UK Newspaper Accuses WPP of Tax Avoidance

05 February 2009

LONDON: English is a convenient language, its semantics lending themselves to all manner of interpretations. 'Tax evasion', for example is (very) illegal and can lead to serving a term at 'Her Majesty's Pleasure' – not as much fun as that phrase might suggest, being a euphemism for 'imprisonment'.

'Tax avoidance', on the other hand, is not only perfectly legal but in some quarters (The Chartered Institute of Taxation, say) is regarded as utterly admirable. 

According to UK daily newspaper The Guardian, WPP Group ceo Sir Martin Sorrell is a skilled practitioner of the latter and, in particular, a sophisticated technique known as the 'Double Luxembourg'.

This stratagem, say the scurvy band of tax dentists employed by Her Majesty's Revenue and Customs, is even more complicated – and effective – than such Kama Sutran-sounding manoeuvres as the 'Irish Branch' or the 'Dutch Partnership'.

In all of which fiscal contortions Sir Martin, an accountant by nurture as well as nature, is allegedly a skilled practitioner.

Even allowing for WPP's substantial overseas interests, critics accuse WPP of spending the past decade successfully running a series of elaborate avoidance schemes, involving billions in assets held in low-tax regimes such as Luxembourg, Ireland and the Netherlands.

According to The Guardian, "overseas company filings show that over the years, in response to the UK revenue blocking a loophole, WPP appears to have ingeniously reorganised itself with even more hard-to-grasp spiders' webs of legal entities". 

In 2008 BBC News gave prominence to Sorrell's accusation that prime minister Gordon Brown had threatened corporation tax rises that would cost millions, hit WPP's profitability, and force it to move to Dublin. 

This woeful taxation tale induced the BBC to report that WPP "currently pays £200m a year in tax to the Treasury", which sum [in the event of a move to the banks of the Liffey] would be lost to the UK.

Not so, avers The Guardian. Far from paying £200m a year to the UK in corporation tax, the marketing services giant has shelled-out very little under that heading in recent years.

States the newspaper: "[WPP] has instead made acquisitions and piled up debt in the UK, enabling it to claim large amounts of tax relief on the interest. WPP's £200m tax payments went almost entirely to other countries.

"WPP had no UK corporation tax to pay last year. Its average UK tax charge over the last six years, taking into account claimed reliefs, has been less than £5m, against global profits averaging £500m a year." 

Meantime, WARC News readers are advised to igore a scurrillous rumour that a new category will be specially created for the this year's Cannes Lions ...

"... and the winner of the 2009 Creative Tax Avoidance Award is … 

Data sourced from; additional content by WARC staff