WPP Shows U.K. Government Who's Boss on Corporate Tax

Last Updated Dec 11, 2010 11:19 AM EST

The U.K. government has bowed to WPP's demand that the corporate tax rate be reduced, and WPP (WPPGY) has responded by raising its figurative middle finger in a remarkable display of raw power from the world's largest ad agency holding company.

CEO Martin Sorrell moved the official HQ of the world's largest ad agency holding company from London to Dublin in 2008 in order to reduce his company's tax burden. It was a blatant tax dodge -- the "office" turned out to be a deserted house.

In a remarkable series of public statements before the recent elections in Britain, Sorrell said he wanted U.K. corporate tax lowered. The Conservative Party's finance secretary George Osborne said he'd review the situation. "The return of WPP would be a fantastic first step," Osborne said at the time.

The conservatives won the election -- and now Osborne, the new chancellor of the exchequer, is doing what Sorrell wants. The move will cost British taxpayers £100 million a year, in a country where the deficit is 12 percent of GDP.

WPP's response? A big "screw you!" basically. The company will not move its HQ back to London, sources told City A.M. And just to make sure the Conservatives realize that WPP absolutely doesn't care what they think, the company bought a slice of Lord Peter Mandelson's new corporate advisory firm. Mandelson is a former cabinet minister of the opposition Labour Party's previous government.

I'm sure prime minister David Cameron will understand that this is nothing personal, just business.


Image by Flickr user ballanross, CC.