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UK's Boots in Gibraltar 'tax loophole' row

Alex Dunham · 16 Oct 2013, 13:20

Published: 16 Oct 2013 13:20 GMT+02:00

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A British trade union has slammed slammed the high-street chain for using a legal tax loophole to avoid paying taxes, the UK's Daily Mirror has reported.

The union Unite claims Boots has deducted interest payments on the €10.7 billion (£9 billion) debt taken on to fund its buyout six years ago.

Unite has declared Boots’s "missing millions" could have paid for "two years’ prescription charges in England, the starting wages of 78,000 nurses or 5.2 million ambulance calls".

Founded in England in 1853, Boots was bought by Italian billionaire Stefano Pessina and US multinational private equity firm Kohlberg Kravis Roberts in 2007.

The new owners moved the headquarters to tax-friendly Switzerland and now run Boots via a firm based in Gibraltar.

Boots responded to the allegations by releasing a statement in which it claims to organize its tax affairs strictly in compliance with all applicable laws and always with the highest standard of good ethics.

The news comes just as the European Commission opens a rigorous investigation to corroborate whether the new Gibraltar corporate tax regime introduced in 2010 selectively favours certain categories of companies — a stance which breaches EU state aid rules.

"The Commission will in particular examine the exemption for passive income such as royalties and interest from corporate tax," read a press statement released by Brussels on Wednesday.

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It’s these exemptions for passive income — including dividends, royalties and corporate tax interest that are not subject to tax in Gibraltar irrespective of where the source of the income is located — that Boots has allegedly made use of.

“Tax avoidance is now part of the DNA of a corporate British culture that is rotten to the core,” said Unite General Secretary Len McCluskey. 

Alex Dunham (alex.dunham@thelocal.com)

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