WPP — which includes such marketing and PR leaders as Hill & Knowlton, J Walter Thompson, Young & Rubicam and Ogilvy & Mather among its subsidiaries — moved its tax base to Dublin in late 2008 in order to escape the British corporate tax regime and benefit from the Irish 12.5% rate.
In one of the most widely anticipated aspects of his budget, British Chancellor George Osborne announced plans to cut the British corporation tax rate from its current level of 28% to 23% over the next three years — decreasing by 2% this year and by 1% every year until 2014.
Such a move would give Britain the lowest corporate tax rate of any G7 country and could go some way in persuading British-headquartered companies to remain in the British tax net. A number of British companies have switched their tax base to lower rate nations such as Ireland and Switzerland in recent years.
However, a more important bit of legislation change is likely to see a relaxing of anti-tax haven abuse legislation, the Controlled Foreign Company (CFC) rules, which apply directly to foreign subsidiaries of British multinationals.
The rules are aimed at preventing companies using overseas tax havens to dodge tax bills.
While WPP — which has its shares dually listed in London and New York and generates as much as 90% of its revenues outside of Britain — would have to clear the relocation decision with its board and shareholders before any action was taken, group chief executive Martin Sorrell told the BBC yesterday that “it looks as though we will make that recommendation”.
It is unlikely, however, that WPP will move its tax base from Ireland this year and, given that the new CFC legislation — more details of which are still to come to light — may not come into being until well into 2012, that move may not actually take place for anything up to two years from now.
Another British company — business publisher and events organiser United Business Media — has said that it is also looking at giving up its three-year tax stay in Ireland to return to Britain.