Multinationals in line for £1bn tax break

Multinationals were given details of what amounts to a near £1bn tax break on their overseas profits yesterday – on the day thousands of public sector workers walked out on strike over cuts to their pensions.

David Gauke, the Exchequer Secretary to the Treasury, said the proposals – which lift some of the burden on companies that divert profits to low tax jurisdictions – "better reflects the way that businesses operate in a globalised economy".

Treasury figures reveal that they will cost the taxpayer £210m next year but that figure will balloon to £840m by 2015. The proposals – reforming anti-avoidance rules – were unveiled in a 110-page document that had even accountants scratching their heads yesterday. The Government has been desperately trying to tempt multinationals back to the UK, not least because it wants them to create hundreds of thousands of new jobs to replace those lost from the public sector as it slashes spending.

A spokesman said the figures for the cost of the measures did not include an estimate of the benefits from companies choosing to relocate to Britain. The media giant WPP, having previously bolted for Dublin, is planning such a move.

But critics still argue that they amount to an undue tax break at a time when individuals are suffering a brutal fiscal squeeze with taxes increasing, high inflation and little or no rises in wages to compensate.