I have learned that George Osborne is mounting a pre-Budget charm offensive to lure back multinational companies which moved offshore for tax reasons under the last Labour government.
The Chancellor and Treasury officials have in recent weeks stepped up their efforts to persuade the likes of United Business Media and WPP Group – both of which are now domiciled in Dublin – to relocate their tax base back to the UK.
Whitehall sources tell me that Mr Osborne is keen to announce the return of at least one of these companies alongside details of corporate tax reforms to be outlined in Wednesday’s Budget. It’s not clear whether any of the companies with which the Treasury has been in discussions in recent weeks are prepared to move that swiftly (given that such decisions would need to be debated and approved by their boards of directors).
About a dozen major British companies, including Regus, the serviced offices supplier, Brit Insurance and Shire, the pharmaceuticals group, have moved their tax base overseas during the last three years amid growing concerns about the competitiveness of the UK’s corporate tax rules.
Of particular concern to the bosses of big multinationals has been the approach to taxing profits earned by their overseas operations (known as the Controlled Foreign Companies rules). Britain’s approach to taxing foreign earnings has left companies, often under pressure from large institutional shareholders, with little choice but to explore moving overseas.
Ireland has been one of the destinations of choice for offshore companies seeking lower-tax climes although faith in the stability of its tax system has been shaken by the dire state of the country’s economy.
Other UK companies have moved to locations such as Switzerland (Informa, the media company, and Wolseley, the building materials group) and the Netherlands (Brit Insurance).
Those that have moved are only the tip of the iceberg. FTSE 100 companies including the drinks giant Diageo and the home and personal care products-maker Reckitt Benckiser have stated openly that they are keeping the situation under review.
For reasons specific to reforms taking place in the banking sector, HSBC and Standard Chartered are also looking at whether the cost of being based in the UK is now too onerous.
The Chancellor signalled last year that he wanted to overhaul the CFC regime and in this week’s Budget will outline his plan to enable multinationals’ overseas profits to remain largely out of the taxman’s reaches.
I’m told that the Treasury has been working for several months on detailed pledges to the company bosses in order to lure them back.
The Treasury declined to comment. UBM and WPP were unavailable for comment.
During last year’s general election campaign, Sir Martin Sorrell, the boss of WPP, told me:
“If consultation resulted in certainty that overseas profits would not be taxed and legislation [is] enacted, and rates remained the same, we would move back.”
So Mr Osborne is giving Sir Martin what he wants, right?
Well, maybe, but there’s another obstacle still. The chief executive of another company which moved its tax base a couple of years ago told me today that the lack of certainty about the actions of future governments was acting as a significant deterrent to his fellow board members.
“We can’t just move back only to have another administration reversing the changes in four years’ time. We need certainty and I’m not sure any government can provide that.”
A different perspective on this subject was provided by Andrew Witty, chief executive of the drugs company GlaxoSmithKline, in an interview in today’s Observer.
He criticised companies which had moved offshore, saying:
“One of the reasons why we’ve seen an erosion of trust broadly in big companies is they’ve allowed themselves to be seen as being detached from society and they will float in and out of societies according to what the tax regime is. I think that’s completely wrong.”
It is, I suspect, a view that will chime with the instincts of many people.
Mr Witty has, it’s worth pointing out, been among the Chancellor’s biggest business allies since the general election, last autumn choreographing an announcement about a new £500m UK manufacturing commitment for GSK alongside a Treasury statement on the taxation of income earned from patents.
And it’s also fair to say that Mr Witty’s shareholders would be rightly asking some serious questions if he was not paying close attention to the competitiveness of the UK corporate tax regime.
By Mark Kleinman
Source: http://blogs.news.sky.com
The Chancellor and Treasury officials have in recent weeks stepped up their efforts to persuade the likes of United Business Media and WPP Group – both of which are now domiciled in Dublin – to relocate their tax base back to the UK.
Whitehall sources tell me that Mr Osborne is keen to announce the return of at least one of these companies alongside details of corporate tax reforms to be outlined in Wednesday’s Budget. It’s not clear whether any of the companies with which the Treasury has been in discussions in recent weeks are prepared to move that swiftly (given that such decisions would need to be debated and approved by their boards of directors).
About a dozen major British companies, including Regus, the serviced offices supplier, Brit Insurance and Shire, the pharmaceuticals group, have moved their tax base overseas during the last three years amid growing concerns about the competitiveness of the UK’s corporate tax rules.
Of particular concern to the bosses of big multinationals has been the approach to taxing profits earned by their overseas operations (known as the Controlled Foreign Companies rules). Britain’s approach to taxing foreign earnings has left companies, often under pressure from large institutional shareholders, with little choice but to explore moving overseas.
Ireland has been one of the destinations of choice for offshore companies seeking lower-tax climes although faith in the stability of its tax system has been shaken by the dire state of the country’s economy.
Other UK companies have moved to locations such as Switzerland (Informa, the media company, and Wolseley, the building materials group) and the Netherlands (Brit Insurance).
Those that have moved are only the tip of the iceberg. FTSE 100 companies including the drinks giant Diageo and the home and personal care products-maker Reckitt Benckiser have stated openly that they are keeping the situation under review.
For reasons specific to reforms taking place in the banking sector, HSBC and Standard Chartered are also looking at whether the cost of being based in the UK is now too onerous.
The Chancellor signalled last year that he wanted to overhaul the CFC regime and in this week’s Budget will outline his plan to enable multinationals’ overseas profits to remain largely out of the taxman’s reaches.
I’m told that the Treasury has been working for several months on detailed pledges to the company bosses in order to lure them back.
The Treasury declined to comment. UBM and WPP were unavailable for comment.
During last year’s general election campaign, Sir Martin Sorrell, the boss of WPP, told me:
“If consultation resulted in certainty that overseas profits would not be taxed and legislation [is] enacted, and rates remained the same, we would move back.”
So Mr Osborne is giving Sir Martin what he wants, right?
Well, maybe, but there’s another obstacle still. The chief executive of another company which moved its tax base a couple of years ago told me today that the lack of certainty about the actions of future governments was acting as a significant deterrent to his fellow board members.
“We can’t just move back only to have another administration reversing the changes in four years’ time. We need certainty and I’m not sure any government can provide that.”
A different perspective on this subject was provided by Andrew Witty, chief executive of the drugs company GlaxoSmithKline, in an interview in today’s Observer.
He criticised companies which had moved offshore, saying:
“One of the reasons why we’ve seen an erosion of trust broadly in big companies is they’ve allowed themselves to be seen as being detached from society and they will float in and out of societies according to what the tax regime is. I think that’s completely wrong.”
It is, I suspect, a view that will chime with the instincts of many people.
Mr Witty has, it’s worth pointing out, been among the Chancellor’s biggest business allies since the general election, last autumn choreographing an announcement about a new £500m UK manufacturing commitment for GSK alongside a Treasury statement on the taxation of income earned from patents.
And it’s also fair to say that Mr Witty’s shareholders would be rightly asking some serious questions if he was not paying close attention to the competitiveness of the UK corporate tax regime.
By Mark Kleinman
Source: http://blogs.news.sky.com
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