TaxCorporate TaxTax under attack

Tax under attack

No one expects a tax cut, especially in the current economic climate – unless you are the CFO of GlaxoSmithKline

Julian Heslop, CFO at GlaxoSmith­Kline, is one of two FTSE finance chiefs to
call for a huge cut in corporation tax to 15%. At a time when most people expect
tax rises, Heslop has taken a contrarian stance.

What’s happened?

Heslop was at what should have been a sedate and cerebral discussion about
controlled foreign companies at The Oxford University Centre for Business
Taxation when he and John Connors, tax strategy director of Vodafone, let rip
with their belief that the way forward for the taxation of business in the UK
was to “slash” the rate of corporation tax to almost half of where it currently
stands at 28%.

Treasury officials at the meeting sat stoney faced while the idea prompted a
vigorous and wide-ranging attack on Treasury policy.

In such rarefied company Heslop, alongside Connors, placed himself very
publicly at the front of a debate about what government should do to encourage
business and to discourage companies from moving their headquarters offshore.

Slashing corporation tax met with some support, though it was generally seen
as an “extreme” view. Indeed, the Tories have already committed the party to
cutting it by 3%.

Many academics, and even ratings agencies, will question whether a tax cut
will bring any real benefits. Businessmen really want demand for their products.
In an environment where there is low demand, tax cuts are viewed as an
opportunity to make savings rather than make an investment.

What happens next?

Heslop will no doubt keep banging the drum for something to be done about
corporation tax in the UK, but a pertinent question, now his radical views have
been revealed, is whether he will get access to the right people?

Heslop is a big hitter in the world of finance and tax. He was on the
chancellor’s forum on tax alongside HSBC’s CFO Douglas Flint and James Lawrence
of Unilever. Heslop is also chairman of the fiscal committee at the Hundred
Group of FDs, the low profile group of mostly FTSE100 FDs who come together in a
bid to lobby government behind the scenes.

The one big weapon in his armoury is to suggest that GlaxoSmithKline would go
offshore in search of a more sympathetic tax regime. That would be a blow to the
government, but it’s hardly likely to happen while there is the prospect of
reform by the Tories, if they get in.

And, while some companies have undoubtedly gone offshore (notably Shire
Pharmaceuticals, a Glaxo competitor), there has not been the often threatened
exodus of executives packing their bags. That’s not to say they wouldn’t. Only
to suggest they haven’t yet been pushed quite far enough.

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