Cicero Policy Briefer

Issue 25, June 2008

Tax doesn’t need to be taxing

By Iain Anderson

Mmm. I am not so sure that HM Treasury officials would agree with this interpretation of Government policy any more. Indeed, I am not so sure that corporate Britain would either.

Some companies, such as Shire, have decided that enough is enough and are planning to domicile in Ireland. The recent round of corporate reporting has seemingly created a momentum effect on the likelihood of UK plc heading overseas.

There is no doubt some ‘froth’ in the nature of these stories. When asked the question, “Do you keep your domicile under review?”, most firms will always wish to keep their options open. So I do not believe there is going to be a stampede towards Dublin, Luxembourg or the Caribbean.

However, there is clearly a conscious decision by firms to articulate concerns and the debate does seem to be settling around ‘tax certainty’. In my conversations with companies across sectors right now, there is much talk of constantly moving goalposts, increasing costs of compliance and the need to maintain overall competitiveness.

The Treasury’s consultation document on the taxation of foreign profits is expected to appear before Parliament rises for the summer recess towards the end of July. The direction of this document will set much of the tone for the debate—but at the moment it appears almost impossible to decipher the direction of travel. So much for ‘tax certainty’ it seems!

But continuing doubt as to the direction of travel of policy will do the Government no favours.

Of course in the current political climate the Treasury might decide this is one political hot potato which is not worth pursuing. The debate remains finely balanced.

Indeed it may even be a new Chancellor who, by July, looks to progress the debate.

Tax does indeed appear to be more taxing than ever!

Iain Anderson can be contacted on +44 (0)20 7665 9532 or click here to email.