It's probably a good thing that the British Labour government has lost local and by-elections and is sagging in the national polls. Barely 14 months in office, Prime Minister Gordon Brown is struggling to hold on as PM long enough to even contest the next election that must be held by 2010. If these trends continue a Conservative Party victory may be in the cards for the first time since 1997.
No doubt one major issue is going to be the high tax socialism that Brown and his cohorts have imposed on British citizens, U.K. corporations and even on previously tax-exempt foreigners living in the United Kingdom.
Last March I reported that the Labour government had imposed an annual tax of £30,000 (US$62,000) on all wealthy foreigners who make their homes in the U.K. After years of tax exemption, a great many of these wealthy foreigners began packing their bags and moving to true low tax havens, such as Switzerland or Monaco.
A few days before that I commented on the fact that high corporate taxes in the U.K. were also pushing major companies to move their corporate offices to low tax countries. At the time one of the big companies moving out was the European headquarters of the Internet giant Yahoo, headed for new digs in Zurich.
Going, Going, Gone
In the last 48 hours several news dispatches from the U.K. indicate that many wealthy British citizens are joining the exodus of expats.
A leading attorney in Manchester said there was "a huge low tax incentive for people with English connections to make Switzerland the center of their operations." One of the strong appeals of Switzerland, he said, was that in spite of pressure from the U.S. and U.K. "...Switzerland is seen as having more muscle power, saying we'll carry on doing things our way, as they have done for centuries," a reference to traditional Swiss bank secrecy.
More Corporate Migration
The venerable Henderson Asset Management group in London, one of the City’s investment stalwarts, which has been headquartered in Britain throughout its 74-year history, announced it was moving to Ireland. If it stayed in the City it would be forced to pay the standard UK corporation tax rate of 28%. In Ireland, the corporation tax is only 12.5%. By moving its headquarters to Dublin, Henderson’s foreign profits are charged at the Irish rate rather than the full UK rate, saving the company about £8.5 million (US$15.1 million) a year.
Henderson’s departure was the first of a mini-exodus last week.
Charter, a major engineering group that can trace its roots back almost a century to Cecil Rhodes, the Victorian South African colonial businessman, said it was leaving too, followed by Regus, the office service specialist. Regus said the move to Luxembourg would reduce the overall tax burden on the company, which operates from 900 locations in 71 countries. Brit Insurance said it was considering joining the ranks of several ex-U.K. insurance companies that are long gone for the tax haven of Bermuda.
The latest announcements have given the Conservatives another stick to beat the Labour government. The Tory shadow chancellor, George Osborne, laid the blame squarely on Labour tax policies. "It is further evidence of the damage done to the UK by the confusion in the last year over the future of our business tax regime, combined with the fact that 10 years of a Labour government have left us with some of the highest corporate tax rates in the European Union," Osborne said.
Tax Competition Is Good
We libertarian free spirits at the Sovereign Society love tax competition among nations.
Face it -- taxes are a just another cost of doing business, personally or commercially, so we believe one should have the inherent right to choose to base activities in a country that imposes no, or lower taxes.
It's insane, for example, to do business in socialist Germany, where 50% of your income is confiscated by taxes, when you can locate in Ireland, Luxembourg or some other tax haven where taxes are minimal or nonexistent. And high corporate taxes ultimately are paid by you and me -- the consumers -- in higher prices of goods and services.
But tax hungry politicians in the socialist welfare states of the UK and in Europe and elsewhere just don't get the message -- "It's high taxes, stupid", that drive out good businesses and destroy jobs. Compare this tax stupidity with the "Irish Miracle" where low taxes have transformed a formerly impoverished nation into one of the most prosperous in the European Union.
In this age of globalization and instant electronic financial activity, modern communications and transport links administrative bases can be located almost anywhere -- and they go where taxes are lowest. And they should.
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