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Aviva Shifts HQ To Ireland

by Jason Gorringe,, London

27 October 2009

Aviva, the UK's second largest insurance firm, has announced plans to consolidate its European business under the umbrella of a new holding company in Ireland, but the firm has insisted that the move is not motivated by a desire to reduce the amount of tax it pays.

The company announced on October 22 that the plan is designed to cut costs and consolidate its business across its 12 separate operations in Europe. But while the company expects that the move will cut its overall tax rate, it argues that tax savings are not the sole motivation.

"The programme is going to deliver a set of improvements in terms of revenues and costs, and there is also room for improvement in terms of the blended tax rate we have," Andrea Moneta, European chief executive told Reuters. However, he added that the company's plan has "very minimal" tax advantages.

A company statement announcing its decision explained that: "As part of the transformation of its European business Aviva has established a single holding company for its European operations in Ireland. It will convert a number of existing subsidiary businesses in the region to branch status, where it is appropriate to do so, and subject to regulatory approval. This will deliver economic, operational and regulatory benefits to Aviva, especially with the anticipated introduction of Solvency II."

Recently, a number of UK-incorporated companies have fled the UK citing the burdensome corporate tax laws as a primary reason.

Pharmaceutical firm Shire, publishing company United Business Media, advertising agency WPP, Brit Insurance, engineering firm Charter, and investment company Henderson have been prominent names on this list.

Ireland, with a corporate tax rate of 12.5%, has been one of the main beneficiaries of these corporate defections.

Aviva has stressed that the reorganization does not include its UK operation, nor its companies in the Benelux countries, which it plans to float.

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