Sorrell Threatens to Relocate WPP HQ Outside UK

07 May 2008

LONDON: Canny accountant and unblinking poker-player, WPP Group ceo Sir Martin Sorrell (pictured) has out-stared many a muscular opponent in his day. The British government, by comparison, is easy prey.

Especially when the battleground is corporate taxation, a subject in which Sorrell graduated with cum laude honours whilst still gurgling in his high chair.

The adland knight is less than happy at the UK government's latest tax proposals that, if implemented, would require UK-headquartered companies to pay taxes on dividends earned overseas – a move that would see WPP's current annual tax bill of £200 million ($393.58m; €254.07m) rise by "very, very significant sums of money".

A noted exponent of stick and carrot negotiations, Sir Martin first employed the former.

"If the measures [as they stand] are introduced, ratified, confirmed and implemented, we will be taking a very serious look at the advantages and disadvantages [of moving WPP's tax domicile and headquarters offshore]," he told the BBC.

Then the carrot. Such a move would abroad have to be balanced against other factors such as its potential impact on the company's image, Sorrell conceded.

He has already made his feelings known via the Multinational Chairmen's Group, whose members include some  of the world's most powerful companies and which recently met with prime minister Brown and chancellor Darling to voice similar concerns.

The political duo argue that another new proposal – to exempt companies' foreign dividends from taxation – should  make the changes "broadly revenue neutral" overall.

This seems to have had a mollifying effect on Sir Martin who declared it to be "good to see the government taking it seriously" by setting-up a task force to examine the issue.

The velvet glove was then removed: "But I do hope we will get some action [otherwise] I think the proposals will lead to the exodus of a number of multinationals. I have been surprised by the number of our clients and non-clients who are considering this action."

Such an exodus could have profound long term effects, Sorrell warned.

"It will be a dent in the image of London as a financial centre. This is another issue that will make London less competitive and, given the rise of the East, will become more and more important."

Data sourced from BBC Online (UK); additional content by WARC staff