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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