Risk & Economy » Tax » Tax does influence business location, PwC research finds

A COUNTRY’S TAX REGIME has a considerable impact on where companies choose to locate, according to PwC research.

The findings follow Starbucks’ announcement last week that it would move its European headquarters to London. The past two years have seen the coffee house attract extensive criticism for its tax practices, after it emerged it had paid almost no tax in the UK over the decade between 2002 and 2012.

Between its arrival on British high streets in 1998 and 2012, it handed just £8.6m over to HM Revenue & Customs. The café minimised its tax liabilities by recording substantial losses in its UK accounts year after year.

However, following the opprobrium of the Public Accounts Committee, senior MPs, the public and the tabloids, it made the first £5m instalment of a £20m corporation tax bill in June last year.

Around 63% of the 1,344 CEOs surveyed worldwide by PwC said government tax policy plays a part in where they choose to operate their business. The government has operated a policy of promoting the UK as a place for business, with the lowering corporation tax rate to 20% by 2015 a crucial part of its efforts.

PwC head of tax policy Mary Monfries said: “Decisions on business location are influenced by many things, including customer demand, resources and skills, and political stability. Tax is undoubtedly an important part of the decision mix. When considering tax systems, it’s not just the tax costs, but the stability of the regime and compliance burden that matters.”