Sir Martin Sorrell has warned that George Osborne's decision to cut corporation tax to 20 per cent in the Budget may not be enough to persuade some companies from diverting UK profit offshore.
"It's become a question of moral choice," said WPP boss Sir Martin. The 68-year-old told The Independent that an international company can still minimise its UK taxes by charging royalty and procurement fees to another branch of the company overseas. "You have to make a decision about how aggressive you want to be, within the law."
However, the advertising chief, who brought WPP back to the UK this year after a spell in Dublin, suggested that Mr Osborne's declaration in the Budget that he wanted to name and shame tax avoiders could present a threat for corporations. "In return for reducing the rate, do they [the Government] expect companies to pay that rate?" he asked.
WPP has been close to the tax avoidance issue as its public relations subsidiary RLM Finsbury advised Starbucks after it was revealed the coffee giant paid just £8m in UK corporation tax on £3bn of sales over 14 years. Starbucks volunteered to pay £10m in tax for the next two years following a public outcry.
Sir Martin added that the UK Government could not clamp down on tax avoidance on its own. "It's a global issue," he said.
American tech firms including Google, Amazon and Apple have come under fire for funnelling some of their revenues from the UK and elsewhere in Europe via low-tax jurisdictions such as Ireland and Luxembourg.