is, and how economically viable it is to the wider UK economy, in terms for example of lost tax revenues; first, there are the lost corporate income tax revenues from the mine. Second, there are lost labor taxes (income tax, National Insurance Contributions). Third, other local businesses – shops, pubs, retail services, etc. – will see less footfall (possibly closure), hence lower or no profits, leading to even lower tax revenues, including VAT. Maybe I’m wrong; maybe tax revenue loss and welfare costs would make a tiny dent in the GBP43 per tonne cost. But in a bloated UK tax code littered with allowances, reductions, benefits, and exemptions, one would think there might be a little room for an incentive or exemption – as has been made for the oil sector in the face of falling oil prices – for a mine with another 10–15 years’ worth of coal in its seams.


For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look





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