UK UnCut claims that since Boots, bought out by private equity firm Kohlberg Kravis Roberts in 2008, moved its headquarters to Switzerland, the tax it pays has dropped from 33% to 3%, saving £150m a year.
It isn\’t the move to Switzerland which has reduced Boots\’ corporation tax bill. Not, at least, in anything more than a very minor manner.
It\’s the interest bill it\’s paying which has reduced corporation tax paid.
The company was bought by loading it up with debt. The interest on that debt is therefore an operating cost of the company and so reduces taxable profits.
Do also note that it\’s not actually certain that such a manouvre has reduced total tax collected. Of course, yes, the debt has reduced taxable profits at Boots and thus the amount of tax that Boots pays. But the interest received by whoever does actually receive it is taxed at the level of the recipient. If it\’s, just as an example, a higher rate taxpayer who holds one of the Boots bonds, then they will be paying 40% (possibly even 50%) on that interest received: a higher rate than the 28% corporation tax that Boots would have paid without the interest bill.
And whining that all the interest goes to foreigners doesn\’t work either: what this means is that there\’s some £billions (whatever the number is) of foreign capital being used to provide luvverly shops and pharmacies for Brits to enjoy: us getting the benefits of foreign capital is a good thing.
I would bet reasonable money that not a single one of UK Uncut would be able to explain this story. Yet they\’ll still protest it: gullible, ignorant fools that they are.
Of course, don\’t look for those who do understand this (Mr. Murphy perhaps? TJN?) to bother to tell anyone. Gullible, ignorant fools are just what they need and are thus delighted to have.