Offshore planning has caused fall in tax revenue

A House of Lords member says that the anger and alarm from UK-based
multinationals should not obscure the real problem that the Treasury is trying
to address – that of the erosion of the national tax base caused by offshore

Referring to comments by Angus Russell – the chief executive of Shire who
claimed the company wanted ‘to be a good corporate citizen’ and ‘to provide them
most efficient tax structures for shareholders’ – Lord William Wallace of
Saltaire said these were ‘divergent objectives’ of Shire.

‘Institutional shareholders, especially offshore-based hedge funds as
activist shareholders, do not naturally rank the quality and security of the
societies within which their companies operate as qualifying their pursuit of
the profit objective. ‘Reputational considerations for companies with direct
relations with the public may moderate the hunt for tax-efficient offshore
structures to a degree. Past revelations of efficient tax avoidance by major
supermarkets and news companies, however, do not seem to have significantly
dented their reputations or sales,’ said Lord Wallace in a letter to the

Lord Wallace pointed out that governments of advanced democracies faced the
unwelcome choice of further reducing taxes on companies, depending for their
revenues more and more heavily on consumer taxation – and personal income tax on
those who cannot claim to live across national borders – or of limiting the
autonomy of offshore financial centres and negotiating tighter international
rules for corporate taxation.

‘The CBI, the Engineering Employers’ Federation, the pharmaceutical companies
as a group, would do well to offer a constructive response to the erosion of the
national tax base, before some populist politician or press campaigner seizes on
the issue to use against them,’ he said.

Further reading:

Treasury all at sea on foreign profits

‘Another’ Darling u-turn

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