As I understand it, the cost of plugging the well, cleaning up the spill and compensating the thousands of people is fully deductable - meaning that, ultimately, the people pay for it.
Only the Gov imposed fine is a cost to the business?
Is that’s pretty much the extent of(BP) corporate laibility for this event?
All expenses are deductible. Companies pay income taxes on their net profits.
No. It means that you can’t tax a business if they didn’t earn any money. Yes, there are rules about deductability, but it’s pretty universal that if you spend money on operations (like plugging a leaky well) you don’t have to pay taxes on that money. You only pay taxes on the net money you earn Revenues - Costs = Net Earnings Before Tax - Tax = Net Earnings After Tax.
In terms of “the people” what the people have is a company that once was marvelously profitable and contributing to the tax rolls turned into a company that is losing money (for a short time, anyway), and no longer pays tax.
It’s like complaining that a really rich guy who lost enough money in the stock market this year to reduce his total income to $0, doesn’t pay taxes this year. We pay tax on income, he’s got no income (this year) so he pays nothing, that’s how it works.
There’s a difference between a tax deduction and a tax credit. Let’s say, for the sake of simplicity, that the tax rate is 25%. If I spend 10 billion dollars on something, and it’s tax deductable, that means that I subtract 10 billion dollars from my income before I calculate my taxes, and therefore, the deduction ends up saving me 2.5 billion in taxes (25% of the 10 billion). By contrast, if there’s a 10 billion dollar tax credit for something, that means that after I calculate my tax burden as a percentage of my income, I can then subtract that credit straight off the amount I owe. So if I get a 10 billion dollar tax credit, that means that I pay 10 billion less in taxes. But tax deductions are far, far more common than tax credits.
Another implication of this is that it never makes sense to do something purely just to get a tax deduction from it. If whatever it is has some other benefits too, then the deduction might move it from the “not worth it” category to “worth it”, but only if there are those other benefits. For instance, all else being equal, a company that doesn’t make charitable donations will net more profit than one that does (of course, all else isn’t equal, and a company may well get other benefits from donations, such as better public relations or a better-prepared workforce).
In the US tax system, fines and penalties are not tax-deductible. However, virtually all other costs of doing business are, and so are most lawsuit settlements.
In addition, a company with a net operating loss can carry it back to prior years - meaning your loss this year can be subtracted from profits in previous years so that you can get a refund of taxes you paid in those years.
I don’t know enough about the specifics of what BP has paid, or whether we’re talking about the US or UK tax systems, but I see no reason to doubt that they’ll get a hefty refund.
Not even sure how one could come to that conclusion. BP paid for the clean up.
The logic was the erroneous assumption that BP paid a fine and then was able to deduct the entire cost of that fine from their tax bill. That in effect was equivalent to BP not paying the fine, then paying that money in taxes to the government and then the government paid for the cleanup.
No, reread the OP.
No discussion of a fine.