Aviva plans to cut costs by moving headquarters to Ireland

BRITAIN’S second-biggest insurer Aviva plans to cut costs and exploit growth opportunities by moving its European headquarters to Ireland.

The company denies the move is linked to Ireland’s competitive corporation tax rate of 12.5%. Aviva is to simplify the range of products it offers across its 12 European businesses and speed up new product launches, it said.

Its chief executive for Europe, Andrea Moneta, said Ireland’s low corporate tax rate of 12.5% would cut the company’s overall tax bill, but stressed the targeted efficiency gains did not depend on tax reductions.

“The programme is going to deliver a set of improvements in terms of revenues and costs, and there is also room for improvement in terms of the blended tax rate we have,” he said.

Other overseas companies including WPP, the leading British advertising agency, and British insurance brokers Willis, which owns the Dublin-based Coyle Hamilton Group, have relocated their headquarters to Ireland enticed by the low rate of business tax.

WPP said it moved here in opposition to the change in British tax rules. It will save up to 10% of its overall profits as a result of the more favourable tax regime here, it said.

Mark Barrett, tax partner with Moore Stephens Nathans, said that while the strategic objectives given for the decision to move are plausible “there is no doubt in my mind that it is tax driven”.

The flow of companies into Ireland over the past 12 months highlights the attractiveness of Ireland as a place to relocate to, Mr Barrett said.

“It remains to be seen what gains the economy will derive from this type of transfer,” he said.

The 12 European businesses being integrated into the Irish operations, which has still to be given regulatory approval, excludes Aviva’s domestic British business and its Benelux operations.

The group’s decision will not have any real impact on jobs in Ireland, but Stuart Purdy, managing director, Hibernian Aviva in Ireland, said it will result in more capital being held by the group at the new Irish headquarters for the rest of Europe. It was also a significant endorsement for the Irish arm of the European operations, he told the Irish Examiner.

He was not in a position to say how much the lower tax regime will add to overall profit.