There was an article in the Telegraph a couple of days ago in which it was claimed:
As it happens, companies are paying an increasing amount of tax. Even more significantly, they are doing so as the rate of corporation tax falls. There are two things that we can learn from that. The corporate sector is paying its “fair share”, and arguably more than it really should. And if lower rates generate more cash for the Government, perhaps we should think about bringing them down further.
Along the way the article had a serious go at all those campaigning on corporate taxes - saying we have got most of our claims wrong. There was also a side swipe at the Fair Tax Mark.
But the claim made is wrong. This diagram, admittedly prepared just over a year ago, shows why:
What the corporation tax data for the UK clearly shows is that there has been a fall in large company tax payments and an increase in small company payments.
Small company payments are rising simply because of the growth in the number of such companies. The actual sum paid by each is falling slightly, and I have, of course, argued that a great many (hundreds of thousands a year) do not pay what they owe, but the fact is that sheer numbers are pushing their contribution up. In contrast the contribution by large companies is falling significantly (more so when inflation is taken into account) and will in 2015 be more than £8 billion less than was predicted in the June 2010 budget.
There are three reasons for that. The first is the enormous cut in the late company tax rate - from 28% to 20%. There has been no Laffer effect, of course.
The second is the massive range of new opportunities that have been provided for tax avoidance by this government, including excluding all income earned outside the UK form tax, the patent box and offshore treasury allowances.
Third, there is a cut in staff at HMRC. Like it or not, that is bound to have an impact, as is an HMRC Board dominated by big business.
But what is also shocking is that the share of profit has been going up in the economy and still there is a fall in revenue form big business.
The Telegraph is wrong: big business corporate tax abuse remains a massive issue and we are right to campaign on it.
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The tools to fight avoidance are in the government’s hands; that is, the government could change domestic legislation and could press trading partners to change international conventions. The fact that they choose not to do so is evidence that politicians of all major parties are far too sympathetic to the interests of business leaders, despite their constant protestations to the contrary. But you knew that anyway.
As a small business, it was always rather annoying to us when CT cuts were trumpeted as the cut did not apply to us. My opinion is that a cut in the smaller company rate would be good for the economy. It would stimulate growth in many small businesses, allow them to employ more staff, and might even persuade some non-payers to pay.
What is your take on this, and is there any evidence on the subject?
The small company CT rate cannot be less than basic rate tax
As it is the rate positively encourages avoidance
Very helpful and answers my question in another blog on the contribution of corporate tax, a favourite theme of not just the Telegraph
So to what extent I wonder, does the rapid growth in small business tax, reflect the growth in self-employment, as people set up one-person or small businesses? Which in turn is reflected in PAYE tax receipts?
It reflects tax avoidance in small business
Almost no PAYE is paid
A point of clarification.
There are no “small companies” for tax payments. There are companies whose profits are taxed at the small profits rate (£300k).
Then there is marginal relief (£300k-1.5mn).
From 1 April 2015 there will be a single Corporation Tax rate of 20% for non-ring fence profits.
https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax
John, as a former senior partner of PWC and Lord Mayor of London was often heard to say when little was added to the conversation, “most helpful”.