James Ashton: Tax tourism is a flagship policy, and President Obama is helping things along
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Version 0 of 1. My Week There are several factors that have turned the cross-border mergers and acquisitions tap back on this year. A recovering world economy, boardroom confidence and cash piled high on balance sheets have all played a part. Over lunch this week, one senior corporate adviser pointed out another secret weapon in generating deal fees: Barack Obama. Tax inversions of the type being proposed by drugs company AbbVie in its £27bn pursuit of FTSE 100 firm Shire are the talk of Wall Street. Whether it succeeds, AbbVie, which wants to move tax domicile to Britain but manage the combined company from Chicago, will not be the last to try. President Obama, seeking to limit corporate tax avoidance, has made the matter all the more pressing. A proposed clamp-down on inversions that is going through the US Senate means that companies are dashing to find takeover targets in Britain before the loophole is closed. No matter the strength of the pound: American firms moving here can save millions from a lower corporate tax rate and release billions in cash accrued overseas that would be taxed at 40 per cent on its return to home shores. But consummating such transactions is harder than it looks. The merger of advertising firms Publicis and Omnicom collapsed and Pfizer fell short in its takeover of AstraZeneca. Both enlarged companies would have resided in the UK for tax purposes. A presentation from the City law firm Slaughter and May compares the three most attractive destinations in Europe for so-called corporate migration: the UK, Ireland and the Netherlands. The irony is that what appeals most about Britain is George Osborne's falling corporation tax rate and what appeals least are governance reforms championed by his Coalition partner, Vince Cable, that give shareholders a binding vote on boardroom pay. There are other advantages, however, such as that Britain doesn't demand that these companies actually hold board meetings here, while Ireland and the Netherlands require some to take place locally. It begs the question of what actually changes beyond a brass plate on the door? I suppose that some more cash rolling into Treasury coffers is accompanied by a shift in the centre of gravity for corporations that otherwise would have nothing to do with Britain. That might bring with it jobs. How strange that Margaret Hodge and others have got in a lather about companies such as Google not paying their way. Yet the Government, including the Treasury Secretary Danny Alexander, who was banging the drum on Wall Street this week for more American investment in Britain, have made tax tourism a flagship policy – as long as companies are clear about the correct direction of travel. |