RSS feedsGordon Brown could have come across all statesmanlike; presenting himself as the next prime minister in waiting, taking little action in his more traditional chancellor’s role. The temptation must have been great. Not much detail and a clear message to the country that he is the coming man.
And to an extent he did just that, especially with his announcements on education. But he still took the time to get caught up in the detail of tax and tax avoidance, showing that his eye is still very much on the country’s finances and the finer detail of Treasury work.
But that said, his action on the arcane subject of controlled foreign companies indicates a chancellor who knows his stuff. Essentially, the measures will allow companies to establish subsidiaries in a lower tax jurisdiction and to take advantage of the advantageous rates.
The Treasury had fought with companies over this issue earlier in the year, and this resulted in a win for taxpayers in Cadburys-Schweppes case at the European Court of Justice. And there had been expectations that the Treasury would continue fighting.
But Brown has acknowledged defeat. This is compelling for two reasons. Firstly it changes the Treasury’s habit of fighting every ruling tooth-and-nail. But it also indicates a chancellor who is aware that there is increasing concern about the British tax regime and its lagging competitiveness with other countries.
There had been mounting pressure. A senior tax expert at HSBC had recently warned Westminster that UK tax was looking very unattractive - and shortly after that research showed a number of companies fleeing the UK in search of more favourable rates.
In making his admission Brown perhaps made a virtue out of necessity. He certainly gave it a positive spin, but it seems like a message is hitting home.
Having said that there’s no sign of the actual rates changing – that, I assume, would probably be an admission too far.
