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I think there's often confusion between turnover and profit. Companies collect VAT on their turnover and pay it (less VAT they have paid out) to the exchequer. These amounts do not appear in financial statements as P&L accounts are prepared net of VAT. An Internet business with £1billion turnover at a 5% gross profit margin will make a GP of £50m. With staff costs of £20m, property costs of £5m and advertising costs of £15m, they make a £10m net profit. With the main rate of corporation tax at 23%, that's £2.3m for the exchequer- just in corporation tax- and thats without any avoidance strategies. But on a turnover of £1bn they will have collected and paid £200m in VAT, and on a wage bill of £20m, paid nearly £3m in employer NICs. Then probably a quarter of the premises costs (£1.25m) will be business rates. So all in all for each £1b of turnover generated by such a business, about £206m goes to the exchequer. Of which just over 1% is corporation tax.
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