British U-turn on dividends could staunch tax exodus
Televisions showing the Chancellor of the Exchequer, Alistair Darling, live in Parliament delivering his Pre-Budget Report yesterday. Matt Cardy/Getty Images
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Tuesday November 25 2008
THE UK Chancellor announced the scrapping of plans to tax companies on overseas dividends in an effort to allay concerns that have led several big companies to shift their tax domicile to Ireland.
In his pre-budget submission to the UK Parliament yesterday Alistair Darling said he will exempt foreign dividends from taxes to stem the tide of companies moving headquarters here.
In September WPP Group, the world's second-biggest advertising company, followed United Business Media and drug maker Shire stating it would move its headquarters to Ireland to reduce payments.
WPP, said it was moving its headquarters to Ireland in a bid to slash its tax bill.
The budget measure will save UK companies an estimated £300m a year in dividend tax.
It is understood that Diageo was also considering a move of its headquarters to Ireland, potentially saving the drinks giants millions in annual taxes.
UK tax officials were understood to be aghast at the prospect of such a move -- and the Chancellor's U-turn has come as no surprise.
As well as the treatment of overseas dividends, one of the major attractions for Diageo and other UK bosses is the 12.5pc corporate tax rate levied on company profits here.
It is understood Diageo was considering the plans earlier this year, before it made the €650m announcement to close its breweries at Kilkenny and Dundalk, reduce capacity at St James's Gate, and build a new brewery on the outskirts of Dublin.
- Pat Boyle
