Posted by Brian Marks on 24 June 2001 at 21:01:58:
In Reply to: The Black Knight posted by Serf of Blair on 19 June 2001 at 14:22:59:
Honours have always been used as a carrot to persuade company bosses to put their firm's money into projects that the government had an ideological interest in. There was probably an element of that in the honours that used to be given to IBM UK executives, even though the honours were well justified for other reasons.
The Gerstner award looks like a case of realism - recognising that UK executives no longer make any major decisions. Some folk, no doubt, will draw analogies between the Blair centralisation devaluing Parliament and the Gerstner centralisation devaluing the management in subsiduary companies.
For those of you wondering what this ongoing Inland Revenue enquiry is, here is a little more information. Some of IBM's financial health arises from contributing less to the community through taxes. In 1994, for instance, IBM's overall tax rate was 41.4%. Since then, it has fallen each year, reaching about 30% in 1998. (I expect there are more recent figures available somewhere.) The question arises as to whether this has meant encroaching on grey areas at the margins of avoidance versus evasion, or even beyond that.
A former employee of IBM UK has alleged that the company avoided paying some £340M in UK taxes between 1991 and 1996 by increasing to 12%, from 8%, the royalties it paid to its parent for revenues earned in the UK. The Wall Street Journal said that if the allegation is true, it would mean IBM lowered the operating profit of its British unit, and thereby lowered its British taxes. It would also mean a corresponding increase in the operating profit for IBM's business in the US, where IBM did not pay taxes between 1991 and 1993 because it was losing money.
With institutions like the Inland Revenue and IBM, there is not much chance of the public knowing what is happening. All we get are muffled symptoms of something unusual. The Poughkeepsie Journal report that Mike gave us a link to says:
In that [1999] report, IBM United Kingdom Holdings Ltd. also revealed rising expenses for auditing, up by half, and filed the report on the last legal day for doing so, Oct. 31, in contrast to its previous pattern of filing earlier in the year.