Let me suggest something. It's just an idea. I can't prove it right or wrong. Nor can it, for that matter be disproved. But the suggestion I want to make is that a country's corporation tax rate might be inversely correlated to its confidence in the offering it has to make to those companies who want to locate their businesses in its jurisdiction.
In that case look at this graph from the autumn statement on where the UK will be compared to other countries:
I call that a vote of no confidence by George Osborne in the UK. We're in the wrong company. But maybe that's because he thinks we can't compete with the eilte. If so, that's worrying.
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And I thought if tax rates were low tax avoidance was reduced?
@Sean. Where’s your evidence that tax avoidance is increasing?
Don’t think so:
http://www.transparency.org/cpi2012/results
I don’t get the link
A lack of confidence in the economy is not the same as saying it’s corrupt
Surely, businesses will have less confidence in countries that are more corrupt so I there should be a correlation between corruption and confidence in that economy if you are a business (not perfect but good enough). You can then use that to compare against your tax rate analysis.
OK – I get that now
Sick…
http://itservices.cbronline.com/news/atos-secures-uks-cloud-service-contract-051212
What is going on with the government and Atos ?????????.
£££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££
Knighthood Knighthood Knighthood Knighthood Knighthood Knighthood Knighthood
I think it’s a point worth making that besides the USA, which is the richest homogenous market available in the world, the next top 6 countries on this graph have all been performing badly recently. Japan and Italy are a mess, Brazil and India have been stalling recently, Argentina is suffering from badly disguised inflation and no entirely new French company has entered the Cac 40 since 1987 (the year it began). The US can get away with high rates because it has no VAT, which allows companies to pass on higher taxes to consumers and is also such a large market businesses just have to accept the rate. The UK has to compete with Ireland right next door with a rate of just 12% an english speaking population and all the same benefits acess to the single market brings.
We’ve not got much choice but to lower it and keep it low. That said George Osbourne needs to get his act together or he should be out of a job.
I am not sure about Osborne’s confidence in the UK economy, but if one looks at FDI (flows and stocks) related to the UK economy, foreigners seem to have confidence relative to other FDI destinations.
Of the countries listed in the chart above:
– the UK ranks number 4 in $ terms of FDI inflow for 2011
– the UK ranks number 3 in $ terms of FDI inward FDI stock for 2011
If one looks at the UK in terms of fellow EU-27 countries:
– the UK ranks number 2 in $ terms of FDI inflow for 2011
– the UK ranks number 1 in $ terms of FDI inward FDI stock for 2011
The UK accounted for 21% of all EU-27 FDI inflows in 2011; the UK accounted for 16% of all EU-27 inward FDI stock in 2011.
So, if one looks at FDI related to the UK as a measure of confidence, or the willingness for businesses to locate their investment dollars in the UK jurisdiction, the UK is not fairing to poorly given the financial environment.
FDI includes the sale of UK based assets
A lot of that is selling the family silver
Or take over of UK registered companies
Is that what you want?
That would be a different topic (and contradictory to the original post).
The original post implies some sort of lack of confidence by business as it relates to locating in the UK due to low levels of corporate tax rates. Not sure what the proper measurement of such a phenomenon would be, but as it relates to FDI flows and stocks, a pretty strong indicator of business voting with their money, the UK is at the top of the tables.
Despite the low level of corporate tax.
And as I have argued, FDI is often a measure of selling FTSE companies to foreign buyers
Never better than when selling BAA for example
So that’s a useless indicator
So what quantifiable indicator(s) should we look at to measure this theory?
It’s an instinct
Maybe you don’t do gut feeling
I do
It works
Especially in business
And politics
No penalty for guessing it seems. Not sure about crafting economic/tax policies on a hunch though.
Get real
That’s how life works
Only economists think otherwise
I guess that explains a lot then. Maybe a little more informed thought would go a long way in helping to avoid/mitigating so many policy disasters and unintended consequences.