Subsidies are negative taxation

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Companies the world over seem to call for two things. The first is a simplified tax code. The second are lower tax rates. Nowhere though do they call for a removal of subsidies. But let's be clear: subsidies to business are negative taxation in all but name, and specific complications in the tax code, again in all but name.

Take the following reported this morning:

BP is delaying investment in a new £500m UK carbon capture power plant at Peterhead.

The energy company said it was waiting on an announcement on whether the green energy plant at Peterhead Power Station would get government support.

Let's be clear here: BP had record profits of $22.25bn in 2006- up 15 per cent on 2005 - thanks to higher oil prices. This is not a company on hard times. And using carbon fuel to create energy is what BP does, It also likes to claim it's green. No doubt it also says its entrepreneurial and that presumably justifies its profit, but that's hardly evidenced by this attitude to risk taking. Because despite it's record profits it's saying it won't invest in what is absolutely essential for the future of life on this planet unless it's given a subsidy.

That's an abuse of the tax system. It's asking for a special reduction in rates all for itself. I sincerely hope the government says no. What the government should instead do instead is change regulation so that this technology is priced into acceptability. That is possible. It has to happen. And that's so much better than giving specific tax subsidies to companies that do not need them.