Diageo chief Walsh in tax warning to government

PAUL Walsh, chief executive of global drinks giant Diageo, yesterday issued a stern warning to government ministers not to impose punitive taxes as they would risk seeing companies like his own quit Britain.

Walsh said few governments understood that because of the advance of technology many companies were much more mobile and could work from anywhere.

"It doesn't matter where we are based. Governments forget that if they think they can be cute in introducing new tax regimes and take companies for granted they will force us to look wider," Walsh told a media briefing in Edinburgh.

"We will work with whoever is in power but when governments suggest things we do not like we will be very vocal.

"The last thing I want to do is re-domicile this company but in the face of substantial increases in tax I would have to look at it."

Walsh emphasised that there were no current taxation threats and no plans to move but he was mindful of the last government's attempts at trying to tax overseas profits and of the present government's need to raise money to pay off the deficit.

He said Diageo, which makes Johnnie Walker Scotch whisky and Smirnoff vodka, paid 1.6 billion to the UK Exchequer and 3.5bn to treasuries around the world.

Walsh hit back at criticism levelled at the City by Vince Cable, the business secretary, at the Lib-Dem conference. The Diageo boss said any attempt at controlling shareholder behaviour following the acquisition of Cadbury by US firm Kraft Foods should be aware that it would work both ways in preventing firms like his from making moves on foreign companies.

"Cadbury was sold because its shareholders wanted to sell. The day you try to stop shareholders having that liquidity of ownership just brings further problems," said Walsh. "I am not saying that some of the themes from Mr Cable do not warrant debate. They do. But it is naive to think there are quick fixes."

Walsh said Diageo now generates 99 a second in export revenue and was feeling bullish. "I am feeling better than I felt a year or 18 months ago. The next 12 months will continue to be challenging. I don't think we will fall off a cliff or into double dip (recession]."

The company has spent 600 million in Scotland over the last five or six years, he said, as Scotch is "vital to the success of our company." He said some tough decisions had been taken, including the closure of facilities in Kilmarnock and Port Dundas. Some 300 of the 700 employees at Kilmarnock will be taking other jobs in the company.

The firm had sufficient cash to make a sizeable acquisition but had no immediate targets, Walsh added.