Save content
Have you found this content useful? Use the button above to save it to your profile.

Corporation tax: The not so beautiful game

6th Dec 2010
Save content
Have you found this content useful? Use the button above to save it to your profile.

What do the government’s proposed corporate tax reforms and England’s FIFA World Cup bid have in common? They’re both a recipe for disaster, according to Simon Sweetman.

The government recently produced a document outlining its ideas for the reform of corporate taxation, stating an aim of creating the most competitive regime in the G20. Note that they didn’t say they wanted the best one, or the one most suited to their taxpayers – the emphasis was on being the most competitive, i.e. appealing to those who currently pay their tax elsewhere so that they will spend money moving things and people for no good reason.

This happened in the week that the holy trinity of Englishness – David Beckham, Prince William and David Cameron were made to look extremely foolish in pursuit of the megalomaniac bid for the 2018 World Cup. (Note that our representatives were all rich white men, a detail which is symptomatic of a world to be made safe by posh boys for posh boys, even if Becks’ poshness is merely by marriage). Given the apparent behaviour of the voters here this looked very like another race to the bottom which failed because there is always somebody more unethical than you out there.

The notion of tax competition is in fact a relatively recent one, and is of course relevant only to the internationally mobile, meaning large corporations and their executives. You and I don’t actually get much choice about where we pay our taxes.

The great majority of limited companies are as a matter of fact small businesses, most of them paying the small companies rate of corporation tax. You would not know that from the document, which is concerned with making life easier for large business. If the small companies’ rate survives this parliament, I for one will be very surprised.

Perhaps this is fair enough, given that the OTS is looking generally at small business and that the affairs of small companies are likely to be central to that as the area possibly most in need of reform, but it doesn’t look very joined up.

Very early on the document refers to the UK’s ‘lead’ on corporate tax rates being eroded. By ‘lead’ it means ‘lowest’, suggesting that the intention is to move towards the Irish model which, as we know, George Osborne so greatly admires (or, perhaps, admired).

So we failed to seduce FIFA with our pretty posh boys - will it work any better on multinational companies?  ‘Oh look,’ we can tell them, ‘we’ll only tax your patents at 10% given that a major part of international tax planning involves hiving off your intellectual property to a low tax jurisdiction!’ This is a fairly blatant play for those IP holding companies. Of course, given the restrictions on immigration you can’t actually bring your staff with you (except your senior executives) but since most of this is playing at residence rather than anything one might recognise, that is not going to be a real problem.

It still looks to me as if nobody wants to see the real problem, which is that wages in this country are so low that you can have a couple working full time and still in poverty, while at the top end you get CEOs paid 83 times as much as their average employees.

 

Tags:

You might also be interested in

Replies (2)

Please login or register to join the discussion.

avatar
By mikewhit
07th Dec 2010 12:42

Wrong target ?

"the emphasis was on being the most competitive, i.e. appealing to those who currently pay their tax elsewhere so that they will spend money moving things and people for no good reason."

Why not plan for a tax regime that, for example, raises the most tax revenue ? Obviously this implies walking a path between high tax / fewer businesses and low tax / low income.

Thanks (0)
avatar
By listerramjet
04th Mar 2011 16:14

I suppose

that when your habits get expensive you have to do what you can to keep the coffers from emptying!

Thanks (0)