Government seen risking business exodus over tax

Some of the biggest names in British business have told the government that it risks a corporate exodus if it presses ahead with tax proposals on foreign earnings, newspapers said on Sunday.

A delegation from the Multinational Chairmen's Group expressed their concerns at a meeting with Prime Minister Gordon Brown and Chancellor Alistair Darling around 10 days ago, The Sunday Times and Sunday Telegraph reported.

The delegation included HSBC Chairman Stephen Green, Vodafone Chief Executive Arun Sarin, GlaxoSmithKline CEO designate Andrew Witty and BP Chairman Peter Sutherland, the Sunday Times said.

It said they were up in arms about a discussion document issued by the finance ministry last June which proposed changes to the rules on tax paid by UK groups on dividends from their foreign operations.

A spokeswoman for Brown's office had no immediate comment.

In recent weeks, drugmaker Shire and media group United Business Media have decided to shift their tax domiciles from Britain to Ireland, piling pressure on a government already facing criticism over a tax change that will leave the country's lowest paid workers worse off.

A Treasury spokesman said the government announced in the budget in March that proposals on changes to the rules on taxation of foreign profits would be published before the summer.

"It is our intention that any reform would exempt foreign dividends from tax and that any changes would be broadly revenue neutral," he said.

"We have had regular and ongoing discussions with businesses on the shape of these proposals and have been clear that the aim of any changes would be to enhance competitiveness. Any changes will be taken forward in close consultation with business," he added.

Darling said on Tuesday he was forming a new working group with the private sector to look at the tax system and ensure competitiveness lies at the heart of any future reforms.