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WPP Chief Comments On UK Corporate Tax Row

by Robert Lee, Tax-News.com, London

04 January 2013


Sir Martin Sorell, the chief executive of global advertising and marketing firm WPP, has waded into the row over how much multinational corporations pay in tax to the UK Exchequer, saiying that these amounts are often "a question of judgment."

In an interview broadcast on BBC Radio 4, Sir Martin suggested that large multinational firms will choose to pay tax in a particular country more out of a sense of corporate responsibility rather than because the law tells them to.

“Every company we deal with without exception knows that doing good is good business, not because it’s legislated,” he said. "I hate the term 'corporate social responsibility' but all of those contributions you make... are a question of judgment. There are the rules, if then companies choose... to make a contribution to all the stakeholders on a long-term basis all credit to them."

While coffee shop chain Starbucks came in for particularly harsh criticism over the level of tax it pays in the UK, Sir Martin made the point that they had in fact run their tax affairs by the book. "Lets be quite clear, they did negotiate with HMRC (HM Revenue & Customs) and agreed a royalty and it was perfectly transparent."

Nevertheless, Coffee giant Starbucks is to take the unprecedented step of paying around GBP20m (USD32.2m) in extra tax to the UK after coming under fire for failing to pay any corporation tax in the past three years.

Starbucks is just one of several multinational companies to have experienced mounting hostility in past weeks over its UK tax affairs. In the vanguard has been parliament's Public Accounts Committee which recently issued a highly critical report on HMRC's ability to deal with large corporations which generate significant income in the UK but which appear to pay little or no tax there.

In Starbucks's case, it emerged that while the corporation has around 760 outlets in the UK, it had paid no corporation tax in the past three years, and a total of just GBP8.6m in 14 years of trading there.

WPP has come in for criticism itself for moving its corporate headquarters to Ireland, where corporate tax is much lower than in the UK, four years ago. At the time, Sorrell blamed the move on the uncertainty surrounding the taxation of overseas profits. However, last year, he announced that WPP would make a return to the UK because "corporately, the environment seems to us to have changed."

In particular, the decision has been influenced by changes to the taxation of overseas earnings by multinational companies. In September, WPP's interim report stated: "This will mean that, at least for the life of this government, there will be no tax cost to the Group by returning its Headquarters to the United Kingdom from Ireland."

TAGS: tax | business | Ireland | law | corporation tax | United Kingdom | corporate headquarters | multinationals | corporate responsibility

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