Brown warned about corporate exodus to lower tax regimes

Financial Times: Brown warned about corporate exodus to lower tax regimes

By Jean Eaglesham, Chief Political Correspondent
Published: May 6 2008 03:00 | Last updated: May 6 2008 03:00

Gordon Brown is in “very dangerous territory” on corporate taxation, with Britain facing an exodus of companies moving to lower tax regimes, a leading business organisation has warned.

Changes under Mr Brown’s premiership have made tax “problem number one” for British business, the EEF manufacturers’ body said.

In an interview with the Financial Times, Martin Temple, EEF chairman, said there were strong disincentives to moving to lower tax jurisdictions, such as relocation costs. But he warned: “There is a point whereby if you lose confidence in the system and it starts to become expensive, you start thinking about this [and] it becomes a boardroom agenda item . . . We are absolutely on the edge of that.”

His warning of a new “boardroom fashion” for considering relocations follows recent decisions by Shire, the pharmaceuticals company, and United Business Media, the publisher, to move to Ireland for tax reasons. Other companies switching jurisdictions include Experian, Hiscox, Invesco, Omega and Royal Dutch Shell. WPP, the advertising group, has warned it might also depart.

Sir Martin Sorrell, WPP chief executive, said that if the Treasury tightened tax rules again “we will be taking a very serious look at the advantages and disadvantages [of moving]”.

“We are talking about very, very significant sums of money,” he told the BBC.

The tax flight is not restricted to multinationals, according to the EEF. “We’re getting examples now of quite small companies that are moving to Ireland.” Mr Temple said. “I wouldn’t say it’s a major trend yet, but if we don’t watch it, we’ll get this [exodus] . . . it’s very dangerous territory.”

He warned that the government’s move last week to try to stem the corporate flow from Britain would not necessarily work. The Treasury has agreed to set up a review with industry of the UK tax system’s long-term competitiveness.

“The question is, will it be effective but fast enough to stop the [business] thought processes that frankly started just after the pre-Budget report?” Mr Temple said.

Business does not expect immediate tax changes to assuage its concerns, according to Mr Temple. But he said the government needed to “make sure that the signposts are strong enough to show that they’ve realised the importance of the debate”.

Brown has lost ‘trust’, Page 2 Out of the door, Page 15

Copyright The Financial Times Limited 2008

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