Companies leaving the UK: what will we lose?
When everyone is saying one thing, it’s always worth putting a contrarian view
So why not try this one: let’s not worry about companies leaving the UK for
tax reasons.
For a start, the tax loss looks likely to be minimal. Some said WPP’s
departure would cost the UK £200m in tax. Not so the company pays £200m in tax
worldwide, and, according to its most recent accounts, got a tax credit in the
UK.
The sectors most affected by the foreign profits move are supposed to be
pharma and media. They have most intellectual property.
The NAO’s analysis of corporation tax revenues established that pharma and
media contribute £2bn of CT revenues, nothing compared to banking and oil and
gas.
It is also pointed out that company headquarters are important for the UK
economy. That may be true, but the argument also clashes with another totem of
corporate thinking. That is that you have to pay huge amounts and be incredibly
attractive to attract the best boardroom talent.
How many execs will want to trek out to some far flung tax haven to work? Not
many. If it really is the case that companies without the best will wither and
die, then those companies fleeing our shores will not be long for this world.
Of course, being contrarian isn’t everything. The foreign profits rules look
like a classic case of brilliant Treasury theorising triumphing over the reality
of business.
But even I can see that dire theories that the UK economy is going to
collapse as a result
of companies leaving are a bit strong.
Let’s hope the Treasury don’t decide that, because all those arguments are
overstated, it needn’t revise its draft rules.
Alex Hawkes is news editor of Accountancy Age