Tax row engulfs Rexam predator

THE US giant trying to take over Britain’s biggest drinks can maker in a £4.3bn deal is a serial user of tax havens.

Ball Corporation is in talks to buy FTSE 250-listed Rexam that would create an industry goliath.

The deal could be finalised as early as this week, and would make Rexam the latest British industrial champion to be bought by an overseas predator.

But almost one third of Ball’s subsidiaries are based in countries or jurisdictions renowned for being tax shelters, the Mail can reveal, raising questions about how much the takeover would contribute to the UK economy.

Analysis of Ball’s corporate documents has revealed that it has 17 offshoots in the US state of Delaware – a notorious tax base that houses more companies than people.

Up to 300,000 firms can be registered at a single address in the state.

The US can-maker has also set up a labyrinth of holding companies to run its overseas operations.

Of 112 subsidiary companies disclosed by the firm, 32 are located in tax havens – compared with just eight in the UK.

It is likely that payments between these companies will enable it to whittle down profits in the countries that it operates, allowing it to slash its tax bill.

In contrast Rexam, which paid £79m of corporation tax in the UK last year, has no declared tax haven subsidiaries. Ball’s European oper- ations are run through a division registered in Delaware.

Analysis of its structure has revealed a chain of obscure holding companies controlling its operations in Britain – allowing payments and dividends to flow out of the UK into lower tax regions.

Its top UK holding company, Ball UK Holdings limited, is owned by an arm based in Luxembourg.

This entity is owned by another Luxembourg company, which itself is controlled by Ball International Holdings BV – a firm based in the Netherlands.

This company is owned directly by Ball Pan-European Holdings, which runs all of Ball’s European divisions and is registered in Delaware.

The structure is similar to one used by Google, which uses two Irish holding companies to funnel money out of its European businesses in a way that means it minimises its tax liabilities.

The setup is known as a ‘ sandwich’ because it uses two companies based in the same jurisdiction. While legal, the scheme is criticised because it deprives governments of tax revenues.

Tax accountant Richard Murphy said: ‘This structure does look like a sandwich.’

He added it would be ‘extremely likely’ that Rexam would be folded into the same tax structure if the takeover was successful. The pair have already agreed that one third of the money for the deal will be paid in Ball’s Wall Street-listed shares, with the remainder in cash.

It is likely that Ball would raise money on the debt markets to fund this, rather than dipping into its reserves.

Murphy added that this will allow it to whittle down its British tax bill further because debt interest payments are tax deductible. The deal has also aroused competition fears, as Rexam and Ball have more than 70pc market share in the European drinks can markets, and over 60pc in the US.

Rexam shares, which Ball would pay 610p for under the deal, fell 9p to 518.5p.

No one from Ball was available to comment.