WPP's Ireland HQ May Be Focus of Tax Probe

Last Updated Dec 7, 2009 5:00 PM EST

WPP (WPPGY) CEO Martin Sorrell could soon be the focus of a tax investigation that will examine his email and other records to see if his company's HQ moved to Ireland as a tax dodge. A senior British tax authority source told The Guardian:
"We will be looking for substantial evidence that a move has taken place and is genuine. We will want to see emails to establish there has been a physical relocation and that the brains of the company has moved."
BNET first noted the link between WPP's improbable move to the banks of the River Liffey a year ago. WPP -- which owns Ogilvy & Mather and JWT, among other venerable ad agencies -- is organized as a complicated web of companies based in various foreign jurisdictions (including Luxembourg!) to avoid tax.

WPP also uses debt to avoid tax, as interest payments are tax deductible. Unfortunately, WPP is so heavily indebted that to support those interest payments -- among other expenses -- the agency holding company has laid off thousands of staffers.

It could be difficult for WPP to prove its Dublin "HQ" is actually the corporate nerve center of the business, as the "office" it's in is a deserted Georgian town house that allegedly has eight employees, none of whom were seen shortly after the move last February. The Guardian again:
If companies are found not to have moved high-level staff in appropriate numbers, firms may be levied fines and forced to pay back tens of millions of pounds in tax.
On suggestions that Irish offices held a skeleton staff which gave the impression of playing fast and loose with tax law, [an anonymous tax director at one firm] stated that a holding company required few staff and that he believed the Revenue would find it very difficult to win a case against his firm.
And finally: WPP will have a little more revenue to pay those surprise tax bills and fines. It's revised upward its forecasting for the year to a decline of 11.6 percent from a decline of 14 percent.

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