| 16 September 2007
The news that Hannover Re is thinking of moving its base from highly-taxed
Germany to lightly-taxed Ireland prompts the question: Why don't more large
companies leave expensive cities like London, New York and Frankfurt and set
up in tax havens?
The reinsurance industry is admittedly a special case, being strictly a business-to-business
affair, without brands, and not needing to appeal to the public for capital.
And one by one, its operators are filing out of the door.
One can see that for 'national champion' sorts of companies like say General
Motors in the US or Citroen in France it's partly a question of patriotism and
brand - imagine the hail of negative publicity that would accompany a decision
by Citroen to relocate to Bermuda. But what is stopping multinational conglomerates
with feet in a dozen different markets from leaving?
What is the logic for, say, GlaxoSmithKline to remain based in London? In 2006,
that company paid GBP2.3bn in tax, much of it to the UK Treasury, a tax charge
of 29.5%, very close to the UK's headline rate of 30%. Of course it does have
a substantial business in the UK, and it is always going to pay tax on its UK
profits, but compare it with Rupert Murdoch's News International, which normally
has a tax charge below 10% due to clever use of holding companies in the Cayman
Islands and other tax havens.
If you ask the bosses of GSK why they are gaily tossing billions of pounds
of shareholders money at the taxman, they will tell you about the importance
of being close to government (but does Gordon Brown listen?), ease of communications
(Heathrow, anyone?) and such twaddle.
No, the real reasons are because the bosses of UK plcs want knighthoods, they
like their Park Lane mistresses, their chauffeur-driven Daimlers, and their
plush Thames-side penthouses. When are the shareholders going to wake up to
this brazen thievery?
Now I've woken up to it (a good friend told me about it over dinner last night)
I'm going to take my money out of FTSE companies and stache it somewhere it
can't put the jam on Gordon Brown's bread and butter.
You have been reading an entry on the following blog:
Penelope Wise
Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.
Penelope blogs on investment and financial services around the world: mainstream and alternative. Contact: penny@lowtax.net
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