UK 'a tax haven for multinationals'

 
City of London skyline UK-based multinationals tend to buy high-value services from the City

The boss of one of the world's biggest banks last week described the UK to me as the world's "biggest, most developed tax haven".

Which rather jars with the splash in this morning's Telegraph, whose headline is "high taxes 'stifle UK entrepreneurs'".

So what is going on?

Well my banker was talking about the declining and low rate of UK corporation tax, which will be a uniform rate of 20% for big and small companies from next year, and reforms by this government which mean UK-based multinationals pay no UK tax on dividends they receive from their overseas operations.

If this system was designed by the Treasury to attract more huge global companies to take up residency here, it seems to be working: this morning America's Pfizer said that if it succeeds in buying the UK's AstraZeneca, the new pharmaceutical monster's holding company would be incorporated in the UK.

Also if Omnicom of the US and Publicis of France ever make it down the aisle to create the world's biggest advertising company, it would be tax-resident in the UK (though apparently HMRC is a bit embarrassed at being seen to be aiding and abetting what some would described as tax avoidance, and is dragging its feet on approving the tax status of the merged beast).

So the days when multinationals feel the irresistible pull of Dublin's ultra low tax rates seem to be over - and in spite of the regular spankings administered by Margaret Hodge and the Public Accounts Committee to the digital multinationals, Google, Amazon et al, for contributing little in the way of corporation tax to the UK Exchequer in spite of apparently being rather successful here.

Which for George Osborne, David Cameron and Treasury mandarins would be regarded as good news - because when multinationals are resident here, certain numbers of highly paid jobs are also located here, and they also tend to buy high-value services from the City.

This is how one Treasury official put it to me the other day: "London is now the unchallenged capital of the world; it is wonderful."

Which is all very well, if London's status as the home of choice for the richest and most successful generates work and prosperity for the UK as a whole - and some would say that is moot - but not everyone is thrilled by the associated creation within London of ghettos of properties affordable only by the super-rich.

Entrepreneurs

But back to the apparent contradiction between London as putative tax haven and the UK as alleged high-tax strangler of entrepreneurs.

The high taxes in question, according to a report by the Centre for Policy Studies quoted by the Telegraph, are the 45 pence top rate of income tax and the 28 pence rate of capital gains tax.

These are supposedly a reason why the UK spawns fewer home grown billionaire entrepreneurs per million citizens than Hong Kong, Israel and the US (in that order).

Did I hear you say "so bleedin' what? What have billionaires ever done for us?"

Well there are billionaires who make their dosh creating huge numbers of jobs and revolutionising industries and even economies: Google, Microsoft, Facebook and Amazon spring to mind, as do vast numbers of entrepreneurs in Korea, China, India, Africa and South America, but not so many in Europe.

And then there are others who are brilliant at borrowing cheaply to buy undervalued assets - the private equity and hedge fund titans, inter alia - whose wealth creation typically benefits rather few people.

Role of the state

But even if there are billionaire entrepreneurs whose activities are a net benefit to us all, there is a lively debate about whether societies are becoming less happy, as inequalities become more pronounced.

Also there is by no means a consensus about the institutional and economic structures that best promote industrial innovation and sustainable wealth creation.

There are some, such as Mariana Mazzucato, who argue that the role of the state in the biggest industrial breakthroughs of our time is desperately undervalued these days.

There are others, such as the consulting firm McKinsey, who say that vast multinationals are the best at commercial research.

As for billionaires, the UK does of course have a legion of them. But they tend to be Russian, or Saudi, or Chinese - with most of their industrial activities outside the UK, but a large chunk of their often tax-avoiding nest eggs here.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +50

    Comment number 32.

    I'd rather have more manufacturing jobs created in the Midlands, the Northern Regions, Scotland, Wales and Northern Ireland than more wealthy foreigners being based in London creating an even greater demand for up-market restaurants staffed by immigrants.
    Alan

  • rate this
    +19

    Comment number 31.

    Tax dodging multinationals should be forced to pay a operating tax for any revenue created here, and pay 20% on that, if they don't like it remove their licence to operate here, they will soon fall in line or a rival will take up all their business who will pay it, a win ,win and simple to enforce.

  • rate this
    +7

    Comment number 30.

    Billionaires like Bernie Ecclestone can sod off for all I care, they will always try to find a loophole no matter what level we set tax at.

  • rate this
    -18

    Comment number 29.

    Even auto deleting German too ! The power of the American Cthulhoid Bank monster is all pervading !

  • rate this
    +8

    Comment number 28.

    24.Iy

    "...it's capitalism, it's what we all signed up for..."

    I didn't. Are you sure you did?

  • rate this
    +4

    Comment number 27.

    The UK will only be a ‘tax haven’ for as long as the people of the UK allow it.

    People like Ecclestone getting away with only paying a fraction of what they owe..who cares?

    As long as the general populous are happy to direct their misplaced anger at the working poor, elderly & disabled the real guilty parties will carry on as they are….very nicely, thank you very much.

  • rate this
    0

    Comment number 26.

    Well said, Robert.

    I would only add that: a Neo-Classical Economy is a breeding ground for psychopathy.

  • rate this
    +4

    Comment number 25.

    If these companies create jobs and pay the tax they should to the UK then this is great. If on the other hand they aren't paying any tax and aren't creating jobs and are just using the UK to avoid taxes elsewhere then we should close the loopholes.
    One thing some people on here need to realise big businesses and the jobs they create are good, they are only bad when they avoid what they owe.

  • rate this
    -12

    Comment number 24.

    Don't know what people are moaning about - it's capitalism, it's what we all signed up for. You can't just pick and choose what you do and don't like.

  • rate this
    +2

    Comment number 23.

    @2 watriler

    "Robert does not use the phrase 'trickle down'"

    Most people are starting to realise that this notion, a bastion of the justification of neoliberal thought, should be replaced by the 'suck up' effect.

    Slurp !

  • rate this
    +39

    Comment number 22.

    16. Mark_from_Manchester

    Yes, make this a Tory - Labour question.

    Let's just pretend that there is a difference between the two.

    The banksters and the tax dodgers are extremely grateful for tribal idiots like you, as you are the reason this will never stop.

    Labour = Tories.

    They are one party, the United Bankster Party. Look at their actions instead of their words, and you will see.

  • rate this
    +6

    Comment number 21.

    Because it is, and they know exactly how spineless our politicians are.

  • rate this
    +2

    Comment number 20.

    Britain is certainly a perch for raptors - individuals who appear to enjoy making dosh for no other reason than . . . well, what? And thinking back to the high pageantry in Rome yesterday, one wonders whether Christ views all these shenanigans through the eye of that precious needle.

  • Comment number 19.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +4

    Comment number 18.

    Good news for politicians, estate agents, accountants, Government departments, property developers and bankers. The rest, just hold tight you may get thrown some scraps from the high table.
    There may be some potential for small growth, but I fear that it would be relatively small, definitely not enough to pay for HS2. Although the company bosses will be the only ones able to afford the fares.

  • rate this
    +5

    Comment number 17.

    Late capitalism. Money mates with money to make more money. No trade necessary. No machines necessary. And with computers no people necessary. Eventually it'll go kaput again and with no sovereign bail out funds any more the entire pyramid scam come crashing down. Late late capitalism will give way to fascism or feudalism.

  • rate this
    +1

    Comment number 16.

    I see George's latest wheeze is to let Bernie only pay 1% of his £1 billion tax bill.

    On, wait a minute,

    That happened in 2008 under Gordon and his socialist workers party who fight for the common man against the oppressive capitalist fat cats.

    Hmmm.

  • rate this
    -2

    Comment number 15.

    6.J150

    "At the moment HMRC is actually taking more in tax"

    And yet, as RP puts it: "my banker was talking about the declining and low rate of UK corporation tax" ...meaning it's a haven, but not across th board.

    So... who's paying the extra tax?

  • rate this
    +7

    Comment number 14.

    Dear Mr Preston,
    Are those "certain numbers of highly paid jobs", some but not all the same ones that politicians and their cronies "move on" into after their stint in public office? Seems like greasing the revolving door of self interest of the so-called "elites". Of course I am fairly sure that I am just a disenfranchised grumpy old bloke, so feel free to ignore me.

  • rate this
    -16

    Comment number 13.

    Post moderated out welcome to democracy tory style

 

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