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Is Cameron giving companies the mother of all tax breaks?

Robert Peston | 12:33 UK time, Wednesday, 2 March 2011

There was something of a tweeting storm when George Monbiot accused David Cameron of "plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century".

Canary Wharf

This was quite a claim. What is he talking about?

Well, Mr Monbiot's concern appears to be a plan to bring the tax treatment of overseas branches of multinational companies in line with the tax treatment of subsidiaries of multinationals.

Which probably sounds a bit dry and technical. But the government would explain what's happening as broadly completing reforms initiated by the last Labour government, which was to tax multinationals on a territorial rather than a global basis.

Or to express that in something that is a bit nearer to English, the thrust is to tax multinationals on the profits they make in the UK, rather than on the profits they generate outside the UK. In practice what it means is that income repatriated to the UK from overseas in the form of dividends will no longer be liable to corporation tax.

The reason for moving in that direction is that multinationals are pretty mobile businesses. If they feel that being headquartered in the UK means that they will pay more tax on their global earnings than would be the case if they were headquartered in Dublin or Zurich or Singapore, then chances are that they will move to Dublin or Zurich or Singapore.

Many may not like it that big companies can hold countries to ransom over tax policy in this way, that they put fiscal advantage over patriotic fervour. But given that company law obliges company directors to give greatest weight to the interests of their shareholders, criticising company boards for striving to minimise tax is a bit like attacking gravity for making the rain fall down rather than rise up.

So with most important economies - with the exception of the US - moving in the direction of taxing corporate earnings on a national rather than global basis, it is hard for UK to go in a different direction.

It's the price of globalisation, innit?

This is how the government justifies the reform in its own policy document:

"Globalisation has meant that the world's markets have become more open and competitive. As a result companies increasingly operate across national borders and the ownership of UK businesses has become more internationally diverse. A competitive tax system should recognise this. In particular, the Government needs to ensure that the way the tax system operates for UK headquartered multinationals does not inhibit commercial business practices or make them unattractive to international investment."

As it happens, big banks like Barclays often operate abroad through branches rather than subsidiaries, and any reform which appears to deliver tax advantages to banks tends to generate controversy.

But what are we talking about in terms of the scale of advantage to multinationals?

Well, before we get on to that, it is probably worth putting the receipts from corporation tax into some kind of context.

The first thing to point out is that although corporation tax is an important source of revenue for the Exchequer, it is a long way from being the most important.

The last Budget estimated that corporation tax would raise £43bn in the current fiscal year, compared with £150bn from income tax, £99bn from national insurance, and £81bn from VAT. Personal taxation is so much more substantial than corporate taxation.

Corporation tax would not even cover half the costs of the National Health Service.

It's the tax paid by the millions of us who work for companies and institutions which largely pays for the state, not the direct taxation of the companies themselves.

Which is one reason why it matters that big companies think that the UK is a reasonable place to have an HQ and employ people - like you and me - who provide most of the government's funds.

Second, and according to new research by Oxford University's Centre for Business Taxation, multinationals have contributed 85% of all UK corporation tax revenue over the past 10 years.

So, for example, in 2007 - the year before the crash and Great Recession - UK owned multinationals paid £16.5bn of corporation tax, foreign-owned multinationals paid £17.7bn, and "domestic groups" paid only £1.1bn.

In other words, without corporation tax paid by multinationals, British multinationals and foreign ones, there would be precious little revenue at all from this source. So it seems to make sense to encourage them to stay here.

That said, the Oxford research also indicates that as a proportion of trading profit, the tax liabilities of the UK's 100 biggest companies are lower than for other businesses: unsurprisingly, big companies have the wherewithal to engage in sophisticated tax planning that reduces their tax bills.

Even so the biggest 1% of companies pay 81% of all corporation tax. So although in an ideal world, some may want the corporation tax system to be more progressive, in this less-than-ideal world big businesses are making a non-trivial contribution.

For me perhaps the most striking finding, according to the Centre for Business Taxation, is that although the UK's corporation tax rate has been well below the average for the G7 biggest economies for more than 25 years, UK corporation tax revenues as a proportion of GDP have generally been well above the G7 average.

There is some evidence, therefore, that lower headline rates which reduce the incentives for avoidance or for relocation abroad increase the overall take from companies.

But back to where we started. What about the direct impact of the government's plan to tax the overseas branches of multinationals on the same basis as their overseas subsidiaries?

George Monbiot warns that if dividends from overseas branches of multinationals become exempt from tax, that will create an incentive for multinationals to relocate more of their operations to these overseas branches situated in low-tax countries, such as Switzerland, Ireland or Singapore.

But that is to ignore the enormous current incentive for multinationals right now to relocate every single bit of their operations to low-tax countries, irrespective of what happens to the taxation of dividends from branches.

In other words, the government seems to be trying to do precisely the opposite of what Mr Monbiot accuses it of doing: it is trying to stem the exodus of companies and their assets abroad.

Which is not to say there is no cost to exempting branch dividends from UK corporation tax. The Treasury estimates it at £100m per annum by 2014/15, subject to confirmation by the Office of Budget Responsibility

That's equivalent to 0.2% of all revenue raised through corporation tax, and 0.3% of UK corporation tax paid by multinationals, which will be the beneficiaries.

This is precious money given away at a time when the government is looking for brass farthings wherever they may lurk.

But unless you believe that a fiendish conspiracy of multinationals has somehow succeeded in gulling the Treasury and HMRC about the true cost of all this, it isn't - to quote Mr Monbiot - one of "the biggest and crudest corporate tax cuts in living memory".

Comments

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  • Comment number 1.

    Here we go... another chance for the unreasoning left to come out in their droves. I love this idea that companies should somehow be morally obliged to pay more tax than they are actually liable for - or that perfectly legal so called "loopholes" (loophole says you? exemption says I) are in some way morally wrong.

    I wonder how many people on this comment thread will be off down the boot sale on Sunday. Will they be paying VAT on those purchases? Will they heck as like, as they say 'oop north. Paid that builder cash to do that bit of plastering in the attic did you? Of course you did.

    Perhaps those on the unreasoning, unaccountable, far left will be content when all major businesses flee the UK - taking with them jobs, and tax revenue. Oh no, wait - that won't happen will it - because we have a sensible government in power. Phew.

  • Comment number 2.

    HURRAH!

    Well done bloggers - you're changing the world - finally some analysis.

    "But that is to ignore the enormous current incentive for multinationals right now to relocate every single bit of their operations to low-tax countries, irrespective of what happens to the taxation of dividends from branches."

    ...but Robert isn't that EXACTLY the threat being made by corporations? What Cameron is doing is saying "don't bother moving abroad for tax relief - stay here and fill yer boots'?

    The British Economy will suffer - not least because other countries are going to be a little peeved when they find out why their corporations are relocating to the UK.....and then we get trade embargo's and other nations offering even greater tax breaks than ours.

    ....and where will that end Robert?

    The only brightside is that tax exiles in Switzerland are about to lose their jobs if this goes through.....it will be a shame for them but hey - "them's the breaks" as they say...

  • Comment number 3.

    Fine. Take dividends received from foreign branches and subsidiaries out of corporate tax. No problem with that. Instead establish a separate regime for dividends. I suggest taxing dividends received, whether by individuals or companies, at 50%. The quid pro quo could be to abolish corporate tax altogether. This would offset the oft quoted and possible spurious argument that "companies will relocate if tax is too high...blah blah".

  • Comment number 4.

    Excellent and extremely useful post Robert.

    I common with others who have retained the capacity for rational and independent reasoning I had already rapidly surmised that Mr Monboit's article was a prime example of hyperbole and over exaggeration.

    However, it is timely that it has been revealed as shoddy and sensational journalism by your high profile analysis of the issues in a clear, considered and detailed manner.

    I am sure many of us will await with interest the OBR's take on the issue which one would hope would rather settle this (and hopefully encourage Mr Monboit to stick to writing about subjects he has some greater knowledge of).

  • Comment number 5.

    This goes back to the very arguement of what is 'being taxed fairly'.

    Companies, and multinationals in particular, can relocate to wherever they like, so long as their is a sufficient supply of skilled people who can handle the complexity of keeping a headquarter of a large company functioning. Like people, corporations do not enjoy being taxed twice. Unlike people, corporations can, given the right conditions, fold their tents and pack up.

    So the question is: Do we make taxes fair, or do we make the success a penalty? We can kill the goose that lays the gold eggs by squeezing the last drop of blood out of it (to temporarily fix a structural deficit) or we can keep feeding the goose quality feeds and look forward to many more productive years. Shortism vs. Long-term planning.

  • Comment number 6.

    1. At 13:15pm on 2nd Mar 2011, ProfessorHenryJonesJr wrote:

    "Perhaps those on the unreasoning, unaccountable, far left will be content when all major businesses flee the UK - taking with them jobs, and tax revenue. Oh no, wait - that won't happen will it - because we have a sensible government in power."

    That's right a 'sensible government' who talked confidently about a 'no fly zone' in Lybia - before realising they just cancelled their order for aircraft carriers at a 'sensible cost' of millions for cancelling at such a late stage.

    ...or the 'sensible decision' of Government to let trained armed forces go (after paying for their training) - which includes thosands of front line soldiers and 'flight ready' aircraft pilots.

    ...or the 'sensible' decision to sell off the forests own by the public, or the sensible waste of money when the plan had to go into reverse - because the public didn't find it that sensible.

    ....or the 'sensible' decision to allow universities to increase their fees (but assuring us that most of them won't) - the glories of hindsight eh?

    ...or the 'sensible decision' to sacrifice the poorest and most vulnerable members of society by cutting back the public sector - whilst allowing corporations to pay less and less contribution.

    ......or the sensible decision to all "go on holiday" or selling arms around the world like scavengers leaving the country looking idiotic and badly managed.

    It's not even been a year yet - the idea this is a sensible government was lost in the first 3 months.

    Hows that for reasoning? - although in your world I suspect the reasoned view is "if nobody pays tax then the market will manage our lives".....now how is that one going?

  • Comment number 7.

    Under the new proposals, when a UK business advertises to purely UK customers on Google (an Irish company when operating in the EU) for its UK business, will Google be taxed by the UK or not ??

    Ditto for Paypal (Luxembourg).

    At present, though these transactions seems to be purely UK business, if I am correct, they completely escape UK taxation through EU law. Will this change under the proposals ?

    If not, and until it does change, the UK will be bled dry of corporate tax revenue.
    This is the major issue.

  • Comment number 8.

    Like someone said a few weeks ago - they want all the rights....but none of the responsibilities.

    The right not to pay taxes must be coupled with a responsibility to ensure everyone is catered for and society is fair to all.

    I don't expect banks to pay MORE than their fair share - I mean they only nearly brought the world to the brink of Economic meltdown - what should they feel guilty about?

    it's not like they've started wars or anything is it?

  • Comment number 9.

    Robert you said "...£100m per annum by 2014/15... This is precious money given away at a time when the government is looking for brass farthings wherever they may lurk..."
    Well how about stopping the billions of foreign aid, it is completely insane to be paying money to countries that have space programs and nuclear weapons. If we need every brass farthing then we cannot afford to give money away to other countries, much of which ends up in kickbacks due to corruption.

  • Comment number 10.

    An interesting and well balanced article. Well done Robert.

    #1 Prof

    Profits and shareholders are immoral according to these people. Watch the comments come flying in.

  • Comment number 11.

    SpikeGifted wrote "We can kill the goose that lays the gold eggs by squeezing the last drop of blood out of it (to temporarily fix a structural deficit) or we can keep feeding the goose quality feeds and look forward to many more productive years. Shortism vs. Long-term planning. ".

    And therein you have the difference between Labour, and the Coalition. Agree 100%.

  • Comment number 12.

    All these companies/corporations need UK citizens' money, so they can turn a profit from it.
    Just tell them if they flee for tax reasons they will have to pay another tax to get access to our money. Failing that, start a state run company that runs more ethically, doesn't pay disgusting bonuses for failing, and gives us a better service.
    WE DON"T NEED these corporate idiots in our society, let them leave....
    Facism folks.....

  • Comment number 13.

    If we cannot shut down the tax heavens, let's become a tax heaven ourselves.
    I'm not sure it's right but this is how it looks like.

  • Comment number 14.

    "It's the price of globalisation, innit?"

    Trying to identify with the common people, Rp?

  • Comment number 15.

    A good analysis Robert. A fresh perspective after reading the conspiracy ladened ramblings in the Guardian.

  • Comment number 16.

    1. I wonder how many people on this comment thread will be off down the boot sale on Sunday. Will they be paying VAT on those purchases? Will they heck as like, as they say 'oop north. Paid that builder cash to do that bit of plastering in the attic did you? Of course you did.



    Wow, stereotyping everybody north of London? You wonder why people don't tend to like Londoners.

    For me your whole comment was discredited by your obvious lack of sense. I hope you don't choke on the pollution while you are down there.

  • Comment number 17.

    Sigh. The problem is that under this regime companies will simply use accounting 'creativity' to move their profits to a low tax country, and bingo!, tax avoided.

    And since a company doesn't necessarily need to employ many people in its 'home' country, it may well encourage companies to move here or not to leave, but there will no longer be any tax benefit to the UK in them doing so.

  • Comment number 18.

    Unintended consequences of concentrating on the financial services sector ?
    It still seems to be, on the face of it, an additional incentive for already dwindling numbers of multinationally owned manufacturing sites to physically relocate operations abroad, taking skills, competence, R&D, IP etc. with them, notwithstanding the loss of business for local SMEs which currently support them. And I don't necessarily mean abroad to lost-cost countries, but to those where facilities already exist and it has been made more difficult to "let people go". Whether the headquarters remains in London, then comes down to the personal preference of the board.

  • Comment number 19.

    Groan!!!!!
    Its always about 'the threat' of corporates taking their Head Office toy to another country...
    maybe these corporates should realise it is a priveledge to be in the UK?

    As a UK resident income tax payer - supporting the comfort lifestyle of these upper corporate echelons , I'm thinking that maybe we should just set corporation tax at 0% status, but make all companies that wish to do business or sell product/services in the UK pay a licence fee for every 'user' (potential customer or not) in the UK, discounted for actual active volume user.

    With at least 60 odd million people in the UK - not an unsubstantial market- and at £2 per market user - less discount for actual user : there is both the incentive to sell product in UK, and also save cost if they sell well.

    If Microsoft can use this business model- why shouldn't UK plc do the same?

  • Comment number 20.

    Although banks may operate through branches many banks and other companies do not.

    If you take the insurance industry (which a lot of this is about) they tend to operate through subsidiaries in different countries and surprisingly these are not in tax havens, they are in countries where people want to buy insurance. With the changes to regulatory capital many of these subsidiaries are inefficient; some might have too much capital and some too little but you can't just move the capital around on a daily basis to take account of the shift in assets and liabilities. So it is likely that these companies will move to business model where they operate through branches in each country so the parent company's capital covers all the businesses and it is easier to control.

    As their subsidiaries are not currently liable to UK tax (being taxed in the country they operate) adopting a branch model would make them liable to tax both in the operating country and the UK. If the tax in the operating country is higher than the UK there would be credit for it and nothing would be payable in the UK. If lower than the UK, there would still be credit and the UK would tax the difference. There is therefore no massive gain or loss to the UK tax system. However, in moving to a branch model the companies might decide to relocate elsewhere in which case there would be a loss to the UK. What this change is intended to do is to exempt the branch profits which are currently not taxable in the UK in foreign subsidiaries. There is no conspiracy.

    Furthermore, if you tax companies at a higher rate the money has to come from somewhere. Companies do not have a stash of pound notes under their pillows; there is no return on this. If corporate tax goes up wages over time go down and the income tax take is diminished (wages are a deductible expense for companies. In theory it might be better to pay everything out as wages and to tax it to income tax at rates of up to 50% than to leave it in the company and to tax it at rates of 28%). Alternatively, it might reduce the dividends payable to shareholders. And who are the shareholders? More than 50% of UK plc is owned by pension funds so that would just reduce the money payable to them. The fact is if you up the rate of corporation tax it has to come from somewhere.

    This is about adapting the tax system to keep up with the times.

  • Comment number 21.

    Yes there is no doubt he is givng the large corporations tax breaks and encouraging HMRC not to rigourously enforce control of dubious tax management regimes.

    This is self serving stuff since as the Conservatives and Liberals will be out of power next time round he is ensuring many MPs have a chance at Directorships of these organisations. Such shameful action should be avoided at all costs.

  • Comment number 22.

    @13 - I think you mean "Tax Havens". Heaven isn't about to be taxed (as far as I know) but WOTW might think it morally acceptable.

  • Comment number 23.

    WritingsOnTheWall, seriously, I'm not sure how much mileage there is in debating with you.

    No-one is suggesting that the coalition has not made mistakes - they have. Clegg's "I forgot" bombshell was disgraceful. But compared to running at a consistent deficit for 7 years during the boom times? Sorry my friend, it's not even in the same ballpark. Your party showed breathtaking economic irresponsibility. Your party were pushing UK PLC into bankruptcy before the "financial crisis" even started - not that they will ever admit to that, of course. It was "all the bankers fault", right?

    And you will resolutely tell anyone who listens that we gave £500bn to the banks, never mind the facts - just make the numbers up (after all, your shadow chancellor does). And god forbid the public ever gets reminded that the stakes we have in two British banks *actually have a resale value*.

    Ho hum. Here's an idea - let's go back into the market, borrow a load more money we can't afford, then borrow again to pay the interest! After all, if it gets really bad, we can always default, right?

  • Comment number 24.

    Then let these businesses headquarter elsewhere. What do we need them for?

    Let's stop pandering to these global asset strippers and concentrate on the smaller nimbler UK business that won't just go where the financial weather is best.

  • Comment number 25.

    That doesn´t really explain everything though, above you say -

    So with most important economies - with the exception of the US - moving in the direction of taxing corporate earnings on a national rather than global basis...

    Yet Monbiot´s concerns seem not to be so much about moving in the same direction but the fact that the UK is going further -

    If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland.

    and -

    While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate “of any major Western economy"

    Are these claims untrue or was there another reason why you missed them out of your summary of Monbiot´s article above?
    Also, isn´t the US a fairly important exception to the trend?

  • Comment number 26.

    Very interesting article that answers many questions, Robert. It does not address something quite fundamental, however. Why extend the provision to tax-havens completely outside international tax treaties? Switzerland is the only other country in the world that does this. Globalised tax regimes have their basis on the idea that profits get taxed somewhere. Why create a situation that makes it easy and legal for money to be taxed nowhere?

  • Comment number 27.

    "In other words, without corporation tax paid by multinationals, British multinationals and foreign ones, there would be precious little revenue at all from this source."

    Argggh. So what.

    They don't create the money. They just move it around.

    If these companies were elsewhere then some other entity would move the money around instead.

    And if the money happens to move past a taxation point, the government takes a slice.

    Businesses do not fund the government. The government allows businesses to use the government's currency to facilitate the production of real goods and services and provide the population with an income to buy those goods and services.

    If government decides to use some of those real goods and services for the public good, then it procures them with its own currency, and then issues tax demands to make sure the remaining currency in the system doesn't cause price inflation.

    The country needs real goods and services and the population needs an income to buy them. If big international companies don't want to be part of that, then that is up to them. We don't need them.


  • Comment number 28.

    6.
    I am always amazed at posters such as yourself who conveniently forget the pressures and problems this government inherited. Effectively, we as a country are nearly broke and so some drastic measures need to be taken. This will mean that not everyone is going to be happy and some may not understand but the vast majority of people will recognise that the belt tightening exercise is required due to the past exploits of the Labour government. You state..."It's not even been a year yet - the idea this is a sensible government was lost in the first 3 months...." so I would really love to understand your views on the many years under Labour and exactly what they did "correctly" to land us in such a dire situation.

  • Comment number 29.

    Judge any/all government on the reduction it achieves in the gap between rich and poor. Attempting to micromanage this is at the least unwise and quite often the trees hide the wood.

    The question of foreign dividends brought back to the parent company's domicile is tricky as the company can choose what it does.

    I have always through it better to tax multinationals on their global income as this avoids the possibility of avoidance. The detail as always is the devil. As to do this governments need to transparently and equitably deal with each other. Multinationals must pay their fair share of tax in the same way as individuals. The question is however to whom should they pay the tax? It cannot be right and proper that Braclays, for example, pays tax at a rate of 1.x% on profits when the UK rate is 28%.

    The big multinationals MUST be transparent and declare all of their tax payments on profit in detail along with a fair and accurate statement of the profits in each state in which they operate. They should be clear about taxes on profits and those on employment and sales and not deliberately choose to muddy the water by combining them in an act to deceive.

    What sanctions can be enforced against cheats? I've always fancied imprisonment of the directors and managers as the only viable sanction as no amount of fine bothers them at all. Their cheating is far far worse than a benefits cheat - but we imprison them so why do we not imprison directors an multinationals?

  • Comment number 30.

    Never read such knee jerk rubbish as that perpetrated by someone (No. 1) who wishes so desperately to impress and successfully provokes a reaction. A real PR man in the making!

  • Comment number 31.

    The best line was - "It's the tax paid by the millions of us who work for companies and institutions which largely pays for the state, not the direct taxation of the companies themselves. Which is one reason why it matters that big companies think that the UK is a reasonable place to have an HQ and employ people - like you and me - who provide most of the government's funds."

    A similar argument was ventured on the radio today re: why the fuel stabilizer won't happen - it's better for business if we all pay and the exchequer needs the money.

    Look workers you're all just jolly lucky to be in work, remember it's only companies that have a fiduciary duty, you have no such liability yourselves, so keep smiling and keep coughing up - your company needs you to work longer and harder for less reward and your country needs more of your reward in taxes. But always remember you are the glue that keeps the state and the corporate world going.

  • Comment number 32.

    For me perhaps the most striking finding, according to the Centre for Business Taxation, is that although the UK's corporation tax rate has been well below the average for the G7 biggest economies for more than 25 years, UK corporation tax revenues as a proportion of GDP have generally been well above the G7 average.

    - I think he's got it! 28% of a large number is more than 50% of a small number!
    Here's an idea, slash corporation tax and encourage multinationals to move TO England. The tax take will thus increase and then we can open some of those libraries.

  • Comment number 33.

    3. At 13:18pm on 2nd Mar 2011, Stephen Morris wrote:
    Instead establish a separate regime for dividends. I suggest taxing dividends received, whether by individuals or companies, at 50%.

    - So subsidiary makes a profit and pays corporation tax (whether UK or abroad). It then pays a dividend to the parent and is taxed again this time 50%. Say it's a UK sub, it would be left with 36% of it's profits distributed! Hardly fair old bean. Tell me do you think multinationals would relocate away from England were you to impose such a regime? And can you tell me what 50% of nothing is please?

  • Comment number 34.

    I feel I must point out that the Oxford Centre is funded by the FTSE 100 Group of Finance Directors.

    Ireland has a lowish rate of Corporation tax, didn’t seem to help them much.

  • Comment number 35.

    #1 They won't be paying any VAT because it isn't liable. Only if the boot fair traders have a taxable turnover in excess of £60k (or whatever the current figure is) do they have to charge VAT - and even if they are liable, it'd only be on the margin between what they paid for the goods & what they sold them for. So at most - peanuts - but in most cases, leaglly - nothing.
    We will get the usual arguments of morality against expediency here. If it's true that virtually every other country uses the system the UK is proposing to adopt, it strikes me as foolish to go for a system that encourages large companies to relocate elsewhere. the net result is fewer UK jobs, less tax receipts from those people who lose their jobs (+ benefits paid to them) & we don't get the corporation tax from the companies which have scarpered either. Personally, I think there are larger moral issues to fight on than this - notably the nature of parts of the banking sector (as discussed in the previous article on Lord Turner's views)

  • Comment number 36.

    13. At 13:45pm on 2nd Mar 2011, ReformNotRevolution wrote:
    If we cannot shut down the tax heavens, let's become a tax heaven ourselves.
    I'm not sure it's right but this is how it looks like.

    - Is a tax heaven where you pay inheritance tax? What about tax hell? Tax purgatory?

  • Comment number 37.

    Nice one Professor Henry Jones, get your comment in nice and early, then everyone that disagrees with you is from the lunatic left. You compare the changes in Corporation tax with buying things at car boot sails and not paying VAT and using tradesman who pay no VAT (and probably little or no income tax) But wait a minute arn't the latter illegal, whereas avoiding Corporation tax is not, it might be immoral, but you suggest with your perverse comparison that morality is irrelevent. The reality is that if everybody paid tax that was due, and the tax laws were a little more moral (sorry I realise this probably hurts) we as a Nation would not be in the alleged mess we are in,and we would truly 'all be in it together', the Professor clearly shows, in my opininion, that we are far from being 'all in it together'.

  • Comment number 38.

    In order to provide a level playing field, can you explain how I too can become "headquartered" in, say, Switzerland while still actually working here, like what Boots, etc do?

    Or are we not all in it together?

  • Comment number 39.

    4. At 13:28pm on 2nd Mar 2011, The_Ex_Engineer wrote:

    "However, it is timely that it has been revealed as shoddy and sensational journalism by your high profile analysis of the issues in a clear, considered and detailed manner."

    ...except if you read roberts article you will see that he agrees that this will be the tax break Monbiot claims- it's just that Robert doesn't see that it's anything other than 'doing business for the UK'.

    It's a bit like saying "Britain is arming the world" is an exaggeration - whereas we're actually only arming "parts of the world" and that arming is good for the Economy.

    Clearly the idea that banks shoudl bear responsibility for their part in the crisis is not one that's going to be accepted by you nor any other banking supporter.

    Please re-read the artiucle and this time don;t miss this important paragraph.

    "In other words, the government seems to be trying to do precisely the opposite of what Mr Monbiot accuses it of doing: it is trying to stem the exodus of companies and their assets abroad."

    ...by offering them tax breaks. Exactly what George Monbiot was saying - the Government is turning the UK into a tax haven (and all the consequences that go with it).

    How is that sensationalist?

  • Comment number 40.

    10. At 13:42pm on 2nd Mar 2011, Dr_Doom wrote:

    "Profits and shareholders are immoral according to these people. Watch the comments come flying in."

    not immoral - but can you explain where profit comes from?

    The lack of an answer after 3 years of asking indicates that the correct answer is 'exploitation' - but you could never admit to that....so the question continues to go unanswered...

  • Comment number 41.

    11. At 13:42pm on 2nd Mar 2011, ProfessorHenryJonesJr wrote:

    "SpikeGifted wrote "We can kill the goose that lays the gold eggs by squeezing the last drop of blood out of it (to temporarily fix a structural deficit) or we can keep feeding the goose quality feeds and look forward to many more productive years. Shortism vs. Long-term planning. ".

    And therein you have the difference between Labour, and the Coalition. Agree 100%."

    ...and therin you have a Tory supporter blinded by his ideology. Labour have been doing exactly the opposite - they fed the goose, in fact the goose got so fat it exploded - remember the credit crunch? - or was that all a bad memory?

    It didn't work for Labour - but now you claim it will work for the coalition?.

    What is the definition of madness? - trying the same thing over and over again and expeccting different results.

  • Comment number 42.

    26. At 14:29pm on 2nd Mar 2011, Alex_Bermondsey wrote:
    Very interesting article that answers many questions, Robert. It does not address something quite fundamental, however. Why extend the provision to tax-havens completely outside international tax treaties? Switzerland is the only other country in the world that does this. Globalised tax regimes have their basis on the idea that profits get taxed somewhere. Why create a situation that makes it easy and legal for money to be taxed nowhere?

    - Only Switzerland, Switzerland is a lovely country that greatly benefits from a low tax environment. If England fully copied the Swiss model then I may be tempted to come back (but only after the ghastly coalition has been disbanded).

  • Comment number 43.

    13. At 13:45pm on 2nd Mar 2011, ReformNotRevolution wrote:

    "If we cannot shut down the tax heavens, let's become a tax heaven ourselves.
    I'm not sure it's right but this is how it looks like."

    Exactly - it's exactly what george monbiot claimed and it's what Robert is confirming - but apparently the only thing has changed is it's 'moral acceptance'.

    Luckily I am no so short sighted as the capitalist - what do the other nations do when they see their corporations fleeing to 'tax free UK'?

    These capitalists - living in bubbles....

  • Comment number 44.

    No 29 "It cannot be right and proper that Barclays, for example, pays tax at a rate of 1.x% on profits when the UK rate is 28%."

    It is if you have a system that allows relief for losses brought forward.

  • Comment number 45.

    29. At 14:39pm on 2nd Mar 2011, John_from_Hendon wrote:
    The question is however to whom should they pay the tax? It cannot be right and proper that Braclays, for example, pays tax at a rate of 1.x% on profits when the UK rate is 28%.

    - John you didn't read up on this did you? Barclays paid 1% of it's GLOBAL profits as UK corporation tax. This is GCSE maths John. Let me explain:
    Company A makes a profit of £100. £10 in the UK, £50 in the USA and £30 in China. It pays UK corporation tax of 28% on it's UK profits (£2.80). A journalist declares outrage that the company has only paid 2.8% tax. Can you see where the journalist went wrong? That's right! They ignored the foreign corporation tax paid on foreign profits.

    Now let's say that Company A made a loss of £3 the previous year (you know the way the banks made losses, you may have read about them). Well their PCTCT is £7 so the tax will be £1.96 so now the journalist is really incensed as they paid only 1.96% tax.

    As the Russian meerkat that you all seem to enjoy would say, SIMPLES!

  • Comment number 46.

    15. At 13:55pm on 2nd Mar 2011, The_Juice wrote:

    "A good analysis Robert. A fresh perspective after reading the conspiracy ladened ramblings in the Guardian."

    Have any of these commentators actually read either article?

  • Comment number 47.

    @22. At 14:14pm on 2nd Mar 2011, Gilthead wrote:
    @13 - I think you mean "Tax Havens". Heaven isn't about to be taxed (as far as I know) but WOTW might think it morally acceptable.

    =============================================================

    A literary reference Gilthead.....Tax Heavens by Faust Kalam.......

  • Comment number 48.

    ~23. At 14:17pm on 2nd Mar 2011, ProfessorHenryJonesJr wrote:

    "No-one is suggesting that the coalition has not made mistakes - they have. Clegg's "I forgot" bombshell was disgraceful. But compared to running at a consistent deficit for 7 years during the boom times? Sorry my friend, it's not even in the same ballpark. Your party showed breathtaking economic irresponsibility. Your party were pushing UK PLC into bankruptcy before the "financial crisis" even started - not that they will ever admit to that, of course. It was "all the bankers fault", right?"

    and

    #28. At 14:37pm on 2nd Mar 2011, Phil - London wrote:

    "I am always amazed at posters such as yourself who conveniently forget the pressures and problems this government inherited."

    --------------------------------------------------------------------------

    Same old, same old. Ok here we go again - every government, that's EVERY governement has run up an annual deficit for the last forty years during both boom and bust cycles. There have been three annual exceptions twice under Labour and once under Tories. The tories were particulalrly good at it, they ran up deficits AND sold everything that moved. As for debt to GDP, historically the Tories were worse at that as well, yep even under Thatcher.

    I don't support any mainstream political party so I have no party agenda here I simply ask that you stop believing the mantra. Just go to the government stats website, it's all there.



  • Comment number 49.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 50.

    #23
    Your party were pushing UK PLC into bankruptcy before the "financial crisis" even started - not that they will ever admit to that, of course. It was "all the bankers fault", right?

    "Your party", I thought Professors were supposed to be bright (or are you the lessthanbrightsurfer in disguise). I wouldn't go around making assumptions like that.

    Some of us from oop North are not very happy that some institutions are making profits on the back of direct and indirect support from the taxpayer (that might also include you). I hope that they can be weaned off their "benefits" sooner rather than later.

  • Comment number 51.

    1. I wonder how many people on this comment thread will be off down the boot sale on Sunday. Will they be paying VAT on those purchases? Will they heck as like, as they say 'oop north. Paid that builder cash to do that bit of plastering in the attic did you? Of course you did.



    Wow, stereotyping everybody north of London? You wonder why people don't tend to like Londoners.

    For me your whole comment was discredited by your obvious lack of sense. I hope you don't choke on the pollution while you are down there.

    Richie you plonker! He didnt stereotype anyone so stop being so bloody precious and grow a skin!

    "Heck as like" is a phrase from Yorkshire is it not??? That is ALL he said. Your implication is that he implied that only 'Northeners' go to car boot sales is way off mark. People go to car boot sales all over the UK...it isnt exclusive to the north.

    It shows that you touchy and looking for aggro where they isnt any.

  • Comment number 52.

    23. At 14:17pm on 2nd Mar 2011, ProfessorHenryJonesJr wrote:

    "No-one is suggesting that the coalition has not made mistakes - they have. Clegg's "I forgot" bombshell was disgraceful. But compared to running at a consistent deficit for 7 years during the boom times? Sorry my friend, it's not even in the same ballpark."

    Try looking at history - show me the surplus years please?

    http://www.ukpublicspending.co.uk/uk_national_debt_chart.html

    "Your party showed breathtaking economic irresponsibility."

    It's not my party - I can't tell one Neo-liberal from the other.

    "Your party were pushing UK PLC into bankruptcy before the "financial crisis" even started - not that they will ever admit to that, of course. It was "all the bankers fault", right?"

    Well lets see the facts again shall we?

    http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1900_2011&chart=G0-total&units=p

    Here we have public net debt.....you can clearly se spending rising under Labour (although not as high as the debt they inherited) - and then about 2008 it all goes a little wrong.....now why was that?

    I realise facts are not part of the ideology of the coalition - but maybe take a minute to look at some.

    "And you will resolutely tell anyone who listens that we gave £500bn to the banks, never mind the facts - just make the numbers up (after all, your shadow chancellor does)."

    ...actually it was £850 BILLION - not all handed to the banks directly, some of the subsidies are still being paid to banks through inflation.....or are you yet another capitalist who lives in a bubble where what happens in one part of the world doesn't affect another?

    "And god forbid the public ever gets reminded that the stakes we have in two British banks *actually have a resale value*."

    What a joke - when? This was being said when the banks were taken over. God forbid you actually say when this profit will be realised (although I notice you were careful not to use the 'P' word) - just imagine the stimulus that bailout money could have bought instead of it being wasted on the stock market.

    "Ho hum. Here's an idea - let's go back into the market, borrow a load more money we can't afford, then borrow again to pay the interest!"

    Well Government's have been doing this all your life pal - or didn't you realise? It never ceases to amaze me how many people think a deficit is a 'new thing' - maybe it's just because they don't believe anything exists until their paper tell them it does.

    "After all, if it gets really bad, we can always default, right?"

    Well that's what usually happens - why would this time be any different? I presume you're a bond holder afraid of a haircut - well you know the score - nothing is guaranteed!

    This is just like 1998 when it was said "no nuclear power will ever default" - and then one did - Russia. Funny how Bond holders are always making up rules which have less substance as the paper they're written on.

  • Comment number 53.

    Dear Robert, As one on the "reasoning left", may I thank you for addressing this issue. You have expressed a different point of view from Monbiot, but this ensures that the important issue of accountability of multinationals and their relationship with nation states will remain under the spotlight.

  • Comment number 54.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 55.

    Thirty five years of weak trade unions, low tax and aggressively 'pro-business' policies and the country is in dire straits. Thirty five years of unfettered capitalism and look where it leaves the majority. So what's the solution? I think George Monbiot's point is that now is NOT the time to loosen the responsibilities on big business even further. Big business caused the crash and should be held accountable. Anathema to you Robert, I know.

  • Comment number 56.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 57.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 58.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 59.

    #45 Linsay_from_hendon

    Good luck with getting anyone to listen to your (absolutely correct) analysis. Unfortunately everyone has been wound up into such a frenzy that numbers, maths, and commonsense don't factor into the equation of right and wrong anymore.

  • Comment number 60.

    From post 27;

    "The government allows businesses to use the government's currency to facilitate the production of real goods and services and provide the population with an income to buy those goods and services."

    If you do some research you will see that business in the form of banks let government use its currency of credit, which now makes up 97% of the means of exchange.
    The borrower is servant to the lender.
    Governments could print the money at no interest cost and spend it into circulation, but that would be inflationary according to the great thinkers of the dismal science.
    But they think that Fractional Reserve Banking is not intrinsically inflationary!

    So try starting again.

  • Comment number 61.

    37. At 15:00pm on 2nd Mar 2011, Terence Bullard wrote:

    ...I'm not sure about you...but the last car boot sale I went to the man with the Volkswagen camper van didn't wander off with £25 BILLION in profit (of which some was unpaid VAT)

    ...in fact the inescapable VAT that he paid on his petrol getting there - probably covered his contribution.

    Unlike businesses - people can't claim their VAT back on petrol!

    ...but then maybe I'm just a leftie - but if being a leftie means you're not a slave to the debt masters - then a leftie I shall be proud to be!

  • Comment number 62.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 63.

    42. At 15:34pm on 2nd Mar 2011, Lindsay_from_Hendon wrote:

    "Only Switzerland, Switzerland is a lovely country that greatly benefits from a low tax environment. If England fully copied the Swiss model then I may be tempted to come back (but only after the ghastly coalition has been disbanded). "

    Is that sarcastic? - you'll have to find a better way of expressing yourself as I'm struggling to see which comments are real and which are simply 'bad jokes'.

    We all know you work in Milton Keynes - stop pretending you're a tax exile - and seeing how much free time you have lately - I'd say even that job has dried up.

  • Comment number 64.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 65.

    47. At 15:44pm on 2nd Mar 2011, Hoppingpot wrote:

    "A literary reference Gilthead.....Tax Heavens by Faust Kalam......."

    You're far too well read for this blog - as you can see from the 'analysis' of the two articles - reading is not the strong point of a lot of people here.

  • Comment number 66.

    48. At 15:45pm on 2nd Mar 2011, NorthSeaHalibut wrote:

    "Same old, same old. Ok here we go again - every government, that's EVERY governement has run up an annual deficit for the last forty years during both boom and bust cycles. There have been three annual exceptions twice under Labour and once under Tories. The tories were particulalrly good at it, they ran up deficits AND sold everything that moved. As for debt to GDP, historically the Tories were worse at that as well, yep even under Thatcher."

    No wonder Ian thinks we're the same person - we're even starting to sound alike!!!

    Isn't it nice to be consistent - a pleasantry the capitalists are having real trouble with.

    Still - some people can't get off this "RED vs BLUE" thing, they think it's football and Man Utd vs Chelsea - simple concepts for simple minds.

    ...that's why not one of them even knows what a Neo-liberal is!

  • Comment number 67.

    WOTW wrote "That's right a 'sensible government' who talked confidently about a 'no fly zone' in Lybia - before realising they just cancelled their order for aircraft carriers at a 'sensible cost' of millions for cancelling at such a late stage."

    A classic example of WOTW "reasoning"

    The no fly zone is needed now, the aircraft carriers are not even vaguely close to being ready and in any event would not have enough aircraft to enforce the no fly zone over the entire country. Of course aircraft carriers are not even necessary to enforce the no-fly zone. Airfields in southern italy and southern greece are more than close enough.

    ==================

    Anyway back to the point of Robert's article. I have a simple view of taxes such as income tax and corporation tax (the "sin" taxes such as fuel duty and alcohol duty are different), the job of those taxes is to raise revenue not change behavior and the amount of revenue needed depends on what amount the govt intends to spend.

    If changing the tax system in the way suggested increases corporate tax revenues or simplifies administration such that after deducting the costs of collection the changes result in govt having more money to spend then I am all for the change.

    The problem is that a number of our more left leaning posting brethren do not wish to accept that by lowering tax rates you can actually increase the amount of tax collected.

    Now whether this will happen as a result of changing the tax system I do not know - more research is needed I suspect. But it is an idea worth looking at.

    I would however not trust any analysis provided by HM Treasury and HMRC, they have a consistent history over the last 15 years of getting any projection of the consequence of tax changes completely wrong

  • Comment number 68.

    Ultimately tax has to be collected. Ultimately, the public has to pay. If this is a means, similar those used by the Dutch and the Irish and others to attract foreign head offices, the public and the small independent will end up paying a lot more income tax. Something for us to look forward to.

    If DC wants to make life easier for anyone, cannot he try to help UK manufacturing and SMEs?

  • Comment number 69.

    23. At 14:17pm on 2nd Mar 2011, ProfessorHenryJonesJr

    I don't think you will get to far on that one WOTW has no more truck with the last administration than he does with any other Neo-liberal capitalist government.
    I don’t see the world from his viewpoint but would suggest that you are being somewhat economical with the facts, hopefully not purely from some ideological bias. If you go and look at the data that is freely available I think you will find that the deficit behaviour of the last administration prior to the financial crisis holds up quite favourably against the performance of the Major and Thatcher administrations.
    Your argument that that the government continued to deficit spend during the ‘boom times’ might contain some element of truth in isolation but any implicit suggestion that earlier governments, since the start of the neo-liberal project, did otherwise cannot be justified by the evidence. Conservatives supporters like to continue to parrot this line but it is largely nonsense – try having a go at actually demonstrating it with data.
    Neo-liberal governments chose to borrow to spend and choose to sustain high levels of unemployment (resource under-utilisation). Neither seems necessary once you walk away from their paradigm which seems unfortunately snagged on some out-dated concept of gold standard money value. It seems rather unlikely that the policies adopted by this government will have much long term impact on government ‘borrowing’ as they seem to have a somewhat dodgy understanding of how money works.
    We continue to pour money into the pockets of those who don’t need it. The political system is now all but entirely captured by these people. They claim that we do this in the name of ‘freedom’ but whose concept of freedom and freedom for whom?
    Perhaps Hayek has something useful to say after all. Socialism for the wealthy seems to be leading towards authoritarianism for the rest; the neo-liberal project seems to be stalled at this point without it (or maybe Hagel could provide a better analysis here – that is somewhat above my pay grade).

  • Comment number 70.

    50. At 15:52pm on 2nd Mar 2011, creditunionhero wrote:

    "Some of us from oop North are not very happy that some institutions are making profits on the back of direct and indirect support from the taxpayer"

    Please don't be surprised that the Capitalists are also often xenophobic (or in this case regionalist) - I mean that's how they 'justify' their actions to themselves.

    "Oh it's only Northeners, they're all poor"
    "Oh it's only foreigners - they deserve it"
    "All the 'lefties' out there"
    "all the 'dole scroungers' out there"


    If you look through the posts - this is the common theme throughout. They system fails and instead of blaming the system - they blame anyone and anything they can and use the most base of human prejudice to do so.

    If these blogs weren't moderated I'm sure you would see the full set - I've already witnessed xenophobia, sexism, 'regionalism', 'studentism' (great unwashed comments) etc.

    These capitalists are giving the others a bad name.

  • Comment number 71.

    56. At 16:06pm on 2nd Mar 2011, writingsonthewall wrote:
    32. At 14:45pm on 2nd Mar 2011, Lindsay_from_Hendon wrote:

    "I think he's got it! 28% of a large number is more than 50% of a small number!
    Here's an idea, slash corporation tax and encourage multinationals to move TO England. The tax take will thus increase and then we can open some of those libraries."

    Is that sarcastic?

    - No, 28% of a large number is more than 50% of a small number. Do you need me to post a link to prove that? (The last bit was sarcastic).

  • Comment number 72.

    This may sound extremely naive for which I apologise. Why can't corporation tax be charged on income in the same way as personal taxation?

    The way I see it tax is the price of living/ operating in a certain country and enjoying the benefits that brings. For instance the banks enjoy the protection of the state and the recent Bank of England reports suggests the banks would not be profitable without this state support. Where is this recognised in their financial statements? Would anyone invest in the banks if it was recognised? They are very clearly imposing costs on society while extracting private benefits for shareholders and employees. And if you believe in 'trickledown' why after so many years are people more unequal than ever?

    Fiddling about with the tax system just seems to distort the whole picture while the accountants skip from loophole to loophole always one step ahead of the tax authorities. Setting globally competitive tax rates just seems to be a race to the bottom and makes no contribution to society. Why can't we just end this whole charade and stop wasting so much time and energy?

    Public services need to be paid for and everyone should pay their fair share. Again, forgive me for being naive but I'm genuinely interested in an answer. As an individual I have no mechanism for 'avoiding' personal taxation, unless my employer offers above-the-line benefits such as season ticket loans. Why can't corporation tax be moved above-the-line and become just another operating cost that companies have to pay?

  • Comment number 73.

    51. At 15:53pm on 2nd Mar 2011, Steve

    "Will they heck as like, as they say 'oop north."

    Nobody I know from up north ever says this - grow a brain cell will you? It's prejudice - designed to wind people up.

    Never mind, the 'northeners' shall have the last laugh when they turn up in their thousands on March 26th and show these southern softies what being a man and standing up for what you believe in really is.

    ...speaking of which - when is the next march "for capitalism"? - there hasn't been one....well ever - so much for the system people support!

  • Comment number 74.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 75.

    62. At 16:13pm on 2nd Mar 2011, John_from_Hendon wrote:

    "Your opinions are completely inadmissible as you are a tax exile. Come back to the UK and pay your tax before you dare give us any advice about anything."

    hear hear - I don't mind people who are 'in this with us' voicing their opinion - but you (apparently) excluded yourself from our society Lyndsay - so please take your self serving smugness elsewhere....or admit you are in fact in Milton Keynes in a very, very grey office.

    Either way - tax work must have dried up.

  • Comment number 76.

    @Lyndsay of Hendon

    Am not sure what you mean. Firstly, 50% of nothing is nothing but I am not quite sure why this calculation is relevant. Secondly, a single rate for taxing dividends received simplifies the tax system. This is obviously desirable. Thirdly, if the UK subsidiary is in a low tax jurisdiction it may not be paying any corporation tax. There will be no double taxation under those circumstances when the dividends it remits to the UK are taxed at 50% by HMRC. Fourthly, I posited that corporation tax should be abolished for UK companies. if a UK company wants to leave a jurisdiction where corporation taxes are zero then of course it is free to do this.

  • Comment number 77.

    67. At 16:19pm on 2nd Mar 2011, Justin150

    The government ultimately collects it tax revenue in goverment issued fiat money.

    Tell me how, exactly, does the goverment collect this money before it spends it as you seem to suggest? Uk tax needs to be paid in, and only in, the goverments own scrip, yes?

  • Comment number 78.

    62. At 16:13pm on 2nd Mar 2011, John_from_Hendon wrote:
    And as a Swiss resident you don't understand anything about being honest and paying a sensible contribution from your GLOBAL profits as tax - particularly when you have just robbed every poor widow's mite and squirrelled away vast fortunes.

    Your opinions are completely inadmissible as you are a tax exile. Come back to the UK and pay your tax before you dare give us any advice about anything.

    - Well it's not my opinion, I understand why Barclays paid only 1% tax and explained it to you. I pay UK corporation tax on my UK profits. I do minimise this but not excessively (Seychelles and Panama companies skim "management fees") and I refuse to pay tax twice (i.e. corporation tax and then income tax on those dividends). Everything I do is perfectly legal, hey ring up the tax office and ask them for advice - they know about it all! What I don't do is evade tax. Many do that - cash in hand jobs and the like, I don't.

    Interesting that you mention the widow's mite. The problem with that story is that although she paid 100% of her income in taxes to the temple it was only two small bronze coins. Without the rich giving 5% of their income the temple would not have been maintained. But then don't get me started on those Romans! So, I probably pay more tax than you so contribute more to mother England. Final question, how many jobs have YOU created?

  • Comment number 79.

    67. At 16:19pm on 2nd Mar 2011, Justin150 wrote:

    "The no fly zone is needed now, the aircraft carriers are not even vaguely close to being ready and in any event would not have enough aircraft to enforce the no fly zone over the entire country. Of course aircraft carriers are not even necessary to enforce the no-fly zone. Airfields in southern italy and southern greece are more than close enough."

    Classic Justin150 misleading nonsense. Unlike you I shall DEMONSTRATE what I say.

    Do you mean like the 'mainstay' of the RAF - the Tornado GR4?

    Range: 1,390 km (870 mi) typical combat

    Distance from Greece (Athens) to Tripoli?
    1190 Km

    Distance from Italy (rome) to Tripoli?
    1004 Km.

    Doesn't leave much room for error does it? and of course we couldn't create a no fly zone in the south of the country (too far)

    ....and I'd love to know how the no fly zone will work - I mean Lybian plane takes off - we leave from Italy - an hour later we arrive in Lybia - but the illegal plane has long since landed!!

    I know nothing about the military - but once again, logic and a little research shows you don't even know what I don't know!

    http://en.wikipedia.org/wiki/Royal_air_force#Strike.2C_attack_and_offensive_support_aircraft

    http://www.freemaptools.com/how-far-is-it-between.htm

    http://en.wikipedia.org/wiki/Panavia_Tornado#Specifications_.28Tornado_GR4.29

    Classic capitalist gibberish - destroyed by a simple bit of thought.

  • Comment number 80.

    67. At 16:19pm on 2nd Mar 2011, Justin150 wrote:

    "The problem is that a number of our more left leaning posting brethren do not wish to accept that by lowering tax rates you can actually increase the amount of tax collected. "

    More nonsense - tell that to the Americans. Under Bush they cut taxes, they got less growth and created about 500,000 jobs and collected less in total.

    Under Clinton they spent - they created more jobs and more taxes as a result.

    What EVIDENCE do you have that cutting taxes increases the overall tax take?

    Is it the same EVIDENCE Gerorge Osbourne is using?

    http://en.wikipedia.org/wiki/Ricardian_equivalence

    Dismissed by it's own author - speaks volumes.

  • Comment number 81.

    63. At 16:13pm on 2nd Mar 2011, writingsonthewall wrote:
    42. At 15:34pm on 2nd Mar 2011, Lindsay_from_Hendon wrote:

    "Only Switzerland, Switzerland is a lovely country that greatly benefits from a low tax environment. If England fully copied the Swiss model then I may be tempted to come back (but only after the ghastly coalition has been disbanded). "

    Is that sarcastic? - you'll have to find a better way of expressing yourself as I'm struggling to see which comments are real and which are simply 'bad jokes'.

    - Maybe you don't understand sarcasm - I haven't got the time to teach you! What's sarcastic about saying Switzerland is a lovely country? What sarcastic about suggesting that England should try and copy what Switzerland does in order to bring greater prosperity to all?

    We all know you work in Milton Keynes - stop pretending you're a tax exile - and seeing how much free time you have lately - I'd say even that job has dried up.

    - I've never been to Milton Keynes in all my life! I imagine that's your idea of utopia though: a grid system with idential buildings all along. Everyone will be given the same square meterage. Sorry, I forgot it's not your job to tell us what the perfect system is and you haven't got the time to find out for yourself let alone teach us etc. etc.

  • Comment number 82.

    67. At 16:19pm on 2nd Mar 2011, Justin150 wrote:
    If changing the tax system in the way suggested increases corporate tax revenues or simplifies administration such that after deducting the costs of collection the changes result in govt having more money to spend then I am all for the change.

    The problem is that a number of our more left leaning posting brethren do not wish to accept that by lowering tax rates you can actually increase the amount of tax collected.
    ====================================

    What I suspect is the real issue for left leaning posters is the idea of fairness, i.e. whether these rules allow multinationals pay a lower rate of tax compared to SMEs and thus achieve an additional competitive advantage through a regressive tax system. This was the main issue raised by Monbiot for me and it is an issue not just for lefties but also small business owners and people who favour localism - the bedrock of the conservative party.

    However the numbers Robert gave for the relative intake of tax from multinationals versus others certainly blows the idea that they have been avoiding their fair share out of the window and was a surprise to me. I will be looking into those numbers but I assume it's down to the nature that the vast majority of non-corporates must pay out most profit in the form of salary and very little as dividend or retained. As I said surprising.

    In which case it does come down to a cost-benefit analysis of targetting the tax rate in order to attract this surplus from multinationals.

  • Comment number 83.

    76 wrote "Thirdly, if the UK subsidiary is in a low tax jurisdiction it may not be paying any corporation tax. There will be no double taxation under those circumstances when the dividends it remits to the UK are taxed at 50% by HMRC."

    If it is in a low tax jurisdiction won't it be a CFC in which case the UK Parent will already be taxable when the profits arise. I know you said "may not" but if it's not paying tax and not in the CFC regime then it would probably have a proper presence in the other jurisdiction.

    It really is worrying about how little people need to know about the tax system in order to be able to express an expert opinion on it.

  • Comment number 84.

    69. At 16:32pm on 2nd Mar 2011, Squarepeg

    We may disagree on many things - but the truth in that post is not something you'll find me disagreeing with.

    As you say - I dislike the last Labour Government MORE than the Tories - because unlike the Tories the Labour Government stabbed the working class in teh back (at least the Tories don't pretend to be working class friendly with their cabinet of Millionaires - to their credit)

    ...but like I said, some people can only see 'colour' as a differential between two similar consepts, objects or people - and sometimes that statement alone sums up a lot of the irrational ideas that capitalists hold.

  • Comment number 85.

    WotW

    Actually, I'd posted a rather detailed comment, which for some reason wouldn't post (not moderation, a system failure I think). By the time it got there, Lindsay had posted a fairly decent summary of what I was saying.

    The problem with the Monbiot article (and the crux of my point) was that this whole discussion is based on hysteria from the language and tone he used in the initial article. What disappoints is that it took so long to get to a decent debate.

    I'm a tax advisor, and therefore I see these concepts on a day to day basis. I really do not wish to sound patronising, but fear I will. The issue is that these matters are high level technical issues (in many respects) that cannot be shortened down to catchy soundbites. Or, if they are, it is dangerous to so. For an example of how these new rules will work - some numbers without the sarcasm:

    Company makes profit in the UK of £100 and profit in the US of £100

    Under the current rules - the company pays tax on the full £200 profit (so £56). They then get relief for the US tax paid on the £100 US profit - this gives relief of £28. Total UK tax bill is £28

    Under the new rules - the company only pays UK tax on the £100 UK profit - so £28.

    There is no difference here. This is how the rules will apply in the majority of cases!

    IF the rules were a huge tax avoidance scheme - the tax cost to the UK of bringing them in would be much more than £100m

    #25 says:"If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland"

    There are HUGE anti avoidance rules to prevent artificial diversion of profits. In fact, the problem writing these rules that do not penalise everyone is the reason Labour never got the legislation on the statute books in 2009. Monbiot absolutely ignored these rules in his article, which gives the lie that this is a huge tax scandal - it simply isn't.

    Unfortunately, tax is a complex area. The media seems to think that a tax story can be explained with a headline, two numbers and a percentage. In most cases, it can't (the Barclays story being an example of this). However, the Guardian stories have gone a stage further and deliberately portrayed a story with only half the facts, and a liberal sprinkling of 'Scheme' and 'Avoid'.

    T

  • Comment number 86.

    Let the multinationals move! Then someone else will step into the void, and likely will be a smaller British business who pay their taxes to the full.

    Just typical politicians, doing favors for their rich mates with one eye on stuffing their pockets in a comfy job when they 'retire' from politics in 5-10 years time. Crooks, criminals, mass-murderers, perverts and thieves - every single politician without a single exception.

  • Comment number 87.

    71. At 16:34pm on 2nd Mar 2011, Lindsay_from_Hendon wrote:

    "No, 28% of a large number is more than 50% of a small number. Do you need me to post a link to prove that? (The last bit was sarcastic). "

    That's your analysis? - wow - no wonder you're an accountant - you must be the best one out there.....

    I had to check with my 8 year old nephew - but he has confimed you are right. Therefore you have 'proven'......well nothing really, because your assumption is that an increase in taxation from 28% to 50% will cause 100% avoidance?

    When has that ever been the case?.....and if it were true - then why hasn't everyone left the country already...in fact all the countries come to think of it!

  • Comment number 88.

    No 80 wrote:"What EVIDENCE do you have that cutting taxes increases the overall tax take?"

    It certainly happened when Thatcher cut the rate of income tax from 60% to 40%.

  • Comment number 89.

    WOTW: "More nonsense - tell that to the Americans. Under Bush they cut taxes, they got less growth and created about 500,000 jobs and collected less in total.

    Under Clinton they spent - they created more jobs and more taxes as a result.

    What EVIDENCE do you have that cutting taxes increases the overall tax take?"

    I suggest you look at the UK experience in cutting top rate income tax from 83% to 60% and then 40% and review the proportion of tax being raised from top rate tax payers. Tax rates went down, amount of tax collected went up.


  • Comment number 90.

    78. At 16:42pm on 2nd Mar 2011, Lindsay_from_Hendon wrote:

    "Many do that - cash in hand jobs and the like, I don't. "

    Tax evasion is for the poor - tax avoidance is for the rich.

    it costs about a minimum of £7000 per annum to avoid tax (from 40% to 22%) - now how many people can afford that out of their salary - and will it be worth the tax you're saving?

    Once again - the accountants try to justify what they do - but don't understand why it's unfair.
    Tax avoidance is regressive - but I don't expect accountants to understand that. They're too busy helping themselves to the spillage and telling themselves they are 'doing a service'....they just don't question who they are doing that service for.

    Not that Lynsday is doing anyone's taxes at the moment.

  • Comment number 91.

    No 72 wrote:"This may sound extremely naive for which I apologise. Why can't corporation tax be charged on income in the same way as personal taxation?"

    Because that would be a turnover tax not an income tax. Are you suggesting that the man in the corner shop who does not operate through a company pays tax on what he gets through the till each day and gets no deduction for his rent, utilites and for the wages he pays to his employees? or should he just pay tax on his income which is what is left after he has paid his expenses like companies do?

  • Comment number 92.

    83. At 16:57pm on 2nd Mar 2011, tacksman wrote:

    "It really is worrying about how little people need to know about the tax system in order to be able to express an expert opinion on it."

    But we're all expected to pay it though!

    So in order to simply live in the modern world, you need to be:

    1) A financial expert
    2) An underwriter (as you are responsible for your debts, the bank that' gets 'paid' has nothing to do with it)
    3) A tax expert

    ....now go and apply that to a Plumber, Joiner, Builder, Factory worker, road sweeper etc.

    ...or alternatively the professionals are allowed to charge fees for those services - which in the case of banking - you have no recourse over!

    I can't wait until the banker wants a new house built and the bricklayer slaps down some 'muck', a few bricks and a trowel and stands back laughing as the pinstripe jelly builds a wobbly house destined to blow down in the next stiff breeze!

  • Comment number 93.

    6. At 13:36pm on 2nd Mar 2011, writingsonthewall wrote:
    '...or the 'sensible decision' to sacrifice the poorest and most vulnerable members of society by cutting back the public sector - whilst allowing corporations to pay less and less contribution.'
    -----------------------------------------------------------------------------

    Sorry I'm not sure you grasp a key factor in economic growth/decline - Who creates wealth, Public Sector or Private Sector? And who consumes wealth?

  • Comment number 94.

    50. At 15:52pm on 2nd Mar 2011, creditunionhero wrote:

    "Some of us from oop North are not very happy that some institutions are making profits on the back of direct and indirect support from the taxpayer"

    I love this argument. That, even though the likes of HSBC took nothing from the tax payer, somehow they 'owe' us, and somehow we should have some level of control over them. Because we created an environment that allowed them to profit, somehow they owe us more than their taxes. Like, we built a road, and consequently all haulage firms must kneel before us!

    Anyway. Squarepeg, a wellwritten post there - good points, well made.

  • Comment number 95.

    I have a small software company. Can someone tell me how to do this please. I like the sounds of it.

  • Comment number 96.

    85. At 17:03pm on 2nd Mar 2011, ApplePie

    So what's stopping the corporations moving their UK generated profits into branches abroad to avoid corporation tax? (or tax accountants doing it for them?)

    The difference with subsiduaries is they are seperate entities - branches are not. If the parent goes bust then it will be our Government they come to looking for a bailout. They didn't pay taxes on those subsiduaries earnings previously - but they did on branches.

    So now they have no tax and still we have the responsibility.

    ...and this is all assuming that you accept the non-payment of tax by subsiduaries is acceptable in the first place.

  • Comment number 97.

    If workers threaten to withhold their labour and damage the economy then government acts and implements legislation to prevent it.

    If banks or big businesses threaten to withold themselves, then government changes numbers/rules etc to help them keep more of their money.

    I think the best counter policy would be to increase UK weapons manufacturing and sell more to many countrys, thus the instability this would/could cause would result in more companys finding it safer to locate their wealth in UK.

    Job done!!!!

  • Comment number 98.

    >59. At 16:09pm on 2nd Mar 2011, ApplePie wrote:

    Unfortunately everyone has been wound up into such a frenzy that numbers, maths, and commonsense don't factor into the equation of right and wrong anymore.



    Bill Hicks summed up this view you appear to have a long time ago.
    "Stop putting a God damned dollar sign on everything."

    There is no 'equation' of right and wrong.

    With maths I can prove that a burglary is a bad thing due to the numbers involved in costs. Or how about I prove that it is a good thing for the thief, and that wasting police time when you know it can't be solved is the bad thing and that victims are selfish for wasting our taxes by dialling 999?

    Instead though, perhaps we could look at the circumstances and judge the burglary by those rather than simply getting out a calculator to 'prove who is right' based on a handful of reciepts.

    The only way your numbers, maths and 'common sense' can have any foundation from which to argue is as a result of morals and ethics.

    It is things like 'morals and ethics, backed up by statistics and maths' that should trump 'maths and the numbers it generates backed up by justification' every time. Unfortunately it doesn't, and this is at the heart of what is wrong with our entire political-economic system.

  • Comment number 99.

    WOTW wrote

    "Classic Justin150 misleading nonsense. Unlike you I shall DEMONSTRATE what I say.

    Do you mean like the 'mainstay' of the RAF - the Tornado GR4?

    Range: 1,390 km (870 mi) typical combat

    Distance from Greece (Athens) to Tripoli?
    1190 Km

    Distance from Italy (rome) to Tripoli?
    1004 Km.

    Doesn't leave much room for error does it? and of course we couldn't create a no fly zone in the south of the country (too far)

    ....and I'd love to know how the no fly zone will work - I mean Lybian plane takes off - we leave from Italy - an hour later we arrive in Lybia - but the illegal plane has long since landed!!

    I know nothing about the military - but once again, logic and a little research shows you don't even know what I don't know!"

    ===============================

    Well we agree on one thing you know nothing about the military.

    1. The Eurofighter Typhoon has a range of 2900 km

    2. Rome is not in southern Italy. Sicily is and northern Sicily is about 500-550km from Tripoli

    3. Crete is southern Greece and is about 400 km from western Libya

    (by the way this can be checked using the web sites you quoted, all you need is a reasonable grasp of European geography)

    4. There is a little thing called in flight fuelling. It allows airforces to keep planes up for longer. I would suspect that the correct way of maintaining a no fly zone is to keep a small number of planes constantly in the air, rotating every few hours so pilots do not get tired

    But as always with WOTW arguments why bother with little details such as facts

  • Comment number 100.

    Mushroom is extremely puzzled by all this, and suspects collusion, but has no way to prove it.

    Does anyody know what happens if the UK parts of the companies are funded through offshore debt and therefore make no UK profit at all?

    It sounds (to this mushroom) a bit like we are about to get the tax avoidance rates of Greece, but nicely legalised in an English sort of way...

    I am sure it is MUCH more complicated than that. After all...isn't that what the Big 4 are paid gazillions of pounds to do...obfuscate company accounts?

 

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