Ben Chu: Sir Martin Sorrell's peculiar vision of social responsibility
Outlook Sir Martin Sorrell has expressed himself on the great corporation tax debate. What firms need to understand, the advertising magnate said today, is the imperative of corporate social responsibility.
"Doing good is good business," he told the likes of corporate black sheep such as Starbucks and Amazon, which have faced obloquy in recent months for paying less than their fair share of profit taxes in the UK. I'm afraid this is richer than the Christmas pudding that your grandmother oversoaked in alcohol. For Sir Martin's record on tax hardly resembles a model of virtuous corporate citizenship.
For several decades the British state has had a system whereby a UK-based multinational is required to pay corporation tax on its worldwide profits. In 2007 the Labour government proposed to move to a system where firms would only pay tax on their UK profits, a so-called territorial regime. This was good news for the multinationals, implying a smaller tax bill. But they didn't trust Labour to deliver.
So they upped sticks in a kind of pre-emptive protest. Pharmaceutical giant Shire shifted its headquarters to the Irish Republic. So did United Business Media. The exhibitions and magazines group Informa scurried off to Switzerland. The office accommodation provider Regus went to Luxembourg. And, making the biggest song and dance of all was Sir Martin, who shuffled his WPP advertising empire to the Emerald Isle.
Faced with this exodus the Labour Chancellor, Alistair Darling, redoubled his efforts to establish a territorial tax regime. And Sir Martin made it his business to seal the deal. He extracted a guarantee from Mr Darling's successor, George Osborne, that the new territorial regime would definitely come into force. And, in return, Sir Martin announced last year that WPP would be returning its HQ to London. The territorial corporation tax regime came into full force this week. And WPP is, as Sir Martin promised, on its way back.
The trouble is the new territorial tax regime looks even more open to corporate tax avoidance. Under the old system HMRC could, in theory, go after tax on profits anywhere in the world. It seldom did this effectively. But now, with its territorial remit in place, it is even less likely to do so. And there is still more room for clever accountants to register profits overseas by registering intellectual property rights in tax havens.
This compounds the advantage of multinationals in relation to smaller, domestic firms. We have long known that income tax tends to be for the little people. It increasingly looks like corporation tax is only for the little companies.
The only solution is harmonised international governmental agreement to prevent multinationals playing off national governments against each other on profit tax rates.
As for Sir Martin, he might like to consider whether quitting the country and promising to return only when a law you dislike is changed can be considered "doing good".
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 4 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 5 Apple and Google users being spied on for a decade because of 'Freak' security flaw
The City of the Monkey God: Archaeologists claim to have found city lost for 1,000 years in remote Honduran jungle
Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
Japanese island overrun with cats after population explodes
London property boom built on dirty money
Becky Watts: Stepbrother and his girlfriend named locally as two arrested on suspicion of murder
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...