Yahoo's Search Engine Could Steam Into Switzerland

Yahoo, the Internet Search Company has announced that it is shifting its European headquarters from Shaftbury Avenue in London to Switzerland by calling it a part of its international business strategy in a bid to increase competitiveness and deliver better financial results. Yahoo hence joins a growing list of companies shifting its operations outside of the UK due to the high taxes imposed by its Government.

With corporation taxes in the UK standing at 28%, companies are finding it harder to contain themselves from moving to other countries like Switzerland, where the taxes are around 20%. With Chancellor Darling insistent on taxing non-doms and also not in the mood to lower corporation tax, companies, whose tax amounts are substantially high, are looking at different countries in a bid to save on taxes. So, as Shell moved to the Hague, Kraft Foods moved off to Zurich even as Colgate Palmolive and Procter and Gamble chose Switzerland as their European headquarters.

The business lobby group [CBI], however has laid the blame directly on the UK government for driving away all these tax paying companies out of the UK. Richard Lambert, the director general of CBI said that “We are deeply concerned that the UK corporate tax system is becoming uncompetitive” and cautioned that drastic changes were needed if Britain were to become a competitive place for businesses. The CBI also stressed that it was in favor of a corporation tax of 18% to be brought in within a span of 8 years, and a simple corporate tax system. Yahoo's shift to Switzerland could be completed in the next one and a half years, and with plug and play technology now making these moves quite easy, many more companies could follow suit if the UK government does not act fast.

Some companies like Catlin and Hiscox have chosen to move to Bermuda due to the low tax rate of around 11% and ease of documentation. Yahoo, which is under fire from 2 sides, with Microsoft hot on its tail to snap up the company and with competitor Google trying to snare away its customers, has decided that this move could enable them to save on taxes and improve their bottom line and also impress its investors that it can resist Microsoft's hostile bid.

Google has already moved its office to Zurich, in Switzerland and Yahoo's decision to move does not bode well for the UK Government. The Treasury though, is insisting that of all the countries in the G7 group, it has the lowest corporation tax rate and that it is still one of the best places in the world to do business in and it has seen increased investments in education, R&D, skills and infrastructure. But, there is something obviously wrong in this statement if established companies are leaving the UK and moving their European base to Switzerland, Ireland and Cyprus.

Recent surveys like the one conducted by KPMG, an accountancy firm, too state that the UK is far below other countries in terms of its tax rates and simplicity of its tax structures. Studies also confirm that the UK is slowly losing its competitive edge in attracting companies into its fold. And Chancellor Darling's decision to tax non-doms is just adding momentum to companies leaving to other countries in a bid to preserve their 'green' pastures. With inflation rising to unbearable standards and other business costs such as higher fuel and energy bills eating into profits, many big companies are trying to save on any which way as they legally can.

The ball is now in Chancellor Darling's court and he now has to decide on whether to stand on the sidelines and watch the exodus of companies moving on to its neighboring countries or to stem the flow by bringing in new policies and even reversing some of the earlier decisions, which the CBI has specified as being the cause of these desertions.