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
