Budget Changes persuade WPP to rethink

[Chil1234]

Ad giant WPP considers returning to UK It's just the one company and it's not a done deal yet but let's hope this is a sign of things to come and that changes in yesterday's budget persuade more international corporate big hitters to make their home in the UK again, rather than overseas.

Agreed. UBM are also taking about coming back to the UK.

This change will lose government coffers £2 billion, apparently.

Sure hope these speculated returns happen, and that they result in more than £2 billion for the government.

Otherwise, what have we won?

Poor Ireland, though. Nothing like an uncommitted company abandoning a sinking ship. Thought they had the lowest corporation tax in Europe?

Ireland does have the lowest CT in Europe for trading companies, at 12.5%. It's 25% of non-trading companies.

It also has a wrecked economy.

FWIW, I think that a group that was established in the UK, grew to prominence in the UK and continues to have a significant UK business should be HQ'd in the UK. That's why WPP should come back here. It's also why I can see why HSBC (which started in HK and China, and where less than 10% of its profits and revenue derive from the UK, and where its MD is already based in HK) might have a more reasonable argument for leaving.

The measures in the article are costed by HM Treasury at just under £1bn per annum in CT from 2014/15 onwards. But CT is a much smaller tax than IT and NIC (CT brings in around £40bn pa compared to £100m + for both IT and NIC). We would easily recoup the lost CT in the form of other taxes and increased economic activity.

I heard £2bil on the radio this am. Poss. a mistake.

Hope you're right!

I am - I'm a tax genius!

Cinnabar- You'd better be right because I am quoting your numbers as gospel in dinner party arguments!

I'll stand by the numbers.

If you're interested, here's a link to the Treasury's Red Book with all 104 glorious pages. The Red Book sets out the government's policies, measures and (most importantly here) costings. The costs are now reviewed by the independent Office for Budget Responsibility, so are generally free from political bias or posturing.

cdn.hm-treasury.gov.uk/2011budget_complete.pdf

If you turn to table 2.1 on page 42, you can see that the fifth measure is full reform of the CFC rules, which is what may or may not bring WPP back to the UK. The lost tax is estimated to be:

2011/12 - nil (because the changes won't have been enacted yet)
12/13 - £210m
13/14 - £540m
14/15 - £770m
15/16 - £840m

Of course, that's not just WPP - that's the tax lost from every single company in the UK that would otherwise have paid CFC tax.

The other interesting line for this discussion is the tax lost as a result of cutting the headline rate of corporation tax. Those are also big numbers, and are pretty much being paid for by the bank levy.

FWIW, the Red Book is the first thing I turn to when I analyse the effects of the Budget. Because it tells me at a glance which measures the Treasury think are important (not necessarily the ones that the Chancellor has mentioned in his speech.....).

Enjoy!

And if you want to know more about the amount of taxes collected, check out the data from the Office of National Statistics:

www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf

In 09/10 the total tax collected was £410bn. The biggest three taxes were IT (£145bn), NIC (£96bn) and VAT (£70bn). Together they amount to 76% of all taxes collected. CT and fuel duty are also significant (£36bn and £26bn).

All the other taxes are frankly little more than rounding.