Plans to run supermarket chain Morrisons through a shell company based in a tax haven have met with a cool reception from MPs.
US private equity firm Clayton, Dubilier & Rice (CD&R) has said it intends to use an entity called Market21 GP Holdings, officially headquartered in the Cayman Islands, to operate the business.
Conservative MP Kevin Hollinrake has said he will seek assurances from Sir Terry Leahy, the former Tesco chief executive fronting the CD&R bid, that Morrisons will continue to pay UK taxes.
However, CD&R says that the entity that will own Morrisons - Market Bidco - will be incorporated in the UK, and that Morrisons itself will remain based in Bradford and therefore liable for UK taxes.
Who wants to buy Morrisons?
Two private equity bidders are in the running to take Morrisons over - Clayton, Dubilier & Rice and Fortress. The latter is backed by Japanese financial giant Softbank.
The battle between the two has been ongoing for four months. Morrisons shareholders will vote on the CD&R bid - understood to be around $10 billion (£7.29 billion) on October 19th.
The CD&R bid was agreed with Morrisons last month, dropping its earlier recommendation of the lower Fortress bid. A rare timed auction will finally settle the matter next month.
Why could Morrisons be run from the Cayman Islands?
The Cayman Islands is one of the world’s leading tax havens. Businesses regularly use shell companies headquartered there to avoid tax obligations in other countries.
Although tax avoidance is legal - unlike tax evasion, which is a crime - campaigners argue that it deprives British public services of billions of pounds in funding every year.
While CD&R says Morrisons will continue to pay UK taxes, MPs have expressed concern and anger that another leading supermarket chain could be moved offshore.
Last year, when rival chain Asda was taken over by TDR Capital and the Issa brothers, its ownership was transferred to Jersey - another tax haven.
HMRC estimated in 2020 that tax avoidance costs the British public purse around £31 billion a year.
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