Darling Attempts To Ease Multinationals' Tax Fears

By Robin Pilgrim, LawAndTax-News.com, London

19 May 2008

The membership of a new multinational forum on tax was announced on Monday by the Chancellor of the Exchequer, Alistair Darling and Financial Secretary, Jane Kennedy.

The group, to be chaired by Jane Kennedy, includes senior representatives of multinational companies as well as a number of senior economists.

It will discuss ways in which the tax system can provide the long-term certainty that multinational companies need in the face of increased competitiveness and other global challenges facing both business and government.

Membership of the group will comprise: Richard Lambert, Confederation of British Industry; Douglas Flint, HSBC Holdings plc; Julian Heslop, GlaxoSmithKline plc; Hanif Lalani, BT Group plc; James Lawrence, Unilever plc; Andrew Shilston, Rolls-Royce Group plc; Dr Byron Grote, BP plc; Nicolas Moreau, Axa (UK) plc; Duncan Tatton-Brown, Kingfisher plc.

The Chancellor has also invited four economists to become forum members. These are: Dr Andrew Mclaughlin, Royal Bank of Scotland Group; Professor Michael Devereux, Said Business School, Oxford; Adam Lent, Trades Union Congress; and Dr Parthasarathi Shome, HM Revenue & Customs.

The announcement by the Treasury foreshadows a key speech that Darling is due to deliver to the Confederation of British Industry on Tuesday 20th May when, according to the Sunday Times, he will ease multinationals' fears over new proposals to tax intellectual property rights and patents held offshore by multinational companies.

Darling is expected to tell company bosses that the proposals, which are contained in a discussion paper examining the taxation of companies' overseas dividends, are not designed to extract more revenue from the corporate sector. The Treasury argues that instead, these proposals are designed to prevent companies shifting assets abroad purely to reduce their UK tax bill, and that concessions to companies elsewhere in the proposals will make the changes broadly revenue neutral.

However, business leaders are warning that multinational companies are losing their patience with the government over its constant meddling with tax legislation, as evidenced by recent announcements by FTSE100 firms such as Shire Pharmaceuticals and United Business Media to re-domicile for tax purposes in Ireland, which has a lighter-touch international taxation regime compared with the UK.

“For businesses, the rate is important, but so is consistency, clarity and a sense of strategic direction," Richard Lambert, the Director-General of the CBI, told the Sunday Times.

"And that is why the tax changes over the last 15 months have been so damaging. They have made people think: ‘What are the rules around here?’” he added.

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