The Jersey economy, as I have often pointed out, is the surest evidence that slashing corporate tax rates does not work only guarantees one thing, which is a giant black hole in public finances. But a Sunday Times email this morning says:
The Sunday Times reveals this morning that one of the biggest cards the government thinks it has to play is to wield the threat of a huge cut in business taxes. Under the plan the UK would cut the headline corporation tax rate from 20 %to 10 % if Britain's EU rivals blocked a free trade deal with the UK or refused to give financial services firms the "passports" they need to gain access to the European market.
They believe that would encourage firms to stay and make the UK a magnet for new companies, as Ireland and Singapore have become.
There are three things to say in addition to noting the Jersey style domestic economic disaster that such a policy would foretell. First, Ireland and Singapore attract business because they are conduits to markets but the UK will be giving up that role with the EU: the tax incentive will count for nothing in that case.
Second, Ireland and Singapore (et al) made their mark in the era of intense tax competition and little cooperation. In the era of country-by-country reporting and tax cooperation that opportunity will be gone. The UK cannot win from this policy in that case.
Third, the EU is already looking at preparing a list of tax havens against which to apply sanctions. The UK looks as though it has just applied for membership. I have no doubt it would have some pleasure in imposing them
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If Jersey is “the surest evidence that slashing corporate tax rates does not work”, then the evidence must be pretty thin. Surely there must be evidence to support your thesis from a large-to-medium sized economy?
Let’s use the UK then where the cuts have cost at least £10 billion in lost revenue as a result of a wholly unnecessary giveaway for which there is no identifiable benefit
Their ‘logic’ escapes me. Given that so many MNCs pay far less that this is taxes and claim exhorbitant amounts in tax rebates, I cannot see how this idea can hold water.
It doesn’t
And they already have piles of cash : more will change nothing
It is the duty/responsibility of a sovereign state to ensure its economy has an appropriate level of debt-free money [i.e. interest free sovereign money – not borrowed as national debt] Too many states have abrogated this duty to commercial banks – in the UK 97% of Money is now introduced into the economy as debt. In a Consumer economy in particular this is unsustainable.You cannot run a successful consumer economy on skint consumers and overwhelming debt – national and/or private.
We need:
1. Bank capital reserves hiked progressively to 30%
2. Progressive scaling down of Treasury bond driven finance
3. New money progressively introduced into the system via infrastructure spending
4. Brainless dysfunctional PFIs should be progressively bought out
5. Basic income progressively introduced.
6. Corporation tax progressively abolished as it’s voluntary at corporate levels
7. Taxation focussed upon point of sale/use
Capitalism, as we know it, worked in industrial/developing economies with money recycled through wages and and re-investment. It is not working in mature consumer economies with skint consumers and high debt levels leading to stagnation and the wholesale cascade of money into inflating existing asset values. The current monetary/financial/banking system is dysfunctional and unsustainable.
All money is debt: there are no exceptions in the modern world
What you are saying is you want more of that debt explicitly owed by the government
And I do mean owed by: it owes the money it creates. It says so on it
There is a world of difference Richard between Government debt where money is obtained by issuing bonds to mainly banks and pension funds. NEARLY ALL of this money is created as debt by commercial banks. Obviously banks cannot create money for themselves but can do so for one another and when pension or insurance funds buy bonds ultimately that money would have been created as a loan by a bank.
What I refer to as “debt free money” is in fact interest free money created by the central bank where the theoretical “debt” that you allude to is simply a record held in perpetuity of its creation. To do otherwise would lead to confusion and obfuscation leading further probably to fraudulent gerrymandering and of course inflation!
I think I’m right in thinking that this is the same mechanism that has been used for QE where the bought in bonds will quietly expire rather than being re-sold. The problem is that all this money has been poured via banks and pension funds into existing assets in the forlorn hope that some of it might trickle down into the real economy. It hasn’t and it won’t!
That is still debt
I reiterate: all money is debt
I take it you agree with the rest of it! I thought you would object to focussing tax at point of sale/use as being too regressive. But do remember that income tax is only a recent invention [c. WW1 or maybe Boer War?]. Hiking up the starting point would surely address you concern and encourage saving?
You might need to read The Joy of Tax
I will do [ read The Joy of Tax] but only so long as you open your mind and take a broader view!
Estimated delivery: 28 Oct. 2016
The Joy of Tax
by Richard Murphy
£6.99
Quantity: 1
Sold by: Amazon EU S.a.r.L.
Standard Delivery : get it by Friday, Oct. 28
I am open minded
But not to ideas that are wrong
Richard keeps on referring to capital spending projects in Jersey’s economy as a black hole when it isn’t. Why do you have to lie about Jersey’s economy all the time because you are only kidding yourself when your predictions fall flat on here.
Odd that very one in Jersey bar you does it too
Have you read the JEP?
I wasn’t aware they were a propaganda machine for me