Discussion about corporation tax continues unabated, and I am looking forward to tomorrow and the Parliamentary Accounts Committee hearing. With a little luck I will be there.
What interests me today are the comments of Lord Myners, a Labour peer and former City person, who told the Telegraph today:
“Corporation tax for an MNC operating in the UK is close to being a voluntary payment,” he said. “The problem is that the tax environment many MNCs are interested in is a zero tax environment.”
Lord Myners said that the Government's reductions in corporation tax — which will fall to 22pc by 2014 — would not work.
“You either shrug your shoulders and say you get benefits from secondary effects though employment taxes, VAT, the multiplier effect, and so on. Or alternatively you look for some other form of taxation.”
“If that were to be the case, some form of sales tax has attractions.”
I agree, corporation tax is not working - and that's in no small part because of the changes George Osborne has introduced that are guaranteed to make sure that is the case. But to suggest a sales tax is a terrible idea.
Corporation tax is a tax on capital - on the wonders of companies, and despite all rumours to the contrary claimed often by right wing pundits US government based research suggests that's what it achieves.
A sales tax on the other hand is a tax on consumption and just like VAT it would hit the poorest hardest - the exact opposite of the purpose of corporation tax.
I am disappointed a former Labour minister could suggest such a reform. I sincerely hope it never happens. The result would be capital going untaxed - the exact 0% tax option they're looking for now - whilst ordinary people in this country would pick up the burden. An idea that achieves the exact opposite of what is intended has to be a very bad one.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Why would you assume companies would automatically put the sales tax on their prices? They don’t automatically change the prices when corporation tax goes up or down.
If it’s assessed on sales they’ll add it to sales
Corporation tax is not on sales so it is not added to sales
To suggest sales tax will increase prices by the value of that tax is a gross over simplification, ignoring the elasticity of demand and howretailers might behave. You also ignore the possibility of a variable tax rate. CPT attempts to tax the profits of a company wherever they are earned and it’s hardly surprising they have fled to lower tax jurisdictions. It also seems unfair that profits earned in for example third world countries should be taxed in the UK, to the benefit of relatively wealthy UK residents.
I think you need to learn a) this is a world of price makers not takers and b) how residence and source based tax should properly interact, as I propose
Your allegations are in other words based on your own false assumptions,not mine
I still don’t understand Twitter etc, but helpers ahve strted my blog. I would be interested in Richard Murphy’s ideas on how a Citizens’ Income would affect his view on a sales tax,or indeed his reaction to my view that means testing is a massive tax on the poor.
Please see
http://www.clivelord.wordpress.com
I shall follow lhim if I canfindout how to.
He’s a City Boy, though, Myners, isn’t he? He’s one of theirs, not Labour’s. Another disguised Neoliberal.
Let’s just let corporations run this country, and have done with it. Oh, they already are.
Should we not cast aside those corporations who seek to maximise profit in the old financial paradigm and set about engaging in the new one – the “shadow” layer of the economy described by Manuel Castells in his LSE/BBC Analysis interview with Paul Mason last month? Embrace frugality? Thinkers about money such as Bernard Lietear and Charles Eisenstein have illustrated the features and benefits of a currency fit for purpose in the 21st century. An international consensus on the design side could draw deeply on history and technology to produce a suitable working model. The 99% don’t need permission from the 1% to bale out and change course…
Richard
at present dividends are v lightly taxed, because of the assumption the Co has already paid tax (CT) on the profits.
If there were no CT then, presumably, divis would be taxed in full as income. So, a lot of OAPs will be MUCH worse off, while the corporations will have larger cash reserves. As you’ve pointed out, they already have large cash reserves & don’t know what to do with them.
I think you’re on to an appropriate train of thought
How would you stand on the idea of removing all forms of limited liability entirely?
Surely one solution is to simply remove the status of corporations as ‘legal persons’, and trusts (except where the beneficiary is incapable of looking after their own affairs) whilst you are at it.
It served the accountancy industry very well for centuries to have every individual personally and completely liable for their actions, indeed most of the problems in that profession have only arisen since the development of limited liability partnerships.
Allowing individuals to hide behind limited liability seems to be to me (a rabid libertarian) to lie at the root of half of the world’s problems, the other half is due to allowing governments to take responsibility for individuals.
Limited liability has worked well for the economy – despite its absurdity
We could regulate it properly but do not do so
That is what has to change first
[…] this a fair international tax. This is not a fully developed idea as yet, but when discussion of sales taxes instead of corporation tax is taking place it is vital that all hats be thrown into the […]
I presume Myners is referring to something like a Gross Receipts Tax, which doesn’t give a business credit for input tax, as opposed to something like VAT, which does.
It seems to me that such a regime would have all sorts of problems (e.g. disproportionately disadvantaging high volume-low margin trades relative to low volume-high margin ones; disproportionately advantaging vertically-integrated supply chains), but what is the analysis of where the incidence of such a tax (as opposed to a VAT-style regime) would fall?
Zacchaeus