DIAGEO chiefs are "seriously considering" moving the company to Ireland to avail of low corporation tax rates, in a move that will send shockwaves through London's City and Whitehall.
The Sunday Independent has learned that private talks between newly appointed Tanaiste Mary Coughlan and senior Diageo management, including CEO Paul Walsh and Frank Ryan, Enterprise Ireland CEO, took place early Friday morning, shortly before their press conference.
Sources close to the company said that moving their base to Ireland would save Diageo between €200m and €250m a year.
The Sunday Independent understands that the deal is being "seriously considered" by Mr Walsh, if the Irish Government can guarantee that a 12.5 per cent corporate tax rate will be maintained.
On the other side, it is understood that Ms Coughlan has stressed the need for the company to move its entire PLC operation here.
"She wants the full monty," a senior business source said.
The plans were discussed at a private meeting in the Merrion hotel last Friday morning, shortly before Diageo made the €650m announcement to close its breweries at Kilkenny and Dundalk, significantly reduce its brewing capacity at St James's Gate, and plans to build a new brewery on the outskirts of Dublin.
One well-placed source also explained how an internal battle is under way to bring the world's largest producer of alcoholic drinks to Ireland.
"You can be sure that the UK tax authorities are going to get a huge fright when one of their biggest PLCs moves to Ireland for tax reasons. What Diageo is saying is that before it commits or announces this publicly, Ireland better make sure that it is able to deliver 12.5 per cent across plans as well, which comes with intellectual property rights, etc."
A spokeswoman for Diageo confirmed that senior company sources met with Mary Coughlan, but insisted it was to do with the big announcement and not to do with a move of the PLC.
A Government spokesman also confirmed that the Tanaiste had met Diageo executives.
"One of the matters of concern was the changes the company was making in its operations in Ireland, and the minister stressed that she was anxious that workers affected would get the best possible deal and that any cutbacks would be on a phased basis.
"We will not discuss any other details of the meeting at this stage," the spokesman said.
However, earlier this month, Diageo said it was monitoring the current tax regime in the UK and said it hoped the UK government would understand that tax changes should not make Britain a less-attractive location in which to do business.
The news comes only a week after Taoiseach Brian Cowen vehemently defended Ireland's favourable tax regime for multinationals. In a statement released last weekend, Mr Cowen said: "Over the past decade, this Government has pursued a consistent strategy of maintaining a low tax burden on income. Ireland's corporate tax system is transparent. Some other countries have high nominal rates of corporation tax, but much lower effective rates due to the use of various base-narrowing devices."
Meanwhile, several leading firms have already begun moving their operations to Ireland.
Shire Pharmaceuticals was the first British firm to move, then came United Business Media, and last week it was speculated that Sir Martin Sorrell was considering moving his WPP operations to Dublin. His company contributes more than £200m (€256m) a year to the British Treasury.
It also emerged this weekend that Diageo first looked at selling the entire St James's Gate site, and only rolled back from that after a public backlash.
However, the company is now heading for a collision course with Dublin City Council about the sell-off of 50 per cent of the site, much of which contains listed buildings.