ALEX BRUMMER: Overseas takeovers usually mean a treasure trove of lost corporation tax

The scourge of overseas takeovers is most obviously seen in the loss of command and control of vital public services, as witnessed at Heathrow and Thames Water.

Resources, which could have been invested in Britain and infrastructure, have flowed abroad as dividends and interest payments on debt.

What is often forgotten is that with almost every foreign takeover, public-to-private deal or change-of-listing from London to New York or Frankfurt, there is a loss of corporation tax income to the Exchequer.

One of the first steps taken when High Street stalwart Boots was taken off the public markets by pharmacy magnate Stefano Pessina and buyout kings KKR in 2007 was that the company’s tax domicile was shifted to Zug in Switzerland.

Overseas firms don’t much like paying taxes in the UK. HMRC estimates that as much as £11.5billion of taxes from foreign-owned firms went missing in 2022-23, according to data from accountancy group UHY Hacker Young. 

Selling out: With almost every foreign takeover, public to private deal or change of listing from London to New York or Frankfurt, there is a loss of corporation tax income to the Exchequer

That is 7 per cent higher than in the previous year, with US transnationals the biggest offenders.

The lost revenues in the last tax year would be enough to knock two pence off the standard rate of income tax, leaving some stardust to sprinkle elsewhere.

Each time nodding-dog UK directors argue that they have a fiduciary duty to accept an enticing offer, as Glasgow-based Smart Metering Systems did when it accepted a £1.4billion bid from KKR last week, tax escapes out the backdoor.

As attractive as the private equity offers for supermarkets Morrisons and Asda in 2021 may have been, they will have been disastrous for the tax collector. 

Deals financed by debt can be offset against corporation tax even if domicile remains in the UK.

We should be thankful that three big takeover attempts of the last decade failed. Imagine how much poorer the Exchequer and Britain would be if BAE Systems, Unilever or AstraZeneca had fallen into the hands of overseas predators.

Funny money

How good it is to see UK asset manager M&G deploying cash from the enormous, legacy, £129billion Prudential fund in a growth company. 

The regret must be that it has chosen to become the cornerstone investor in Global Futures & Options Holdings (GFO-X), Britain’s first licenced centrally-cleared digital currencies and derivatives platform.

The City, as a leader in wholesale markets, understandably wants to be part of the crypto-currency revolution.

The stamp of approval from the Financial Conduct Authority ought to ensure that nothing nefarious happens.

American experience with digital assets is not encouraging. Bitcoin maybe on a tear – it reached a 20-month peak of $44,000 last week – but it remains a speculators’ delight rather than an asset that can be relied upon.

There are far too many known unknowns, such as the mystery of mining and energy costs that give cause for caution. 

More significantly, the £7billion FTX fraud and the conviction of Binance for offering services to Hamas and Islamic Jihad demonstrate how crypto currencies are a playground for money laundering and terrorism.

As technology becomes ever more sophisticated with the assistance of artificial intelligence, it may well be that regulators will become better at enforcement and stopping hooligans in their tracks. 

It is also the case that the development of stable-coin, with a recognised currency anchor, together with central bank digital currencies, may prove an opportunity too good to miss. And the London Stock Exchange and GFO-X will be first movers in properly supervised crypto assets.

But one cannot but think that Pru Fund money would be better deployed supporting British high-tech, AI and life sciences start-ups. 

UK fund managers would be much better advised to focus on long-term investment in undervalued UK firms. 

Both listed and unquoted companies have become easy fodder for private equity princelings and overseas predators.

M&G should be backing science and jobs in the real economy of output and work.

Match play

Saudi Arabia is not having it all its own way when it comes to domination of golf despite the recent defection of Spain’s Jon Rahm to LIV. 

Fenway Sports Group, which controls Liverpool FC, is seeking to gate crash LIV’s dollar fest with a rival bid for the PGA Tour. It better be quick or all the stars already will have decanted.

This post first appeared on Dailymail.co.uk