Bye Bye Blighty
Is the threatened tax exodus of some of Britain's largest companies just brinkmanship?
What looked like an arcane tax issue has suddenly turned into business dynamite. Britain's multinationals are threatening mass migration in protest at Treasury proposals to tax foreign dividends. Shire, the pharmaceutical giant, and United Business Media (UBM) have already announced departure plans; many more companies are considering their options.
Once, this would have been viewed as no more than sabre-rattling, but a big barrier to migration has recently been lifted: companies are no longer required to have a UK base to be included in the FTSE.
Hence the treasury's dilemma: it is keen to avoid over-generous concessions but, with competitors like Ireland now offering corporate tax rates of 12.5% (compared with Britains 28%), there's a real risk of exodus.
We can already be sure of the outcome. No one in government ever has the spine to say no to business, least of all our great leader. When business calls, it's not so much clunking great fist, as wee tim'rous beastie.
Sure enough, Gordon Brown was on parade at the Institute of Directors vowing to reduce corporation tax further. As for the Chancellor, Alistair Darling, he should have 10p tax losers wired into his brain whenever he thinks about tax cuts for business. As it is, these companies are getting away with murder.
Richard Murphy of the Tax Justice Network calculates that they pay £12bn less than they should in proportion to profits, and contribute less than 10% to the UK's total tax take. And the avoidance is even more startling when you look at individual companies. Shire paid just £1m in UK tax between 2000 and 2006. The upshot, says Murphy, is that two companies that are basically not paying tax are leaving the UK – and the Government is offering to cut rates and change the whole tax system as a result.
Yet the PM is only too aware of the dangers. The threatened exodus of Footsie companies is bad enough, but if the banks were to retrench, he would have to think seriously about turning off the economy's lights. So, don't expect the Government to join the charge to curb banker's pay, still less make a stand on corporation tax.
These are critical times. It's easy to dismiss these threats as self-interested brinkmanship, but in a globalised world, Britain needs to preserve its competitive edge. The Government must do whatever it takes to prevent the trickle of threatened departures from becoming a flood.
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