Corporation Tax a ‘Question of Judgement’: WPP Chief

The amount of corporation tax that companies choose to pay is “a question of judgement”, according to Sir Martin Sorrell, chief executive officer (CEO) of global advertising group WPP.

In a radio interview, he said that coffee chain Starbuck’s recent decision to pay £20m in tax on its UK activities was influenced because “doing good is good business” and multinational corporations (MNCs)opt to pay tax more out of a sense of corporate social responsibility than because the law obliges them to. The long-term interests of their businesses therefore mean avoiding doing anything that might upset consumers.

Sorrell said that Starbucks had negotiated the additional corporation tax payment in the UK with HM Revenue & Customs (HMRC). “They didn’t do anything underhand at all,” he added

Asked what the right model should be on corporation tax, he replied, “The right model is you make a contribution. All contributions you make to your stakeholders are a question of judgement.

“There are the rules. If then companies choose… in terms of building their long-term brands to make a contribution to all the stakeholders, all credit to them.”

The interview coincided with WPP moving its headquarters back to London after more than four years. The group relocated to Dublin in 2008, in protest at the then Labour government’s proposals, subsequently rescinded, to introduce ‘double taxation’ of corporate profits.

Sorrell also forecast that WPP would see 2%-3% global growth in 2013, with China contributing “significant double-digit growth”, although the general environment would remain hostile for businesses everywhere.

“It’s been a very gruelling year and next year is The amount of corporation tax that companies choose to pay is “a question of judgement”, according to Sir Martin Sorrellto be more of the same. You’re in the trenches and it’s hand-to-hand combat. Corporates are not happy bunnies at the moment.”

Corporate balance sheets were generally healthy, he said, but bosses were reluctant to invest because of uncertainty over several issues, such as:

  • The continuing eurozone debt crisis.
  • Tension in the Middle East, centred on Syria, Egypt, Iran and Israel.
  • The US ‘fiscal cliff’ of spending cuts and tax rises, despite the deal reached in Congress to avert most of these for the next two months.
  •  Slowing growth in powerhouse emerging economies, such as China.

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