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Darling under pressure to ease jitters over tax

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Darling under pressure to ease jitters over tax

By Vanessa Houlder in London and John Murray Brown in,Dublin

Published: August 30 2008 03:00 | Last updated: August 30 2008 03:00

Alistair Darling yesterday came under renewed pressure over tax after the CBI called for “dramatic action to restore confidence in the stability of the tax system”.

The CBI comments followed the news this week that more companies were planning to shift their tax base from the UK.

George Osborne, shadow chancellor, accused the chancellor of damaging the UK after Regus, the office services company, became the third business this week to announce plans to change its tax base.

In a letter, Mr Osborne urged him to adopt Conservative proposals on cutting the corporate tax rate and simplifying business taxes “to restore our competitiveness and help prevent any more companies from deciding to leave the UK”.

He said the “parlous state of the public finances” meant his proposed rate cut from 28 to 25 per cent would be paid for by simplifying capital allowances.

Mr Darling hit back with a letter saying that Mr Os-borne’s criticism of the competitiveness of the UK tax system was “wrong”, citing favourable findings in surveys by international bodies. “The UK is one of the largest recipients of inward investment in the world and hosts more international headquarters than any country outside the USA.”

John Cridland, deputy director-general of the CBI, in an interview with the FT, blamed the government’s destabilisation of the tax system for the “steady trickle” of departures from the UK. He called for urgent action to restore stability after a series of “debacles” over policymaking on capital gains tax, non-domiciled residents and foreign profits.

Mr Cridland also called for aggressive cuts in the med-ium term on tax rates, saying that the overall tax burden was higher in Britain than competitors such as Germany. He criticised the Conservative plan to offset cuts in rates by increases elsewhere. “Even with the Tories we won’t see a reduction in business taxes. Both political parties need to be more ambitious.”

Regus highlighted “the ongoing uncertainty surrounding the UK tax treatment of international groups” as a reason for the shift of its head office to Luxembourg. The announcement followed similar news from Charter, an engineering business, and Henderson, investment manager, which are planning to move their tax base to Ireland.

Ireland said yesterday it was not encouraging UK companies to use Dublin as a location to avoid tax, following news this week of more companies seeking to set up headquarters in the Republic. The finance ministry said: “Ireland does not encourage the establishment of so-called brass plate operations which seek to simply avail of our corporate tax regime. We want to see real substance in investment in Ireland.”

The strongly worded statement comes amid concerns the issue could jeopardise discussions Ireland is having with the UK and other European Union partners on how to resolve the crisis thrown up by its rejection of the Lisbon treaty in June.

Saying goodbye

2003

* Shell Opts for a parent company with Dutch HQ and tax residency

2006

* Experian Spun off from the UK’s GUS and established in Ireland

* Hiscox Announces domicile move to Bermuda

* Omega Reveals move to Bermuda

* Colt Telecom Unveils Luxembourg-based holding company

April 2008 * Shire Plans move of holding company to Ireland

* United Business Media Announces plans to be tax-resident in Ireland

August 2008

* Henderson Plans to move tax base to Ireland

* Charter Plans to move tax base to Ireland

* Regus Reveals shift of HQ to Luxembourg

Regus joins move, Page 16

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