Comment - Diageo more likely to stay in UK?
David Cameron's party heralds a new dawn on corporate tax
Diageo CEO Paul Walsh appears to have caught the ear of the UK Coalition Government, after it today announced plans to make the country a more attractive place for multinational businesses.
The Office for Tax Simplification (OTS) may sit a little strangely with a Coalition Government supposedly determined to free itself from bureaucratic ribbons, but the agency's launch has sent a clear signal to business.
Chancellor George Osborne could hardly have been blunter today (20 July) when, announcing the launch of OTS, he declared the UK "open for business".
Its remit and the noises emerging from the Conservative-dominated Coalition Government will surely be noted by FTSE100 companies, including Diageo and SABMiller.
Since 2008, when the previous UK Government announced it would start taxing overseas operations of UK-based companies, there has been significant disquiet in the corridors of 'UK Plc'.
Swiss authorities waited like white knights (or sirens?) to whisk multinationals away to a land of low tax and never-ending raclette parties.
Diageo's Walsh has publicly criticised the UK tax regime as "uncompetitive". He warned the previous Government that the Smirnoff and Guinness maker would "consider its options" on moving its headquarters out of the UK, if the tax system remained the same.
Diageo declined to comment specifically today on the Coalition Government's plan to cut corporate tax, review tax on overseas profits and trim the red tape.
However, a group spokesperson told just-drinks: "It is important the Government takes steps to ensure the UK remains and develops its position as a good place to do business.
"That means having a more competitive regime in terms of both corporate and personal taxation, a drive to reduce the regulatory burden on business, and strong support for export led businesses."
Chancellor George Osborne's statements are clearly in-line with Diageo's desires.
SABMiller's CEO, Graham Mackay, said back in May that he was "encouraged" by the Coalition Government's emerging policy on tax.
Traditionally, the UK Conservative Party is pro-business and in favour of reduced regulation. However, today's Conservative-dominated Coalition must balance these natural urges against the reality of the largest budget deficit for more than a generation.
Nor can it be seen to tread too lightly over business while the public sector faces the axe. "We're all in this together," is an election mantra just waiting to come back and bit prime minister David Cameron.
Actions will speak louder than words, of course, but the Coalition Government's language will be a promising start for Walsh and co.
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