Diageo could walk over tax

Posted on 12 Feb 2010 by The Manufacturer

Guinness brewer Diageo has threatened to leave the UK over the new 50% tax rate on high earning individuals and what it sees as high corporation tax.

In last year’s budget, Chancellor Alistair Darling said that salaries over £150,000 will have to pay a 50 per cent tax rate from April this year. There are fears that this could push the largest companies away from UK shores and Diageo’s is the latest in a growing list of warnings about potential relocations that the government has heard in recent times. Consumer goods producer Unilever issued a similar threat earlier this week while pharmaceutical company Reckitt Benckiser has also voiced its discontent.

Paul Walsh Diageo, Diageo chief executive, told the BBC: “If the (UK) tax regime becomes so egregious, either for corporates or individuals, we would have no option but to look at alternatives.”

“The UK has become progressively a less attractive location to base oneself in,” he said.

As well as the individuals’ rate, Walsh says corporation tax is too high. This was a charge also leveled at the Treasury by Unilever earlier this week but HRMC dismissed the criticism by pointing out that corporation tax in the UK is at its lowest ever rate and is the lowest of the major G7 countries.

Walsh’s words came after Diageo released performance figures for the last six months of 2009 which show a slight fall in pre-tax profits to £1.39bn from £1.41bn in the same period a year before.
Walsh said trading conditions remain challenging owing to weak consumer demand but sales for the company are now picking up.

Diageo’s spirits portfolio includes Smirnoff vodka, Gordon’s gin and Johnnie Walker whiskey. Its beers include Red Stripe, Kilkenny and the non-alcoholic Kaliber and it also produces a range of wines including the Blossom Hill brand.