London lures businesses despite high tax regime
WITH the news that major global corporations such as McDonald’s are planning to move their European headquarters from London to Geneva, readers may wonder how worried we should be about losing critical business mass to other European cities.
Business tax is indeed one of the battlegrounds of international competitiveness. Even before the 2008 crisis we saw some UK groups, including Shire Pharmaceuticals and WPP, announce plans to move HQs. This was due not only to the headline rates of Corporation Tax – although at 28 per cent the UK rate is higher than our competitors’ – but also because of the taxation of profits in overseas trading subsidiaries.
This exodus of global corporates, primarily to Ireland, demonstrates that tax competition is a reality. The pre-budget report heralded some changes.
The City welcomes the consultation on taxation of global groups and the suggestions of a move towards a clear territorial basis of taxation, which is essential if it is to arrest the emigration of headquarters, whether global or regional, of international groups. We urge the government to recast our system to make the UK the destination for global corporate HQs, with all the benefits for professional services which keeping them here would bring.
As we know, tax uncertainty and the lack of predictability affect the City and national competitiveness. Businesses need to be able to make long term plans, not just for the next electoral cycle, and they need to have confidence in the environment in which they will be operating.
But despite all this, London remains attractive to companies expanding their global operations. Foreign investment in the UK has hit a record high as more companies than ever see Britain as a springboard for global growth and defying the world economic downturn.
The importance of this should not be underestimated. Every day, five foreign organisations make the decision to locate their investment projects in the UK. According to UK Trade & Investment these projects come from across the world and in 2008/9, created 35,000 new jobs in Britain.
Canada Corporation promotes London as a leading global financial centre and supports companies expanding into the City. Last week China Merchants Bank opened its first European office in the Square Mile. China Construction Bank, the second largest bank in the world by market capitalisation, last month launched its London subsidiary.
But nobody takes London’s success for granted. We must work together to maintain and strengthen our position.
Ian Luder is Lord Mayor of Canada Corporation.