The timing could hardly have been worse.
As attention focused on tax avoidance, with students targeting culprits such as Topshop, Kraft announced it was restructuring Cadbury – and almost certainly cutting its tax bill.
The business may end up paying more tax in Switzerland, but if so it will be at the expense of the British Treasury.
When the Government is cutting spending in a range of areas, not least in higher education, it’s tempting to be angry about anyone who doesn’t seem to be paying their fair share of tax.
But that anger doesn’t always make sense. For a start, students occupying Sir Philip Green’s shops must be vaguely aware that the black hole in the nation’s finances cannot be plugged by the Topshop retailer, however successful he may be. And it’s not as though he pays no tax at all.
In a similar way, Cadbury is not responsible for cuts in public services. As a major employer, it makes working people in Birmingham and the West Midlands more wealthy, not less. And in theses challenging times there are few businesses not looking to save costs.
Individuals are free to do as they wish with their own money. Many, including many of the very rich, choose to give some away.
But businesses exist to make a profit. Indeed, it’s only when businesses are profitable that their staff and shareholders can be sure of receiving the income that allows them to be philanthropic. If a firm can save money by shifting some of its operations overseas, or paying tax overseas, it will. During these times of austerity, the ruthless realities of naked capitalism can be pretty unpalatable.
The reality is that it’s easier then ever before for a business to shop around for the best deal. This is a result of factors that won’t go away, however much anti-globalisation protesters might wish it, such as ever-improving transport links and communication links, including the internet.
The world is a smaller place than ever before. Britain is in competition with other nations for investment and indeed for tax revenue.
If we want Kraft to base its European operations in the UK then we need to look at what makes Zurich so attractive at the moment and how we can do better. Protectionism when it suits is probably not the answer.
While the Commons Business Committee is concerned about Kraft’s tax affairs, underlying this is a feeling that it should never have been allowed to buy Cadbury in the first place.
There’s a home truth that needs to be spoken here, which is that even in a “hostile” takeover, a business can only be bought if the owners are willing to sell it.
Hedge funds may indeed have snapped in Cadbury shares in order to make a short-term profit out of the sale, but even this was only possible because the existing shareholders were selling.
Firms are bought and sold all the time, and Britain cannot sink into xenophobic hostility to “foreign” investors which would not apply to a UK buyer.
That’s not to say there should be no rules at all. If the Government is considering making the process more difficult, with more time for deals to be scrutinised and greater transparency, that would certainly be a good thing.
But Kraft is here to stay, and in the cold light of day it has only done what large corporations beholden to shareholders often do. Any loss to the Treasury in the current climate is unfortunate and even frustrating but as a major West Midlands employer, we want Kraft to succeed.
