Shire’s decision to become tax resident in Ireland could mark “a dangerous new phase in the government’s relationship with multinationals”, said Vanessa Houlder in the FT.
On Tuesday, the UK’s third-biggest pharmaceuticals group, which generates most of its sales outside Britain, announced proposals to transfer its tax base to Dublin, although it doesn’t plan to relocate British jobs.
The move marks the first change of tax residency by a FTSE 100 blue chip “that hasn’t come as part of a wider corporate restructuring”, noted the FT’s Lombard.
Why the move?
Shire would pay a lower rate on global earnings in Ireland, where the headline corporate rate is 12.5% against 28% here. But it’s not a big UK taxpayer; this move appears to have been largely pre-emptive. The key issue is the stability of the Irish tax regime, said David Wighton in The Times.
Recent changes to capital gains tax – reversing Brown’s own reforms – coupled with the assault on non-dom workers, have proved “the last straw” for many business leaders; they have lost confidence in “the government’s commitment to stability and competitiveness”. One major worry is uncertainty over how foreign profits may now be taxed – this area is being overhauled – and especially the prospect of complicated anti-avoidance measures accompanying reforms.
What next?
The wider issue is the erosion of competitiveness, noted Richard Fletcher in The Daily Telegraph. Yahoo Europe and Google have decided to base themselves in Dublin rather than London. The CBI director general, Richard Lambert, warned that an “uncompetitive corporate tax system” could tempt other firms abroad.
Time for the Treasury to re-examine its policies on “everything from skills to tax breaks”, said Lombard. It bodes ill when firms up sticks for protection against “what the future here holds”.
SHP: 12m change –12%