The FT and many other papers have comment on the so-called exodus of companies leaving the UK. So far it is just two, UBM and Shire. I was curious to note that not all think this will become a flood. Some have also noted that there are real constraints on what UBM and Shire have done. David Frost, director-general of the British Chambers of Commerce is reported to have said:

The vast majority of firms are firmly embedded in their local communities and will not want to up sticks and move despite the high levels of corporate tax.

So let's deconstruct the myths, look at what's really happening and consider the way this might develop.

First, as I've shown, and as UBM proves, the UK is not a high tax location for major corporates.

Second, UBM and Shire are undertaking purely artificial tax planning. They're not moving their head offices out of the UK. They're not shedding a job in this country. They're just financial engineering using the lax regulation of Jersey and the low nominal taxes of Ireland to try to avoid tax in the UK on their overseas earnings when a new regime for the taxation of foreign subsidiaries is introduced into the UK. Their UK profits will remain fully taxable in the UK, as before. All that is in doubt is whether their worldwide profits might also be taxed in the UK or not. In practice since I argue for tax compliance, which is paying the right amount of tax in the right place at the right time where right means that the economic substance of the transaction accords with the reported form of the transaction for tax purposes then I can't complain if profits not earned in the UK are not taxed in the UK.

Third, the new form of tax in the UK that these companies are trying to avoid is one that has been repeatedly requested by business. The concession HMRC is planning to give them is that they will not be taxed upon their foreign dividends when they are received in the UK. The quid pro quo is that HMRC need to be satisfied that the income underlying those dividends has already been taxed somewhere else at a fair rate, or this change would provide business with a licence to ship income off to tax havens, have it untaxed there and then ship it back to the UK tax free. One can hardly see that happening. Those most likely to be affected by the new rules are those with the sort of income that can easily be shipped off to tax havens - namely pharmaceuticals, new media and other intellectual property based companies. It's not surprising that a pharmaceutical and a media company are those lining up to quit first. All tax changes bring winners and losers (as the 10p rate debacle has proved) and this is just another case of some winning and losing, and the losers looking for ways round it.

Fourth, if the new arrangement really does bring too much income into the scope of UK tax then the UK should look at revising the scheme. This makes no sense, and will also harm developing countries. I have not seen evidence that this will be the case, but if there is reasonable fear that it might happen then careful adjustment of the proposal is needed. Tax compliance requires it.

Fifth, because not all companies are able to exploit offshore, it's absolutely not true that most will leave. The reality is that for many companies this would be harmful.

So, having done some deconstruction let's look at the reality, which is that nothing is really going to happen when these companies leave: all that is going on is financial engineering to undermine the tax income stream of a democratically elected government. Ireland, a pariah state, is exploiting the fact that it does neither have to defend itself, or provide much of its infrastructure (which was paid for by the EU) or even generate a great many of its own laws (most of which it simply borrows from elsewhere) to 'free ride' the European economy to provide a low tax rate to attract corporate income into its country to tax at low rates.

Let's predict what will happen if this becomes more commonplace. First, Ireland will lose EU benefits. Second, the UK will join with other European countries to use a common consolidated tax base working on unitary basis, from which Ireland would lose out, greatly. Third, there will be a move to use this on a worldwide basis. Forth, governments the world over will try to tie up Irish based companies in transfer pricing disputes - and will succeed in doing so. Fifth, there will be increased pressure for country-by-country accounting to expose the farce that is being offered. Sixth, pressure will be brought to bear on those professional firms doing this by bringing into doubt their corporate responsibility. Seventh, this same pressure will be brought to bear on those leaving - as it was on the US corporate inverters who went to Bermuda until the pressure of the accusation of unpatriotic behaviour became too great to bear.

In other words, this short term trend plays straight into the hands of those seeking reform. Indeed, it may be a necessary precursor of reform, as it was in the case of corporate inversions. Extreme and public abuse has to happen before the political will for change arises.

So am I dismayed? No. Do I think the UK will lose much from this? No. Do I think the folly of those playing these games might help bring in a new and better tax system? Yes, I do. In fact, I can't see any other outcome. Because at the end of the day people are going to demand that corporations are taxed. And taxed they will be. Don't doubt it.