Some will say that this is theft

The FTSE company, which owns Smirnoff vodka and Guinness, has rejected the offer which is understood to be just one of a series of proposals that it has received in recent months. However, the terms of the offer from the Swiss canton of Zug highlight how aggressive foreign authorities have become in their attempts to lure UK companies offshore.

Zug offered a deal that would see up to 200 of Diageo\’s top executives exempted from paying income tax and the company itself offered corporate tax rates on more attractive terms that those in Britain. The offer comes in the wake of the UK Government\’s decision to raise income tax rates for those earning £150,000 or more to 50pc from the beginning of April.

Or at least attempted theft. They are \”our\” tax revenues, they belong to the UK in some manner.

However, three things.

1) Diageo is an international company. Sure, it grew from one based in the UK but most of its money is now made outside. There\’s no particular reason why the UK should get a slice of that money.

2) Such tax competition keeps pressure downwards on the tax rates that can be charged to people here in the UK who cannot move. The ability to bugger off is one of the things that creates the Laffer Curve (not the only thing of course), that simple truth that there can be tax rates high enough that revenue collected falls.

3) There\’s nothing you can do about this tax competition. For any corporation has an absolute right to move the brass plate anywhere within the EEA. That\’s the EU plus Iceland, Switzerland, Norway and Liechtenstein. Their right to do so is just as much one of the pillars of the Single Market as the right of you or I to enter France without a visa.

In short, tough titty for those who would raise tax rates to extortionate levels.

10 thoughts on “Some will say that this is theft”

  1. Some will say it means taxes need to be slashed in the UK, but in fact as it’s been rejected it’s an argument in favour of the opposite.

    [It’s fun this arguing against an argument you have invented]

    Tim adds: No, I didn’t invent that argument. Richard Murphy really does argue that tax competition is the same as them stealing our tax money.

  2. Just wait for the much-anticipated “One World Government”.

    The net effect of which will be banning voting with one’s feet.

    Alan Douglas

  3. Could you clarify what’s an “extortionate level”?

    Tim adds: That’s one of those things which is “to taste” I think. The point being that when enough people think that the taxes being levied upon them are extortionate and thus change their behaviour so as to avoid then (in any manner, even by just not doing the work that then gets taxed) then revenues will fall.

  4. Surely you believe people change their behaviour in response to any tax rate?

    Tim adds: Sure, and the sweet spot is where not too many do….

  5. Go Switzerland!!

    We need more activity like this to put the brakes on the tax hikes that are being planned by all parties rather than being forced to bite the bullet and stop spending/wasting our money. If only there was a way for ordinary taxpayers to elect to move their tax affairs to another jurisdiction.

    That’d larn ’em!!

  6. Tim,

    “There’s no particular reason why the UK should get a slice of that money” –

    Apart from the fact that the British Government has allowed it do business here; in order words, if they relocate we nationalise, immediately and without compensation.

    3. ‘There’s nothing you can do about this tax competition.” –

    Sure there is. You can jail the directors for ten years, bankrupt them and disqualify them from holding company directorships for life.

    The coming recalibration of economic understanding is going to be very interesting to watch.

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