{"id":25530,"date":"2014-07-18T15:02:17","date_gmt":"2014-07-18T14:02:17","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=25530"},"modified":"2014-07-18T15:02:17","modified_gmt":"2014-07-18T14:02:17","slug":"george-has-got-his-dream-the-uks-now-a-tax-haven","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2014\/07\/18\/george-has-got-his-dream-the-uks-now-a-tax-haven\/","title":{"rendered":"George has got his dream: the UK’s now a tax haven"},"content":{"rendered":"

In February 2006 \u00a0George Osborne \u00a0went to Ireland\u00a0and gave a speech<\/a> \u00a0that would reward study by those interested in recent political history. \u00a0What I recall from a conversation very soon afterwards with a breathless member of his entourage in London ( who has, I think, \u00a0recently been promoted in the ministerial reshuffle) \u00a0was the overall enthusiasm for the Irish tax system that the Conservatives then displayed. \u00a0The message was, in effect, a very simple one: \" Ireland's got Google because of low tax rates, and we need to do that here\" \u00a0was the message I was given at a time when it should also be recalled that George Osborne was a fan of flat taxation and many other eccentric ideas.<\/p>\n

George \u00a0forgot flat taxes but he did not forget Google, or Ireland. \u00a0In fact, just as he said he would back then<\/a>, \u00a0he has reformed a great deal of UK corporate taxation to not just mimic Ireland, but \u00a0to actually seek to outdo it in the tax haven offering that the UK has to make.<\/p>\n

So, he \u00a0has cut tax rates, enormously. He has revelled in the \u00a0creation of what is, effectively, a territorial tax system for groups of companies \u00a0and has overseen the effective dismembering of the U.K.'s controlled foreign company regime which was designed to prevent tax haven abuse by UK-based multinational companies. \u00a0Coupled with the patent box regime (a Labour legacy) and \u00a0his own special regime for group treasury operations based outside the UK, you would think that George's aim was to make sure that no large company should pay tax in this country, \u00a0even if they might elsewhere. It has worked: \u00a0just look at Barclay's recent announcements on its global taxes with not a penny paid here but rather \u00a0more elsewhere.<\/p>\n

The aim was summarised in that 2006 speech. This is what he said then in praise of Ireland:<\/p>\n

So the low\u00a0business tax rates generate strong revenues for the Irish exchequer,\u00a0from the added prosperity and higher income tax paid on the more\u00a0and better jobs. That in turn encourages the formation of \u2018clusters\u2019\u00a0of industrial expertise which stimulate progress and innovation in those industries, leading to more economic growth.\u00a0 And in a\u00a0world that is increasingly knowledge-driven, that kind of growth is\u00a0absolutely fundamental to long-term prosperity.<\/p><\/blockquote>\n

It so obviously worked for Ireland, didn't it? It's as if George \u00a0never noticed the subsequent crash and continued, helter-skelter, to import the idea wholesale into the UK nonetheless.<\/p>\n

And so let's move to 2o14. Today the FT has reported<\/a>:<\/p>\n

\n

[US pharmaceutical company]\u00a0AbbVie\u00a0has sealed its proposed\u00a0\u00a332bn takeover\u00a0of\u00a0Shire, the UK-listed speciality pharmaceuticals company, in one of the biggest deals so far to involve a US company shifting its tax residence overseas.<\/p>\n<\/blockquote>\n

As they continue:<\/p>\n

\n

AbbVie\u2019s successful bid also continues the trend of US companies using foreign acquisitions to put their offshore cash beyond the reach of the US taxman \u2014 a practice known as \u201cinversion\u201d that is facing increasing political scrutiny in Washington.<\/span><\/p>\n

AbbVie said that, while its administrative headquarters would remain in Chicago and its listing in New York, the merged entity would be incorporated in the Channel Island of Jersey and have its tax residence in the UK.<\/p><\/blockquote>\n

Now this is curious. In 2008 Shire left the UK for tax purposes. \u00a0I reported on the move at the time<\/a>. Then the \u00a0object was to \u00a0avoid any chance of UK tax arising under the then proposed changes to controlled foreign company laws that the Labour government was suggesting that \u00a0might have hit companies with substantial intellectual property, like Shire, hard. \u00a0With the power of retrospect, what a shame that Labour did not have the courage to put through those changes which are still so obviously needed to tackle international tax abuse, as the OECD is now saying, \u00a0but they did not. Shire left anyway, going to Ireland where I gather it has not paid a penny in tax in the intervening years.<\/p>\n

And now it's on its way back for tax purposes. Jersey's there to save stamp duty, of course. And tax haven UK does very nicely for all other purposes. Territorial tax is now firmly in place. All those tax haven located funds within the new group can flow tax free back to the shareholders. New profits can be earned from intellectual property rights located either here via the patent box or\u00a0in low tax\u00a0jurisdictions without ever having to worry that the UK might ever question the arrangements and the US has lost out on all the tax on unremitted profits denied to it for years.<\/p>\n

Welcome to tax haven UK, the place that turns a blind eye to profits made anywhere in the world, and to the simultaneous fact that none ever seem to arise here either. We're happy with the odd dollop of PAYE every now and again; that does us nicely, apparently, just as George said back in 2006. Not that this deal, taking over a company really based in Basingstoke, will actually deliver any more of that either, I am sure.<\/p>\n

No, this is just the wondrous world of tax believe that George set out to create to emulate Ireland. You have to say, he's succeeded, but at cost to us all, to and many other nations on earth as well. His cup will flow over the day he leaves parliament, I am sure.<\/p>\n","protected":false},"excerpt":{"rendered":"

In February 2006 \u00a0George Osborne \u00a0went to Ireland\u00a0and gave a speech \u00a0that would reward study by those interested in recent political history. \u00a0What I recall
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[64,5,32,97,1],"tags":[],"class_list":["post-25530","post","type-post","status-publish","format-standard","hentry","category-corporation-tax","category-ireland","category-tax-havens","category-tax-justice","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/25530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=25530"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/25530\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=25530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=25530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=25530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}