UK seeks to reassure businesses on corporate tax

March 1, 2010

By Adrian Croft

LONDON, Feb 22 (Reuters) – Britain launched a consultation on Monday aimed at giving companies more clarity on any likely changes to tax laws as it seeks to reassure multinationals that the UK remains a competitive place to locate their business.

“Businesses want certainty on tax. That is why today I have set out, in collaboration with UK business, the government’s key principles for tax policy and how we will engage with business when developing tax policy,” finance minister Alistair Darling said.

The framework aims to ensure that UK tax is competitive, fair, minimises distortions to commercial decisions, and is predictable and simple with low compliance costs, the finance ministry said.

Paul Walsh, chief executive of Diageo Plc, the world’s largest spirits maker, made headlines this month when he said tax increases in Britain, where the company is based, could force him to consider moving Diageo’s headquarters.

The consultation was aimed at other multinational companies including HSBC, Unilever, BP and Axa, which want clarity on Britain’s tax measures to plan investment.

Last year British insurer Beazley Group announced it was creating a parent that would be tax domiciled in Ireland, a move that it said would slash its tax bills by 10 percent.

Advertising group WPP, drug maker Shire and media group UBM also announced plans to move their tax domicile to Ireland.

Speaking at an international investment conference on Monday, Business Secretary Peter Mandelson said few companies had left Britain but that the government had to be vigilant to make sure none left through misunderstanding of government policy.

The government, facing an election by June, needs to strike a balance between convincing markets it can tame a record budget deficit and encouraging investment.

“The last thing the UK economy needs is some sort of sudden lurch in policy or in what we do, what we spend or how we invest which would weaken confidence in the economy and would risk pulling the rug from underneath the recovery that is under way,” Mandelson said.

Jin Liqun, chairman of China Investment Corp, China’s $300 billion sovereign wealth fund, said during a visit to London on Monday that CIC was looking for investments in Britain but would not be involved in sectors that might be too sensitive, without saying which areas he meant.

He met Prime Minister Gordon Brown and said he was encouraged by indications that Britain was “very much focused on improving its competitiveness, to reduce its debt, cut public spending and lower the barriers to entry.”

“All this in my view is very positive,” he told reporters.

For the consultation document, see (Additional reporting by David Milliken; Editing by Susan Fenton) (( ; +44 207 542 7947; Reuters Messaging:

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