James Moore: Osborne's Budget bonanza will not bring tax exiles sailing back to Britain
Thursday 24 June 2010
Outlook Business has reasons to be rather pleased about the emergency Budget. It was given a small handful of sweeties while everyone else was given nine-inch nails (rusty ones, at that). No surprise, then, that the Institute of Directors rushed out figures yesterday showing an overwhelming endorsement from the company directors that make up its membership (well, just over 600 or so of them, anyway).
Apparently, 83 per cent felt that the Budget would have a positive impact on the economy, and 90 per cent thought it would have a positive impact in reducing the government deficit. Some 82 per cent were more positive about the long-term economic outlook and 61 per cent were more positive about the short-term. Perhaps they just didn't notice the VAT increase and the cuts which might usually be expected to feed through to customers' wallets.
Miles Templeman, the IoD's director-general, duly gushed about the "emphatic endorsement" of George Osborne's work. It has been years since the IoD's Thatcherite heyday when its views counted for something. But now he will no doubt be dusting down his best suit for that invitation to a reception at No 11 Downing Street.
With Labour's national insurance rise gone, corporation tax coming down and the highly contentious way foreign profits are taxed under review, the Tory party's coffers ought to be positively bursting thanks to a nice injection of corporate largesse.
Who knows, perhaps the Liberal Democrats might get a banana or two. Perhaps not. They're probably the reason why that irksome 50 per cent top rate of tax remains on the statute book. Democracy, what are you going to do with it?
But while business groups were crowing yesterday (with the possible exception of banks, but see below) the proof of the pudding will very much be in the eating.
The past few years have seen a chicken-run of companies departing Britain for offshore boltholes. The biggest beneficiary by far has been Dublin, but Jersey and Guernsey have both made themselves home to a number of exiles, and Switzerland has not proved unattractive.
But now the voice of business has been heard in Britain. So will there be a quid pro quo? Will these measures prevent future departures? And, having loudly complained about Labour's taxes, will the likes of WPP's chief executive, Sir Martin Sorrell, be considering a return to the UK? He has hinted as much but the problem with hints is that, as politicians are only too well aware, they come with all sorts of caveats attached.
It is worth noting that while businesses have done remarkably well out of a bruising Budget, the directors that run them have been rather less fortunate. That 50 per cent rate is likely to be with us for some time to come. And capital gains tax is going up, which will hit one of their favourite tax dodges: finding clever accountants to classify income as capital gains.
So while Mr Osborne might hope for some payback for the fairy dust he has been sprinkling around, he is likely to be disappointed. Because when directors come to review questions of domicile, they are just as likely to consider their personal circumstances as they are those of companies they run. And that means that most of the exiles will probably stay put.
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