How tax can help heal our country

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Rebecca Cave outlines how the tax system could be used to heal the wounds laid bare by the EU referendum.

Who is in charge?

Our country currently has no effective government or opposition. We are in political limbo waiting for the Conservative Party to decide who will be our next Prime Minster, while the Labour Party commit collective hara-kiri. Long term government policies and projects, including making tax digital, are uncertain or have been put on hold, according to research by the Institute for Government.

Then this morning up pops George Osborne (still the Chancellor for now), saying that what the country needs is a reduction in corporation tax down to less than 15%! He argues that is this cut is needed to stimulate investment into the UK.

Crazy rates

My view, and that of a number of other tax experts, is that a corporation tax cut the last thing the country needs right now. What we need is a stable tax system, not constant rate changes. In 2010 mainstream corporation tax was 28% and 21% for small companies. Now all companies pay CT at 20%, and that is due to drop to 19% on 1 April 2017 and to 17% on 1 April 2020. This is a crazy race to the bottom, only Ireland has a lower corporation tax rate at 12.5%, although some tax havens have zero rates.     

Population needs

Corporations did not vote in the EU referendum, if they had we probably wouldn’t be in the mess we are. People voted, and the Government should listen to what those people are asking for, such as:

  • long term jobs
  • decent housing
  • inspiring education
  • reliable transport systems
  • fast broadband
  • well-funded health service and social care

If the rate of corporation tax is reduced, the government funding required to satisfy the above needs must come from individuals either as tax rises or benefit cuts.

How to fund

I believe the money needed for investing in communities should come from corporation tax on large companies, taking the rate back up to a reasonable 25%. The lower rate of 20% could be maintained for small companies, but it should be linked to the number of employees on the payroll rather than to the level of the company’s profits.

All companies (or groups) with less than 50 employees would pay CT at the lower rate of 20%. HMRC can easily determine which companies have 50 or more employees as that information is instantly available through RTI reports. The cut-off point of 50 employees is also the boundary used for RTI penalties, and for tests to establish whether a business is a small company for R&D and other tax reliefs.     

Stimulate investment

The results of the EU referendum shone a spotlight on the inequalities across the UK in terms of industry and opportunities for the local population. Investment by business and government needs to be targeted in areas where it is needed most, eg outside the greater London area.

Here are some ideas for stimulating investment:

  • Business grants conditional on the creation of long-term jobs in a specific area.
  • Scrap the apprenticeship levy (due to come into effect from 6 April 2017), which will only add to the burden of employing people and complicate the tax reporting for all employers.
  • Allow employers to claim tax allowances on providing decent housing and schools for their workers, to emulate the Victorian industrialists such the Cadbury family who built Bourneville village near Birmingham and Sir Titus Salt who founded Saltaire Village near Bradford.
  • Bring back capital allowances for investment in factories and warehouses.
  • Fund improvements in transport systems between towns in the North of England.
  • Scrap the HS2 rail project – it will only pull more people into over-heated London.
  • Improve the ports in the north east and transport links to them.
  • Build support areas for lorry drivers up and down the country – safe and secure overnight parking for drivers.
  • Pay teachers premiums to teach in lower performing state schools, to inspire the young to create the educated workers the knowledge-based economy needs .
  • Make sure every town, village and hamlet has high speed broadband.

Business rates

This is a significant tax for many businesses, which has been devolved to the regions. So Scotland, Wales and Northern Ireland make their own decisions on the rates and reliefs.

In the March 2016 Budget the government proposed a major reform to English business rates to allow local authorities to retain 100% of the money raised. Those funds could be used to spend on urgent local needs such as social housing. Unfortunately, the reform of business rates in England has also been stalled due to political turmoil.

What do you think? Should modest tax rises be used to fund vital investment? Or do you agree with George Osborne that our top priority as a country should be to attract outside investors? 

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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05th Jul 2016 00:30

Osborne is simply trying to stir things up for whoever takes over from him as Chancellor. His political future blew up in his face with the Brexit vote, and he has always struck me as a vindictive little man who was probably bullied at school. The type who in the real world would probably have become a Special Constable or a Traffic Warden.

Being evil for a moment I'd love to see Boris made Chancellor then watch the tumble weed blowing down the streets of London. (I jest of course).

Realistically our entire tax system along with HMRC needs completely rethinking. To my mind if an individual pays tax at 20% and 40% then I see no reason why companies should not pay exactly the same.

Indeed a company director can bankrupt a company, close it, and walk away from the debts. A self employed plumber does not have that protection, so, there is an argument for saying that companies should pay a tax premium for the benefit of that protection.

There is also a good case for adding a premium tax to all businesses based within, say, a 25 mile radius of central London as they benefit disproportionately from capital expenditure on railways etcetera. Maybe that would help to move businesses out of London to the Midlands, Wales and the North thereby spreading wealth and investment more equitably across the country.

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to Disabled Campaigner
08th Jul 2016 10:47

I like your premium London tax idea but I guess it would have to be applied on a reducing scale to avoid a new outer London business belt! We desperately need some good ideas and political direction to reinvigorate the economies of run down and disenfranchised areas of the UK.

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to cereus77
23rd Oct 2016 14:44

A reducing scale, er, that would be a land value tax then.

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05th Jul 2016 13:38

The FT leader today ( https://next.ft.com/content/5bfd0100-41db-11e6-b22f-79eb4891c97d#myft:sa...) says the Osborne's first task should be to divert recession by stimulating demand, rather than to cut corporation tax.

The FT echos my ideas above (which were written before the FT leader) of a public programme of house building.

The FT also suggests cutting employers NIC. Note the appprenticeship levy is effectively an additional 0.5% of employer's NI cost on on all large payrolls, - due to com einot effect from 6 April 2017.

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to Rebecca Cave
08th Jul 2016 10:50

I completely agree with the public house building programme but would qualify that to say the government should be building the most ecologically friendly and compact dwellings based on some of the innovative German and Nordic designs or indeed blazing a trail ourselves. We need the affordable accommodation but we need to be innovative in providing it so we don't concrete over what is left of our beautiful nature.

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08th Jul 2016 10:43

A great article Rebecca; I very much agree with the direction you are proposing.

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08th Jul 2016 11:03

I'm not sure increasing the rate of CT would be a good idea. Up to a point the lower the tax the more money seems to flow. Up to a point.

What Osbourne's comment does do is say we want businesses to come here which must be right. But rather than tinkering and giving more allowances here and there why not take the oppportunity to get the broom out and get serious about overhauling the tax system. My shelf is on its 3rd set of supports with the weight of tax books (and poor DIY skills). May be MTD could work if the regs are designed to fit in with that rather than the other way round. There are opportunities as well as threats and perhaps this could be an opportunity.

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By 2742663
08th Jul 2016 11:08

What a sensible and refreshing view - please transmit this to the Treasury!

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08th Jul 2016 11:08

Successive Governments have made inward investment as attractive as possible in an attempt to balance the UK's current account deficit. They obviously believe that no amount of internal stimulus will change the position. They may be wrong.

Your analysis is in my view correct. The majority of people feel disenfranchised and successive governments of either party have failed to change their plight so this is the result.

Some businesses always find a way to turn any situation to their advantage. For example, you use the cut off of 50 employees to measure large from small. How many existing businesses have already shed all staff except directors and use only "sub-contractors"? How many who currently employ over 50 would adopt that practice in double quick time?

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08th Jul 2016 11:16

Corporation Tax is simply a timing issue for the government as we've seen over the years with quarterly prepayments. Look at what happens at the extremes. If the tax rate is 100% profits are spent on wages or capital investments much sooner. If the tax rate is 0% there is a build up of reserves as investment decisions are deferred. Either way the cash eventually gets into the consumers hands and income tax and VAT get paid but by reducing the tax rate it takes much longer.

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08th Jul 2016 11:24

A cut in corporation tax is exactly the sort of thing that will attract new business to the country. Those businesses will employ people who will pay income tax, National Insurance and VAT when they consume.

Those looking at the future tariffs that may be imposed on UK access to the single market, (Which on a trade weighted average are just 1%) may we'll be persuaded to stay by a corporation tax differential.

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By carlh
to JamesHickman
08th Jul 2016 12:06

JamesHickman wrote:

A cut in corporation tax is exactly the sort of thing that will attract new business to the country. Those businesses will employ people who will pay income tax, National Insurance and VAT when they consume.

Those looking at the future tariffs that may be imposed on UK access to the single market, (Which on a trade weighted average are just 1%) may we'll be persuaded to stay by a corporation tax differential.

indeed the correct view, 2011/12 All UK tax collected -CT= 7% & PAYE/NI = 71% get companies to employ more

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08th Jul 2016 11:39

We need less tax, not more.

We need a fair system that protects the vulnerable but gives incentives to work. If there is a NMW or living wage, whatever you call it, that should be the limit of benefits, else why work? This should be applied regionally though, possibly referenced to the average wage/cost of living in a region. Any further help should be assessed on a case by case basis, and come with strings attached.

There also needs to be a structured plan to take people from benefits to employment/self-employment, with a visible "ladder" so they can see a route to a future. This is what a responsible, mature, caring society should be doing, but with the self-serving mob we have in the corridors of power I can't see how this will happen without a seismic shift in thinking. It is on the one hand beyond the pale that a third of those entitled did not vote on such a game changing vote as the EU referendum, but on the other, where the voices of the people fall of the deaf ears of Westminster who can blame them? At the end of the day it is the apathy of the people that have given us our government, although, that said, we trusted those in power to do the best for us, that trust was mortally wounded long ago, and finally killed and cremated by Blair and it is going to take something spectacular for that phoenix to rise again.

As for education there needs to be collective responsibility between employers and government so that our young are educated to fill society's needs and stop the endless pressure for young people to find themselves 21 years old and £40k in debt, train those with a practical bent in practical skills, not education for educations sake and for Heaven's sake stop calling polytechnics and colleges "universities" and give the degree back some worth!.

As for levies, the only one needed is a health levy - all providers of private healthcare should pay a sizeable levy, at least 25% of their payroll (both directly employed and contracted), ring fenced to pay for training new doctors and nurses, because at the moment the tax payer trains them for private firms to then poach and profit from the best of them - a ludicrous situation.

As for tax, there is no point putting a higher rate on big companies, they have the experts to allow them to avoid it, or worse, you drive them offshore. I am sure Ireland would love it, if they can offer half the proposed rate! The tax system is out of date, a simpler system based on turnover is needed in these global trading days, only a small percentage would be needed if the treasury got a small percentage of every pound spent in the UK, regardless of where that pound went in the world.
If every business just paid a percentage of their income over every month on a simple return they could then concentrate on their business and not on the mess of tax compliance they have to deal with at present.

As an aside, why is it called income tax? Surely it is profit tax? Often pondered that anomaly.

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08th Jul 2016 11:39

Tax increases are never going to be vote winners, but I would certainly vote for the honesty of up-front tax increases. Instead we've ended up with a miriad of sneaky taxes that hit small businesses. I for one believe that we should actually have some small tax increases so that we don't have constant cuts to public services.

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08th Jul 2016 11:45

Simple. Make corporation tax a function of turnover. Even Nigel Lawson agrees with that.

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08th Jul 2016 11:46

A breath of fresh air, Rebecca. Basically it's time to forget politics and concentrate what the people think what is good for the people. In the last two weeks we have seen politics try to decimate democracy and just look at the result.
I'm sure JC would do a better job that GB. So Benn and Co stop playing silly buggers.
Yes, Rebecca, sorting out our unfair tax system would heal the country.

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08th Jul 2016 11:50

Actually I think simple, or at least simpler, would be a better policy than stable. In fact a bit of instability would be better.
I also think you miss an important point. People pay taxes, not corporations. INCIDENCE is what matters. In this time of uncertainty and change, then the draw of lower tax rates would be a good thing.

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By Mallock
08th Jul 2016 11:56

I totally agree with the need to make the UK less London centric. The EU Referendum was a clear message (and probably the first the English have had) to send a message to London that the money and jobs need to be spread out a bit more evenly. The Scottish and Welsh have had an opportunity to voice their dissatisfaction through their own Governments but if London had listened a bit earlier, perhaps much of the popular nationalism would not have arisen.
After the referendum result, I believe even more strongly now that we need to stick together and put all our efforts into making the UK work outside the EU but that will only work if those in London appreciate that there is much more to the UK than their fine city.

I fully agree with Rebecca that reducing Corporate Tax and having to increase personal tax to compensate will do nothing to make the people of the country feel particularly positive or enthusiastic. If anything, it will fuel wage driven inflation but maybe that is all part of the big plan where the value of the UK's debt is reduced by inflation and the low value of the pound makes exports cheaper to foreign buyers.

As for housing, why isn't there a regulation which it compulsory for all new houses built to have one side of the roof covered with solar panels or tiles. A relatively small initial outlay but a massive long term gain. I think it is gross negligence that this hasn't been required for years.

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08th Jul 2016 12:06

Scrap corporation tax. At the end of the day, shareholders will pay tax on the dividends. Stop trying to socially engineer everything with the tax system. Humankind is not clever enough to do this, it usually ends in tears and negative unforeseen consequences.

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By jantill
to mickeyparish
08th Jul 2016 12:57

I suspect that shareholders in companies such as Arcadia would love 0% CT their company. Those domiciled in Monaco would also pay no tax so it would be win-win for that arrangement. Perhaps not so great for the UK tax position.

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to jantill
08th Jul 2016 14:18

If corporation tax is ever scrapped, then simply bring in tax deductions at source on dividends paid so everyone, irrespective of where they reside, receives a net dividend.

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to mickeyparish
25th Oct 2016 14:26

I agree, scrap income tax too (and NI). Introduce 100% Land Value Tax.

Perhaps it would have to be done in phases :-)

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08th Jul 2016 12:39

The funds raised from Corporation Tax are minimal compared to NI, Income Tax and VAT.

Small companies are now caught by the new dividend tax that narrows the gap with the NI/Income Tax combination. Large companies have the resources to avoid Corporation Tax, but they can't easily avoid Employer's NI. I think a two tiered tax system is the way to go:

1. Small limited companies with 20% Corporation Tax, the dividend tax and no Employers NI (or 15% Corporation Tax and a higher dividend tax).
2. Large limited companies with 15% Corporation Tax and Employers NI.

The small companies regime would compare similarly to the self employed, particularly if Income Tax was at 15% and Self Employed NI was the same as dividend tax.

Wait ... I am suggesting merging the tax and NI systems and moving in the direction that George Osborne started. Maybe he is right!!

I haven't commented on the rest of your article, which raises many interesting ideas. This response would be too long, so I have just stuck to tax.

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08th Jul 2016 12:48

With all the companies that have confirmed their commitment to the UK after the referendum(Boeing,JLR,Aston Martin to name just a few) it hardly seems necessary to attract more inward investment by lowering tax rates. A depreciating £ will also act as a magnet for foreign investment.
I know of no problem where raising tax rates and complicating the tax system is likely to be an answer. Lower taxes stimulate economic activity not higher ones.
We are not in a mess in the same way as many countries in the EU where 50% unemployment,riots and tear gas are commonplace. We simply have a Government that failed to prepare for an outcome it should have predicted and an opposition to divided amongst itself to oppose anyone else. Of course there will some upheaval in restoring parliamentary sovereignty.
Thses proposals look like a return to the 1970s(or 1870s in some cases), a decade so bleak that people wanted to join the European Union.

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08th Jul 2016 12:50

If the apprenticeship levy discourages employment (and it does), what will be the effect on companies with 40-60 employees of a whopping corporation tax increase when they are on the wrong side of 50 employees?

Those with 50 or more will look to shed employees and use contractors or other forms of outsourcing, and those between 40-50 will do all they can to avoid hiring.

And then, we'll start to hear about IR35 being a factor in the engager's corporation tax liability, and one of the most complicated, bizarre aspects of taxation in the UK will become even more complicated.

Taxation will always distort business decision-making, but it should be structured to minimise the distortions.

If you want to encourage employment, you don't want a tax structure that discourages it.

Osborne's plan is better, if incomplete. Reduce corporation tax to 15%. Offset it with an increase in the dividend tax.

This encourages investment from outside the UK -- outsiders will benefit from the reduced CT but not have to pay the higher dividend tax, so they will invest and employ UK workers.

It also encourages UK investors to put their funds to work here. They will pay the (higher) dividend tax on foreign corporations, but not on UK corporations, so it will be much to their advantage to invest in the UK as well.

Sure, foreign corporations will move their operations here and not pay all that much corporation tax. And their shareholders won't pay the higher dividend tax, either. So? It means more jobs, more PAYE revenue, and more VAT. And if you offset it with a dividend tax increase, it isn't even going to cost all that much in lost corporation tax, either.

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to NotAnAcctantJustReading
08th Jul 2016 13:24

So in fact, less is more!

what is better, £20b taxed at 20%, or £30b taxed at 15%?

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to Smokoe Joe
23rd Oct 2016 14:48

The laffer curve is a nice idea (Reagan and Thatcher and the well off generally like it of course). But is is not supported by the empirical evidence. Certainly, even anecdotally, it's fairly obvious that the last 30 years of lowering taxes on the wealthy has not resulted in a bonanza for the public finances.

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08th Jul 2016 13:16

Would you like to stand for Chancellor. You seem to be the only person talking sense.

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08th Jul 2016 13:34

"Make sure every town, village and hamlet has high speed broadband."

Why the obsession for high-speed broadband?

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to supremetwo
09th Jul 2016 14:43

Because online games are rubbish to play on a slow connection!

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By 0118295
08th Jul 2016 14:04

To your list of priorities, I would add:
Make sure everyone in every area has access to strong 4G mobile signals (and 5G when that comes).

This will require open roaming across different phone networks within the UK. 100% reliable and fast digital communications land based and mobile are a far higher priority than physical travel speeds. They will require huge investments.

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08th Jul 2016 14:25

True Tax can help us heal but we do not stability, not new tax increases being introduced with different names - Dividend Tax, to get round party promises. Don't see the point of reducing corporation tax as it will be picked up when we negotiate trade agreements! SMEs are large employers in our country, some individuals end up paying more that 60% tax in our country - is that "Fair". What is the motivation to create more jobs by the savvy Entrepreneurs! May be reduce income tax to boost spending in the economy, this in turn creates more jobs?

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08th Jul 2016 15:22

The amount of tax raised by corporation is miniscule when compared with IT, NIC and VAT - that is why these reductions can be made without perceptible effect on revenue raised - but the opposite is also true - raising the rate of CT won't make much of a difference either. Raising the rate is a favourite left-wing platitude just as lowering it gets the right excited - however - how did Ireland persuade the multi-billionaaire Apple to locate there (to paraphrase the sadly missed Mrs Merton) - I think 12.5% had an effect - incidentally also the reason why Northern Ireland will be able to charge a 12.5% rate in future.

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08th Jul 2016 15:32

I couldn't disagree more strongly. With the most likely outcome being the break-up of the "United" Kingdom, as it is more than likely that Scotland will secede (legally, of course) to remain in the EU, and Northern Ireland join with Eire (at best) or return to "the troubles" (at worst), we are left with Little England and Wales. There is strong popular support in London for declaring Independence as a Sovereign City State and financially it is realistic. There are smaller and less wealthy states that survive quite happily! The ideas that Londoners can be treated as milch-cows for the north east tax-eaters is risible and will not be acceptable to London tax payers. As they say, it's not over until the fat lady sings, and she definitely hasn't sung yet!!

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to CMPACDGDB
25th Oct 2016 13:58

The biggest recipient by a mile of Government largess has been the Banking sector. This is true in an ongoing sense inasmuch as they are allowed to collect most of the economic rent in the economy. It is also true in a literal sense as the Banking (and financial sector generally) has been by far the largest recipient of government, and therefore national taxpayers, bailouts in the times of trouble induced, mostly, by the very activities and business models of that sector. Where is that sector based, well, need I say. I think the rest of the country would be well rid of London and it's financial sector, at least, as it is allowed, encouraged, to operate now and in the recent past.

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to CMPACDGDB
25th Oct 2016 14:05

Posted twice in error, only seems to allow edit, not delete, so I've written this instead.

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08th Jul 2016 15:43

What the chancellor needs to do is to stimulate the small business sector, as this is where the majority of local economic growth comes from. The money firms save from tax reductions (small businesses) tend to be spent on business growth and within the UK. this means that the tax revenues benefit from - Increased indirect taxes, Increased paye taxes (from extra employment) increased corporation taxes (extra business = extra profits to tax) and finally from a reduction in state benefits bill (lower unemployment). This does not happen with tax cuts for big businesses as they grow slower and the large part of dividends tend to go to international and corporate investors. If I were chancellor I would look at - cutting employers NIC to 10% (with no cap) - Increasing the NIC threshold to match the personal allowance, cutting the rate to 10% without a cap - making corporation tax banded (as per Income tax) and having the following bands:- 0 - 10k 0%, 10k -500k 15%, 500k-1bn+ 20% and above 1bn at 25%. I would also remove the dividend tax, counting dividend income in with income for income tax, but retaining the allowance… but for small business shareholders who own 25%+ of the shares the dividend allowance would increase to £12k. This would boost small businesses, not discourage big businesses from investing, and limit the loss of tax income whilst the economy is settling down

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to lesrobinson
09th Jul 2016 15:05

Excellent idea, think of all the money the rest of the country could make selling London artisan food and i-pads. Would have to come by boat or truck, city airport can't take large planes, we could put a nice lock on the Thames and charge extortionate passge fees for the ships, but Oh, forgot the docks are all penthouse hflats and marinas now.

But where would you draw the line? just the city, north/south circular, M25? Could be fun, and what fun at passport control as the fat cats arrive from their weekend country piles ready for another week of fleecing investors.
In 2011 some 600,000 souls commuted in to the City of London everyday, difficult td figure quickly, but as far as I can tell 30-50% of workers in London commute in from elsewhere, mainly home counties but a large number further afield.
This is an ill though out and typical accountant answer. It is not just about the income London generates, but so many more things, some mentioned above.

I do think though there is merit in moving the capital to somewhere else, Birmingham would be my choice as it is the most central to other major cities, the national stadium, parliament, cental law courts, etc.

Hang on though, here's a sop to the Europhiles, lets have two administrative centres, then every month everything can be transferred up to Birmingham, and then back down again - after all it works for the EC, but we could do one better, have three, a month in London, a month in Birmingham, one in Manchester then back down south again to start the cycle again for the next quarter.

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08th Jul 2016 16:43

Surely there is a logic in cutting corporation tax which even now is a single digit percentage of tax take? We need to encourage more business, which means more people employed paying more PAYE and NIC, and claiming less benefit. Taxing profits is never really profitable for Government, but companies will be encouraged by the low headline rate.

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09th Jul 2016 12:18

So your idea is to RAISE corporation tax rather than compete on it? The reason he's targeting corporation tax is because many companies look at the headline rate when considering where to invest- just look at how many companies 'operate' through Ireland.
What we don't need is to raise rates, which is tantamount to saying 'don't come here'.
And of course we already have the double taxation on company profits, as the company pays 20% and then the owner pays another 32.5% for individuals with no credit for the 20% already paid on that money.
Yes, let's have 20% and 40% rates for shareholders- that would be a nice cut from the current rates!
Increasing the tax burden isn't a good way of creating jobs and reducing spending, so the idea of a 'London tax' when they already pay sky high rates, salaries, rent, taxes sounds like a good way of ruining the already fragile economy and driving businesses away.
Face facts- we voted to leave. It's not a 'disaster', as bitter remainders keep telling us. As all good businessmen know, change creates opportunities and we should embrace the decision and treat it as an opportunity.
We don't need more taxes, we need to shrink govt expenditure, reduce taxes and give people more freedom to spend their own money as they see fit.

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11th Jul 2016 08:47

Excellent and realistic article, Rebecca. I just wish there was a government left to consider your propositions.

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25th Oct 2016 14:18

Hey, opinionated stuff, not used to that here!

I certainly agree that the money for investing in communities should come from the community as widely defined as possible within a country or even wider political entity (a large part of Brexit was an argument about that I think). I also agree that within the current UK taxation context reducing CT but not other taxes seems unfair.

However, even keeping CT rates up I think the idea of linking CT to employee numbers is a job killer and that's not a good idea (besides which paye income taxes more or less do that already). Also, this would tax jobs as heavily in marginal locations (as does paye) for job creation (eg the North-East, Cornwall) the same as hot areas such as London/South-East.

One of the first comments here mentions the idea of taxing London more heavily than other areas, this is a good idea, however, it is more simply and dynamically achieved by introducing a proper Land Value Tax and making it, as fast as is possible, rather than taxes on profit and income, the central tax in the economy.

Actually, an LVT would not tax London more heavily than anywhere else, instead, it would collect the economic rents generated in London (why is your London 2 bed flat worth £600k while the Peterborough one, even to the same building spec is worth, let say £200k) which so long as they are high will therefore collect a lot of rents. If London's fortunes wane, and other locations rise then the relative LVT yields from those areas would adjust as that is the nature of the tax. In any political unity it's inevitable that some areas will generate more (economic rents which should be) tax(ed) than others. A country is a social unit that redistributes that total income to, hopefully, result in a society where you don't need to, lets say, carry a gun.

With an LVT relative taxes (public funding) would rise and fall both spatially and in time with a regions, an areas and a countries general prosperity.

On Rebecca's 10 bullets,

I'm ambivalent on the 1st, 3rd and 8th (business grants, tax allowances for employer provided housing, support for lorry drivers).

I'm sympathetic to the 2nd, 5th, 6th, 7th and 9th (apprenticeship levy, transport in the north (etc), HS2, better links to North-East ports, teacher premiums in tough schools)

The 4th. An LVT would not tax such investments per-se anyway so it should be unecessary to give them special tax breaks, though during a transitional period such breaks may be justifiable (but only on the cost of the buildings and plant of course not land).

The 10th. Although this sounds fluffy, in reality it would mainly be a subsidy to the generally well-off who can afford to live in those otherwise marginal, but, bucolically attractive places. If they really need broadband then they should pay for it, otherwise move to a town and let people who actually have work to do that must be done in the countryside re-inhabit those pretty villages.

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21st Oct 2016 12:13

I believe the money needed for investing in communities should come from corporation tax on large companies, taking the rate back up to a reasonable 25%. Have a look at Dubai tour packages which you will certainly like.

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21st Oct 2016 13:20

No, a lower headline corporation tax rate is attractive to overseas companies seeking to invest. They may pay less CT but generate very large amounts of PAYE through their employees and their servicers and deliverers or logistics providers, plus of course VAT. In addition, the more investment in business from UK or outside means more employment, and therefore less benefits paid out.

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21st Oct 2016 13:52

Companies don't pay corporation tax. Ultimately it is a mixture of workers and shareholders. And actually, government does not pay for public goods.
You can certainly make a good case for lowering tax rates, as it has the counter-intuitive effect of raising the tax take; and we are certainly in need a of a good dose of tax simplification - undoing the obfuscation overseen by Gordon Brown, and more recently his protege George Osborne.
I would postulate that BREXIT is not relevant to this, although taking control of VAT would be a help.

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to listerramjet
23rd Oct 2016 14:42

Empirical evidence for the Laffer curve, much as the wealthy like the idea of it, is not strong, so your statement, "lowering tax rates.... has the counter-intuitive effect of raising the tax take" is an opinion and no more.

That said if you read my earlier (and other) contributions here you will see that I am not against lower taxes on income and profits, though I'm definitely in favour of higher, in fact 100%, taxes on rents (economic rents). We should introduce a land value tax and shift the main source of taxation away from income and profits and onto economic rents.

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to androo235
24th Oct 2016 11:08

Laffer is theory that is well supported by empirical evidence. As is the theory of tax incidence. You can have an opinion that it isn't - file it alongside flat earth!

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to listerramjet
25th Oct 2016 13:41

Well, here is not the place for the argument, and I don't suppose either of us are really armed for that battle anyway. However, I would say that,

Google search -

Evidence for Laffer Curve - 58,700 hits
Evidence Against Laffer Curve - 69,900.

It's just not a fact, only a theory, and not an uncontroversial one.

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to listerramjet
25th Oct 2016 14:24

What do you mean by "taking control of VAT". I don't like VAT either - it should be scrapped - something we could do outside the EU. Where are you on this?

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24th Oct 2016 15:10

Rather than concentrating on tax rates the government (and pressure groups) should concentrate on reducing government waste and ensuring all government spending gives the best value for money possible. A study a few years ago suggested that government waste (just waste, not poor financial management) accounted for some £40bn or ten times higher than the estimate for tax avoidance at that time. Factor in poor value for money etc and that figure could be double. Even with reduced spending (austerity) the amount of money wasted by the government comes out at around 30% of tax collected (Income & corporation tax for 2014 = £207bn). If government spends wisely and carefully there is no reason whatsoever to increase tax … increasing tax is simply throwing good money after bad, a totally pointless exercise.

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