On Friday, Aon Corporation announced that it will be moving its headquarters to London, in order to be closer to one of the key hubs of insurance and risk brokerage in the world. It turns out that Aon Corp.s desire to be closer to the London market is motivated by something else: tax incentives.
According to Crains, Aons move to London could possibly increase its earnings per share, among other perks:
In addition, the company will have access to $300 million in excess cash abroad that would be subject to US taxes if it attempted to move that money to the Chicago-based parents balance sheet. After the move, the company can obtain that cash without tax penalty and use it for share repurchases or other shareholder-friendly purposes.
The benefits dont stop there. Crains also noted that there will be certain relocation benefits for executives who agree to relocate to London. Although Aon Corp. isnt directly saying that tax incentives were the main reason for moving to London, it believes that the move will allow them to keep pace and be as competitive as other insurance brokerage firms around the world:
Aon… said it will see increasing future cash flows through a significant reduction in our global effective tax rate, due primarily to changes in the geographical distribution of income. Aon said it didnt have a figure on how much that significant reduction will be. A reduction in our global tax rate over the long-term would allow Aon to remain competitive with certain global competitors, the publicly-traded company said.
Aon insists that Chicago will remain Aons North American headquarters and that its relocation will not result in job losses in Chicago. Aon states that it will add jobs to the Chicago market, and that Chicago will not have anything to worry about. The real question here is, do we believe them?
Linda Smith walks her dog Rudy every day, but with the temperatures rising, and Rudy’s age, a simple walk takes a little more preparation than just grabbing the leash.
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