Sir Andrew Witty, the CEO of pharmaceuticals company, GSK,
has been one of the few corporate leaders to address publicly
issues about how multinationals manage their tax affairs.
In an interview in the Observer newspaper in March 2011, Sir
Andrew (plain Andrew back then) stated that his company was
committed to being a tax resident in the UK and that he had no
truck with companies that move about so they can pay the
smallest amount of tax.
"Call me old-fashioned," he said, "but I think you have to
be something. I don’t buy that you can be this
mid- Atlantic floating entity with no allegiance to anybody
except the lowest tax rate. You’re British,
you’re Swiss, you’re American or
you’re Japanese. Whatever you are,
you’re something. And this company is a British
company."
Whitty acknowledged that while GSK had contributed much to
the UK, Britain had done the same for GSK through the support
of its people, government and universities.
He was scathing of news at the time that different companies
were threatening to move their tax residence from the UK.
"I really believe one of the reasons we’ve seen
an erosion of trust, broadly, in big companies is
they’ve allowed themselves to be seen as being
detached from society and they will float in and out of
societies according to what the tax regime is," said Witty. "I
think that’s completely wrong."
The pressure on UK company boards to consider their tax
residence has lessened considerably since Whitty’s
remarks as the tax system has undergone substantial reform. For
example, controlled foreign company rules have been changed and
a patent box offering a tax exemption is being introduced.
However, the impact of a CEO’s views was
important. Tax has proved toxic for multinational companies in
recent years.
For perhaps the first time ever, the public, as well as tax
administrators have been challenging companies to explain why
they manage their tax affairs the way they do.
Concepts used to reduce taxable income, such as transfer
pricing, foreign tax credits and loss carry-forwards, have come
in for intense scrutiny from the general media and different
interest groups.
This has piqued the interest of the public as they try to
understand the rules in place to raise money from corporate
taxpayers.
Company managers have generally declined to confront these
issues in public because of concern that their message will not
be understood or will be twisted in some way.
Whitty has shown that coming forward to be open about such
issues does not always carry the danger that many peers may
suspect.
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