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Tonight, the secret tax deals some of our best known firms would | :00:07. | :00:17. | |
:00:17. | :00:23. | ||
rather you didn't see. Is there anyone there from Northern and | :00:23. | :00:26. | |
Shell in this building because the sign is up here? This is the | :00:26. | :00:29. | |
address they give. Yes, it's definitely there. In a joint | :00:29. | :00:32. | |
investigation with French TV - the UK companies making massive tax | :00:32. | :00:35. | |
savings in a tiny European State. I've never seen anything like this | :00:35. | :00:38. | |
before, setting out in raw detail how a tax avoidance scheme works. | :00:38. | :00:40. | |
And the accountants, advising political parties on taxation who | :00:40. | :00:45. | |
devised the deals. It comes in the wake of one of the most talked | :00:45. | :00:48. | |
about Budgets in years. I regard tax evasion and indeed, | :00:48. | :00:53. | |
aggressive tax avoidance as morally repugnant. | :00:53. | :00:56. | |
The Chancellor is promising a new law to crack down on tax avoiders. | :00:56. | :01:00. | |
Will it work? It's going to be used to condone tax avoidance rather | :01:00. | :01:05. | |
than to condemn tax avoidance. The Government says we're all in | :01:05. | :01:08. | |
this recession together, but is it giving a green light to big | :01:08. | :01:18. | |
:01:18. | :01:35. | ||
Welcome to Luxembourg. I'm trying to find some Luxembourg cuisine. A | :01:35. | :01:40. | |
tiny country at the heart of Europe. A million people visit every year. | :01:40. | :01:50. | |
This is a Luxembourg speciality. It's a type of champagne. So what's | :01:50. | :01:57. | |
it got to offer? Ask the capital's mayor. We have the Schleck brothers. | :01:58. | :02:03. | |
Who won the Tour de France. Cyclists that's OK. Very, very nice. | :02:04. | :02:13. | |
:02:14. | :02:14. | ||
Luxembourg is home to 500,000 people. It's the proof that small | :02:14. | :02:17. | |
can be beautiful. But its biggest attraction is not the food and wine. | :02:17. | :02:20. | |
Luxembourg has a reputation as a tax haven. Thousands of companies | :02:20. | :02:22. | |
have their offices here. Their tax affairs hidden behind impenetrable | :02:22. | :02:25. | |
codes of confidentiality. Until now. We've got thousands of pages of | :02:25. | :02:27. | |
documents revealing the secret tax deals of hundreds of companies, | :02:27. | :02:37. | |
:02:37. | :02:40. | ||
many world famous multinationals, all negotiated with the taxman here. | :02:40. | :02:43. | |
They were leaked to a French journalist and he agreed to share | :02:43. | :02:48. | |
them with us. The documents involve the most | :02:48. | :02:52. | |
sensitive information for all these companies. The profits, how they | :02:52. | :02:55. | |
move the profits around the world and how they're going to pay their | :02:55. | :03:00. | |
taxes. It's unprecedented. I've never seen | :03:00. | :03:03. | |
anything like this before, setting out in raw detail how a tax | :03:03. | :03:06. | |
avoidance scheme works for the benefit of a tax authority that's | :03:06. | :03:12. | |
facilitating it. That's the beauty of it. We're seeing really with | :03:12. | :03:15. | |
these, for the first time, exactly how companies avoid tax through a | :03:15. | :03:20. | |
jurisdiction that wants to help them do it. | :03:20. | :03:23. | |
Richard Brooks writes for Private Eye magazine but used to be an | :03:23. | :03:27. | |
investigator for Her Majesty's Revenue and Customs. The documents | :03:27. | :03:32. | |
are complex and technical. Richard has agreed to help me get my head | :03:32. | :03:37. | |
round some of them. If I lend you �10 with no interest, that would be | :03:37. | :03:47. | |
:03:47. | :03:49. | ||
a zero coupon bond. Really? we've covered the zero, the coupon | :03:49. | :03:53. | |
and the bond. Are you getting this? The convertible bit is important as | :03:53. | :03:58. | |
well because. The bond is convertible into shares. I'm lost, | :03:58. | :04:01. | |
I'm still owing someone tenner and someone is owing me a tenner. The | :04:01. | :04:04. | |
language used might be difficult to understand, but the end result | :04:04. | :04:09. | |
isn't. It's fairly straightforward. It's to move profits from the | :04:09. | :04:13. | |
country where they are taxed at a normal tax rate which might be 26% | :04:13. | :04:17. | |
or 28%, the kind of levels the UK has, to a country or a territory | :04:17. | :04:20. | |
that has much lower tax rates, where they may be taxed at less | :04:20. | :04:28. | |
than 1%. So who's been getting a tax deal? It might not look much | :04:28. | :04:31. | |
but this is the Luxembourg office of one of the UK's most successful | :04:31. | :04:41. | |
:04:41. | :04:45. | ||
multinationals. GlaxoSmithKline, the pharmaceuticals giant. The | :04:45. | :04:47. | |
company is run from corporate headquarters 300 miles away in | :04:47. | :04:55. | |
London. We've discovered that it ha been avoiding tax on some its multi | :04:55. | :05:00. | |
billion pound profits. Thanks to Luxembourg and its enticing tax | :05:00. | :05:08. | |
regime. Now with the help of these secret documents we can tell you | :05:08. | :05:17. | |
how they did it. For GSK, it was about reducing profits in the UK, | :05:17. | :05:20. | |
which were then taxable at 28% while at the same time taking | :05:20. | :05:23. | |
advantage of Luxembourg's extremely generous tax breaks. It required | :05:23. | :05:28. | |
some clever tricks, all legal of course. GlaxoSmithKline is based in | :05:28. | :05:37. | |
the UK. In 2009, it opened a new subsidiary in Luxembourg. The | :05:37. | :05:39. | |
following year that subsidiary lent �6.34 billion to a GlaxoSmithKline | :05:39. | :05:47. | |
company in the UK. In return, the UK company paid nearly �124 million | :05:47. | :05:57. | |
:05:57. | :05:58. | ||
in interest back to Luxembourg. So that's �124 million gone from the | :05:58. | :06:05. | |
UK company's taxable profits so no longer available to the UK taxman. | :06:05. | :06:15. | |
:06:15. | :06:16. | ||
And the financial magic didn't end there. If the transaction is big | :06:16. | :06:18. | |
enough, the Luxembourg taxman will agree, upfront, an extraordinary | :06:18. | :06:27. | |
deal. Tax, effectively of less than 0.5% of that �124 million. Not bad | :06:27. | :06:37. | |
:06:37. | :06:39. | ||
considering it would have been taxed at 28% in the UK. So that | :06:39. | :06:42. | |
meant the taxman in Luxembourg only took around �300,000, leaving | :06:42. | :06:45. | |
GlaxoSmithKline with a potential saving in UK corporation tax of �34 | :06:45. | :06:52. | |
million. Magic. That was year one. The plan was do the same thing all | :06:52. | :06:58. | |
over again in 2011. And it was all approved here at the tax office in | :06:58. | :07:07. | |
Luxembourg. Astonishing, isn't it? This rather non-descript building | :07:07. | :07:12. | |
is the centre of what goes on here. This is where the deals are done | :07:12. | :07:15. | |
which help make this place so desirable for business. | :07:15. | :07:25. | |
:07:25. | :07:26. | ||
Well, there's an unholy alliance here. There's certainly the | :07:27. | :07:29. | |
multinationals that want to reduce their tax bills without incurring | :07:29. | :07:32. | |
any real economic cost. There's a country within the European Union | :07:32. | :07:36. | |
that is exploiting its position as a member of the club to say come | :07:36. | :07:39. | |
here and use us to avoid your tax bills back home. And there's the | :07:39. | :07:45. | |
advisors that are more than happy to do it to help them to do it. | :07:45. | :07:49. | |
So just who was advising the companies in our documents? Price | :07:49. | :07:53. | |
Water House Coopers or PwC. One of the four giants of corporate | :07:53. | :07:59. | |
accounting. They are the biggest tax advisors | :07:59. | :08:01. | |
to multinational corporations in Britain and they are extremely well | :08:01. | :08:09. | |
connected within Government and within the opposition as well. | :08:09. | :08:12. | |
Over the last few years, they've given more than �1 million worth of | :08:12. | :08:17. | |
advice to both the coalition parties and Labour. From their | :08:17. | :08:23. | |
Luxembourg office, they devised all the tax deals in our documents. Tax | :08:23. | :08:26. | |
avoidance or what most people call tax dodging is not illegal. But is | :08:26. | :08:36. | |
it fair? Absolutely without a shadow of a doubt, legal. I'm still | :08:36. | :08:42. | |
able to ask the question, is this acceptable? This is purely | :08:42. | :08:44. | |
artificial structuring which is designed to undermine the tax | :08:44. | :08:47. | |
revenues of the UK. Last year companies paid just over | :08:47. | :08:49. | |
�42 billion in corporation tax, around 10% of the Exchequer's total | :08:49. | :08:59. | |
revenue. Even so, tax avoidance by big business is reckoned by the | :08:59. | :09:04. | |
revenue to be �1.2 billion. Tax investigators say it could be five | :09:04. | :09:08. | |
times as much. What my members see every day is some large businesses | :09:08. | :09:12. | |
are managing to avoid paying their fair share of taxes which means | :09:12. | :09:15. | |
that everyone else has to pay more tax. That doesn't seem very fair. | :09:15. | :09:21. | |
It doesn't seem very ranl. -- reasonable. | :09:21. | :09:26. | |
Just over half of the biggest 100 companies listed on the London | :09:26. | :09:30. | |
Stock Exchange have subsidiaries in Luxembourg. | :09:30. | :09:37. | |
GSK is just one of them. And remember that magic formula, get | :09:37. | :09:41. | |
some of your profits off shore in a place like Luxembourg and reduce | :09:41. | :09:49. | |
your UK tax bill. But there was a big problem for big | :09:49. | :09:56. | |
business. UK tax law. And it is controlled by foreign companies | :09:56. | :10:01. | |
rules. These laws that say if you control a company in a tax haven | :10:01. | :10:05. | |
and divert profits into it, we will still tax the profits of that | :10:05. | :10:08. | |
company. Go but two corporate giants, | :10:08. | :10:13. | |
Vodafone and Cadbury Schweppes had other ideas. They argued that the | :10:13. | :10:18. | |
rules breached European law by limiting economic freedom. | :10:18. | :10:24. | |
. It led to battles being fought at the European Court in Luxembourg | :10:24. | :10:29. | |
and the High Court in London. By the time Vodafone's case got here | :10:29. | :10:33. | |
in 2008, it looked like the rules were dead in the water. But the | :10:33. | :10:39. | |
judge said the taxman couldn't examine the company's books. | :10:39. | :10:44. | |
The accountants PDWC were quick to sell this as an opportunity. Our | :10:44. | :10:52. | |
secret documents reveal that afterwards, they devised a tax deal | :10:52. | :11:00. | |
for another major UK company. Northern and Shell. You probably | :11:00. | :11:04. | |
won't have heard of it, but you will know some of the companies it | :11:04. | :11:12. | |
owns like Express Newspapers and Travel Five. The man at the top is | :11:12. | :11:18. | |
Richard Desmond. His companies also got an office in Luxembourg. It is | :11:18. | :11:22. | |
a little tricky to find. That's number 11 and number 12, we are on | :11:22. | :11:30. | |
the right street so we will just see where this takes us. | :11:30. | :11:40. | |
:11:40. | :11:45. | ||
Here we have it. Number 17. This looks like a stamp shop! | :11:45. | :11:52. | |
Here we go, the fifth floor Northern and Shell. | :11:52. | :11:56. | |
Hello. Hello, how are you? I'm fine. | :11:56. | :12:02. | |
Good. Good. I'm looking to speak to someone from Northern and Shell. | :12:02. | :12:09. | |
Right. I don't know who this is. Sorry, my name is Darragh McIntyre, | :12:09. | :12:19. | |
:12:19. | :12:20. | ||
I am a a a reporter with the BBC. This office became the proud owner | :12:20. | :12:28. | |
of of �880 million of company debt. I don't work for Northern Shell. | :12:28. | :12:34. | |
This is a different office. Is there anyone from Northern and | :12:34. | :12:38. | |
Shell because the sign is up here and this is the address they give? | :12:38. | :12:43. | |
Yes, it is definitely there. I am not aware of that. | :12:43. | :12:46. | |
This is the address on their company accounts. Our documents | :12:46. | :12:50. | |
show that before 02 2009 Northern and Shell companies in the UK had | :12:50. | :12:58. | |
been lending each other money. �804 million. There was no obvious | :12:58. | :13:03. | |
tax advantage to be had on these transactions in the UK. | :13:03. | :13:06. | |
So Northern and Shell looked to Luxembourg where it set up a | :13:06. | :13:11. | |
company and transferred the UK loans there. | :13:12. | :13:16. | |
Interest payments left the UK, leaving lower profits available to | :13:16. | :13:22. | |
the UK taxman. In Luxembourg, the same profits got the magic tax | :13:22. | :13:27. | |
breaks. The end result - it looked like Northern and Shell had saved | :13:27. | :13:37. | |
:13:37. | :13:42. | ||
The deal was so sweet, they did it again - this time creating a | :13:42. | :13:50. | |
potential loss to the UK taxman of over �9 million. But you're | :13:50. | :13:57. | |
definitely not Northern & Shell? Hello? Our friend has gone. | :13:57. | :14:00. | |
The company puts its money into Luxembourg and borrows it back. It | :14:00. | :14:04. | |
just sends money round in a circle and picks up a tax break on the way. | :14:04. | :14:07. | |
Just the sort of thing those rules on taxing foreign profits should | :14:07. | :14:11. | |
have been able to deal with. So you would have expected that to end up | :14:11. | :14:13. | |
in negotiations with tax officials? There shouldn't have been any | :14:13. | :14:16. | |
negotiation about it. I mean, that should have been a straightforward | :14:16. | :14:26. | |
:14:26. | :14:31. | ||
I'm now going to try to speak to the main man, Richard Desmond. I'm | :14:31. | :14:35. | |
hoping he's going to be up there. We were told the Northern & Shell | :14:35. | :14:41. | |
chairman was abroad. Richard Desmond didn't want to be | :14:41. | :14:51. | |
:14:51. | :14:56. | ||
interviewed, but his company later told us... That the Board considers | :14:56. | :14:58. | |
it entirely proper that Northern & Shell endeavours to structure its | :14:58. | :15:01. | |
tax affairs in a tax efficient manner it says it has an open, | :15:01. | :15:03. | |
honest and positive working relationship with HM Revenue and | :15:03. | :15:05. | |
Customs and that where there are differing legal interpretations | :15:05. | :15:07. | |
between ourselves and tax authorities, we will engage in | :15:07. | :15:09. | |
proactive discussion to bring matters to as rapid a conclusion as | :15:09. | :15:19. | |
:15:19. | :15:21. | ||
possible. PricewaterhouseCoopers say that all their advice and | :15:21. | :15:24. | |
assistance is given in accordance with UK and European tax laws. | :15:24. | :15:26. | |
Their client relationships are strictly confidential and they | :15:26. | :15:29. | |
cannot comment on individual cases. And it says it provides limited and | :15:29. | :15:35. | |
fully disclosed technical support to the main political parties. | :15:35. | :15:38. | |
By 2010, more than 150 companies were in dispute with the taxman | :15:38. | :15:45. | |
over whether they should pay UK tax on their foreign profits. But the | :15:45. | :15:49. | |
tide was turning. The Court of Appeal ruled that the taxman could | :15:49. | :15:57. | |
go after the foreign profits of UK companies after all. Rather than | :15:57. | :15:59. | |
pursuing companies through the courts, the taxman started doing | :15:59. | :16:04. | |
deals. But were the companies paying enough? Parliament didn't | :16:04. | :16:10. | |
think so. We asked the National Audit Office | :16:11. | :16:13. | |
to undertake an inquiry into the settlements that HMRC were reaching | :16:13. | :16:21. | |
with the corporations. There's big money at stake here. In fact both | :16:22. | :16:25. | |
the National Audit Office and HMRC say that up to �25 billion could be | :16:25. | :16:35. | |
:16:35. | :16:36. | ||
One of the deals that troubled the MPs was Vodafone's. The company had | :16:36. | :16:42. | |
set aside �3.1 billion in case it lost the dispute. In 2010, Vodafone | :16:42. | :16:49. | |
eventually settled with the taxman for less than half that amount. It | :16:49. | :16:51. | |
was suggested in Parliament that Vodafone actually owed much more, | :16:51. | :16:56. | |
�6 billion. Her Majesty's Revenue and Customs described that figure | :16:56. | :16:59. | |
as absurd, but refused to discuss how they settled the case, citing | :16:59. | :17:07. | |
taxpayer confidentiality. Because of the veil of secrecy | :17:08. | :17:10. | |
surrounding all these decisions around tax - and we're talking big | :17:10. | :17:13. | |
numbers here - lack of transparency means that we, on behalf of the | :17:14. | :17:16. | |
taxpayer, cannot be certain that this was a good, honest, proper | :17:16. | :17:26. | |
:17:26. | :17:30. | ||
Vodafone told us that it complies with the law in all the countries | :17:30. | :17:33. | |
where it operates and that it discloses all relevant facts to all | :17:33. | :17:39. | |
relevant tax authorities. Her Majesty's Revenue and Customs says | :17:39. | :17:41. | |
large business settlements are carried out according to the law, | :17:41. | :17:50. | |
clear codes and practices. We know Vodafone did a deal, but who else? | :17:50. | :17:53. | |
Pharmaceuticals giant GlaxoSmithKline did one, too. We | :17:53. | :17:58. | |
know because their man in Luxembourg says so. I've just | :17:58. | :18:03. | |
spoken to the manager of GlaxoSmithKline Luxembourg. He | :18:03. | :18:08. | |
tells me a deal was made with the taxman back in 2011. GSK refutes | :18:08. | :18:18. | |
:18:18. | :18:22. | ||
any suggestion of wrongdoing. It told us... Both the UK and | :18:22. | :18:26. | |
Luxembourg authorities are agreed that we have paid all the taxes | :18:26. | :18:30. | |
that are due. We take very seriously our duty to pay tax. But | :18:30. | :18:34. | |
we have a duty to our shareholders to be financially efficient, so | :18:34. | :18:38. | |
that we can maximise returns to investors and fund for the | :18:38. | :18:42. | |
development of future medicines. GSK agreed to close down the �6.34 | :18:42. | :18:46. | |
billion loan operation through Luxembourg. We asked how much tax | :18:46. | :18:53. | |
they had to pay. But they didn't answer that question. | :18:53. | :18:56. | |
When we are talking about the tax affairs of large corporations, they | :18:56. | :19:05. | |
should be totally open, totally So what does the Government plan to | :19:05. | :19:12. | |
do about tax avoidance, to make every tax penny count? | :19:12. | :19:15. | |
I regard tax evasion - and indeed aggressive tax avoidance as morally | :19:15. | :19:22. | |
repugnant. So not just evaders, you'd be forgiven for thinking that | :19:22. | :19:24. | |
the Chancellor's Budget speech was bad news for tax avoiders, too, | :19:25. | :19:27. | |
like those companies using legal ways to wriggle out of paying the | :19:27. | :19:37. | |
:19:37. | :19:38. | ||
taxman. Big UK companies involved in tax | :19:38. | :19:40. | |
avoidance schemes, would you in theory find such schemes morally | :19:40. | :19:44. | |
repugnant? Do we think that companies and individuals should | :19:44. | :19:47. | |
pay the tax that they are legally required to do, consistent with the | :19:47. | :19:50. | |
way in which Parliament has legislated and with the intention | :19:50. | :19:56. | |
of Parliament? Then yes, we think companies and individuals should | :19:56. | :20:00. | |
pay that tax. This government is determined... Is it morally | :20:00. | :20:06. | |
repugnant? Well, yes, but... Yes, absolutely. Yes. But that depends | :20:06. | :20:12. | |
on, you know, exactly what a company's doing. | :20:12. | :20:15. | |
The Government says it is committed to introducing a new anti-avoidance | :20:15. | :20:19. | |
rule. They say it will only work if it focuses on the most serious | :20:19. | :20:23. | |
cases of abuse. But the union which represents senior tax investigators | :20:23. | :20:31. | |
It will only catch the really most objectionable case, and the vast | :20:31. | :20:34. | |
majority of avoidance will not be caught by it. And indeed, anything | :20:34. | :20:37. | |
that is not caught by this will now be treated as reasonable tax | :20:37. | :20:41. | |
planning. It's rather as if you legalised murder and then said that | :20:41. | :20:51. | |
:20:51. | :20:51. | ||
So where does all this leave the companies in our documents and | :20:51. | :20:56. | |
their Luxembourg tax deals? Remember those "controlled foreign | :20:56. | :21:00. | |
companies" Rules, the ones meant to stop multi-nationals avoiding tax? | :21:00. | :21:07. | |
Well, the Chancellor has relaxed them. Deals designed to avoid tax, | :21:07. | :21:12. | |
by draining profits out of the UK should be caught by the taxman. But | :21:12. | :21:14. | |
from now on, profits created by the overseas subsidiaries of UK-based | :21:15. | :21:24. | |
:21:25. | :21:27. | ||
companies should face little or no That's good news for another big UK | :21:27. | :21:34. | |
company - Pearson, which owns the Financial Times and Penguin Books. | :21:34. | :21:37. | |
Again, a company with subsidiaries in Luxembourg and a dispute with | :21:37. | :21:46. | |
the UK taxman. I'm looking for Boulevard Grande Duchess Charlotte. | :21:46. | :21:50. | |
Here's what Pearson were doing, according to their company accounts. | :21:50. | :21:53. | |
In 2004, Pearson in Luxembourg were lending almost $1.5 billion to its | :21:53. | :21:59. | |
operation in America. Over seven years, almost $500 million in | :21:59. | :22:05. | |
interest flowed back to Luxembourg. Because of a loophole in the old | :22:05. | :22:08. | |
controlled foreign companies rules, profits appeared to escape UK | :22:08. | :22:12. | |
taxation. But in 2008, that loophole was closed, so profits | :22:12. | :22:17. | |
could be taxed after all - something Pearson well knew. No | :22:17. | :22:21. | |
sign of their name, though. By 2009, company accounts revealed that �26 | :22:22. | :22:28. | |
million in tax had not been paid. The reason? Pearson, like Vodafone | :22:28. | :22:30. | |
before it, believed that the controlled foreign companies rules | :22:30. | :22:40. | |
:22:40. | :22:41. | ||
breached European law, and so they No brass plate but just a copy of | :22:41. | :22:47. | |
the Financial Times. We asked if they paid up. But they wouldn't | :22:47. | :22:51. | |
tell us. They did say that Pearson pays all tax legally required in | :22:51. | :22:55. | |
all jurisdictions in which it is subject to tax. And it | :22:55. | :22:57. | |
categorically refutes any suggestion that it "refused to pay" | :22:58. | :23:03. | |
any tax for which it was legally liable. Now that the Chancellor | :23:03. | :23:06. | |
only intends to tax the UK profits of big companies, that Pearson | :23:06. | :23:08. | |
scheme involving America and Luxembourg would probably face | :23:08. | :23:18. | |
little or no tax. Those changes are effectively | :23:18. | :23:21. | |
exempting a whole range of income that is moved into tax havens by | :23:21. | :23:28. | |
British-controlled companies. They will be taxed far more lightly, if | :23:28. | :23:38. | |
:23:38. | :23:40. | ||
at all, than they were under the No wonder it was smiles all round | :23:40. | :23:47. | |
when big business got together with government last month. | :23:47. | :23:50. | |
The tax regime in this country is now competitive with virtually | :23:50. | :23:54. | |
every country in the world. There is no better place from which to | :23:54. | :24:00. | |
run a multinational corporation in tax terms. I believe that fervently, | :24:00. | :24:10. | |
:24:10. | :24:13. | ||
and it's the result of 10 years of And among those doing that hard | :24:13. | :24:16. | |
work, GSK and Vodafone, two of the companies who had been in dispute | :24:16. | :24:26. | |
with the taxman. The coalition invited them and others to consult | :24:26. | :24:36. | |
:24:36. | :24:36. | ||
Your question was, is the influence disproportionate, does somehow | :24:36. | :24:41. | |
business somehow have a backdoor key to Downing Street? I'm not | :24:41. | :24:44. | |
saying big business had a backdoor key. I think the front door has | :24:44. | :24:47. | |
been wide open. I'm saying it's blatantly clear that big business | :24:47. | :24:51. | |
has had disproportionate influence on government policy. I reject that. | :24:51. | :24:53. | |
I don't think they've had disproportionate influence on | :24:53. | :24:56. | |
government policy. Government makes its own decisions. They don't take | :24:56. | :25:03. | |
a lecture from the CBI or from me. Obviously the interests of | :25:03. | :25:05. | |
businesses are ones that the Government has to take into account, | :25:05. | :25:08. | |
quite particularly when they are so concerned about the weakness of the | :25:08. | :25:13. | |
economy. It matters less if you've got great prosperity, a booming | :25:13. | :25:22. | |
The Treasury reckons relaxing the rules on taxing foreign profits | :25:22. | :25:28. | |
will cost over �800 million in the next few years in lost revenue. | :25:28. | :25:31. | |
Worth it, says the Government, because it will boost investment | :25:31. | :25:37. | |
and encourage more companies to move their HQs here. And they're | :25:37. | :25:40. | |
already coming. The world's largest insurance company, Aon, is moving | :25:40. | :25:46. | |
its HQ here from Chicago. When it's finished, this building will become | :25:47. | :25:50. | |
home to some of the 6,000 Aon staff who already work here, and the new | :25:50. | :25:57. | |
arrivals from the States. So what exactly will the UK get out of it? | :25:57. | :26:01. | |
Well, not a lot. Only seven top executives and a small group of | :26:01. | :26:05. | |
support staff will actually be moving to London. All told, just 19 | :26:05. | :26:15. | |
:26:15. | :26:18. | ||
people. Aon says that... Although relatively small in number, those | :26:18. | :26:20. | |
moving to London represent the executive decision making within | :26:20. | :26:26. | |
the firm. There are lots more new jobs on the way. But they will be | :26:26. | :26:30. | |
in Chicago, not London. My guess is that the benefits of | :26:30. | :26:33. | |
this for the UK economy are pretty trivial. We'll get a little bit of | :26:34. | :26:37. | |
revenue from the people who were brought over, but the impact on our | :26:37. | :26:42. | |
economy is going to be very small. Moreover, this is a global | :26:42. | :26:46. | |
competition. Other counties will be trying to do the same thing. We may | :26:46. | :26:56. | |
:26:56. | :26:57. | ||
feel that we lose more than we gain in this. Aon told us... That while | :26:57. | :26:58. | |
their decision provides them with increased financial flexibility, | :26:58. | :27:04. | |
their resolution to move to London was primarily a strategic one". But | :27:04. | :27:07. | |
in the small print of Aon's disclosures filed with US financial | :27:07. | :27:09. | |
authorities, tax was a major motive for the move. | :27:10. | :27:13. | |
Look, these are difficult times, but if we want to see growth, if | :27:13. | :27:15. | |
we're really determined about seeing growth in this country, we | :27:15. | :27:18. | |
have to have a competitive tax system. | :27:18. | :27:21. | |
Business in the UK now pays a lower rate of corporation tax than most | :27:22. | :27:27. | |
of the world's biggest economies. But what are the consequences of | :27:27. | :27:35. | |
this competition to attract companies by taxing them less? | :27:35. | :27:39. | |
At the core of this, I think, is a race to the bottom on the taxation | :27:39. | :27:47. | |
of profits and capital income. What is fundamentally clear is, as the | :27:47. | :27:49. | |
tax revenue can be generated from the corporate sector diminishes | :27:49. | :27:51. | |
under this long-term downward pressure of tax competition, | :27:51. | :27:54. | |
somebody else must pay more to support the functions of the state | :27:54. | :28:04. | |
:28:04. | :28:10. | ||
or the functions of the state Whether or not the Government | :28:10. | :28:17. | |
attracts more businesses by asking for less tax remains to be seen. | :28:17. | :28:23. | |
And if they do come, what will ordinary taxpayers get out of it? | :28:23. | :28:26. | |
What the secret tax deals in Luxembourg reveal is just how far | :28:26. | :28:33. | |
companies will go to avoid paying their fair share. | :28:33. | :28:36. |