Tuesday, May 6, 2008

The eternal truths

Day after day, the financial pages of the heavier end of the the British press drum out the message:
Reduce corporation tax!

Another firm moves its HQ to Ireland to benefit from the lower corporation tax!
A typical story is that of Shire:
The FTSE-100 company said it was applying to a court to create a new holding company incorporated in tax-haven Jersey and would become tax resident in Ireland, where corporate tax rates are less than half those in the UK.

The 22-year-old biopharmaceutical firm whose key products include a treatment for attention deficit hyperactivity disorder (ADHD), said its headquarters would remain in Basingstoke and it did not plan to cut or relocate any UK jobs.

But its board of directors will hold meetings in its Dublin office once the tax residence move gets court approval.

Most importantly, the move means it will be subject to an official corporate tax rate of 12.5%, compared with 28% in the UK.
This weekend the Sunday Times was at it again, with a new twist (taxes and not paying them are a Big Thing for the Murdoch Media):
Bosses' tax threat at No 10 summit
SOME of the biggest names in British business have told Gordon Brown and Alistair Darling that Britain risks a corporate exodus if Treasury tax proposals on foreign earnings go ahead.

The warning was delivered at Downing Street 10 days ago by a delegation from the Multinational Chairmen’s Group, a secretive body that brings together leaders of some of the most powerful companies in the world ...

Those involved in the discussion say the foreign-dividend proposals have given a hard edge to general discontent over UK corporate taxation.

In recent weeks two leading companies, Shire Pharmaceuticals, a FTSE 100 drugs group, and United Business Media, a media and conventions group, have decided to shift their tax domiciles from the UK to Ireland. There were rumours last week that another FTSE 100 group was on the verge of leaving.
The not-so-subtle hint about "another FTSE 100 group" was merely a taster for a Times story on Tuesday:
One of the most prominent players in the Lloyd’s insurance market is considering shifting its corporate headquarters outside the UK, the latest in a string of City businesses angered by unpopular tax proposals from the Treasury. Brit Insurance, the reinsurance broker valued at £800 million in London, is investigating whether jurisdictions such as Dublin or Geneva are more tax-efficient than the UK, which is increasingly seen as operating a business-unfriendly regime.

Several other companies, including Sir Martin Sorrell’s WPP Group, have said they are considering such a move ...
Naughty Malcolm.
Naughty, naughty Malcolm:
you forget that the great and the good
have a fiduciary duty to their shareholders,
to avoid paying tax.

As in the Shire case:
"Shire has concluded that its business and its shareholders would be better served by having an international holding company with a group structure that is designed to help protect the group's taxation position, and better facilitate the group's financial management."

A Shire spokeswoman stressed it was not stopping UK tax payments outright.

"We will not pay corporation tax in the UK but will continue to pay tax in the UK on our UK business," she said.
Don't we "little people" yearn for that choice "not to pay"?

In any case, too many "British" companies have already decided that they should enjoy the benefits, but shirk any commitment to Britain:
a National Audit Office study has revealed that almost one third of the UK's 700 biggest businesses pay no corporation tax whatsoever - not one penny. A further third of these businesses pay less than £10m a year in corporation tax, the main levy on UK company profits.

Intriguingly, almost 70 per cent of all UK corporation tax in the 2005/6 financial year was paid by just 50 companies, the report showed. While Britain's banks stumped up £7.5bn in corporation taxes, the alcohol and tobacco industries coughed up next to nothing. While oil and gas companies shelled out close to £7bn, the mega-bucks property sector paid just a few hundred million.

There are armies of accountants in the City of London trained in the dark arts of tax minimisation. But it's not all about offshore accounts in the British Virgin Islands or Bermuda. For the modern multinational, it is remarkably easy to make a large tax bill simply disappear - through entirely legitimate means.
Malcolm would insert a small aide-memoire here, from last August, for that reference others may be trying to recall:
Leona Helmsley, the cutthroat hotel magnate whose title as the “queen of mean” was sealed during a tax evasion case in which she was quoted as snarling “only little people pay taxes,” died Monday at age 87.
Helmsley (right) embezzled $1.2M of tax money by claiming personal expenses on the firm: everything from renovating her Connecticut estate to paying for her knickers. She, eventually, went to jail for 21 months of a four-year term. Even then she cheated: much of her "community service" was done by her employees.

When she died, she charmingly left her little dog, "Trouble", $12M.

There was nothing for two grand-children, though.

She died lonely; she died alone: but she died rich.
And that's what really matters, yes?

Compared to machinations like these,
decent whoring looks a respectable business.

In all the Gaderene rush to set up shop in Dublin, never, not once, does the accompanying article comment on the other side of the equation:

VAT in Ireland is 21%.

But only the "little people" pay VAT. Sphere: Related Content

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