A gentle plea for calm from HM Treasury

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When the government puts out a press release saying that reasoned argument is 'ridiculous' you know that something is wrong.

That's what they did yesterday in response to the suggestion I made on BBC radio and television that corporation tax needs to be reviewed to ensure that rather more than 70% of the 700 largest companies in the UK make a reasonable contribution to the UK Exchequer. They issued a press release saying:

It is ridiculous to suggest that business does not pay its fair share of tax.

Businesses are using the capital allowances and deductions that government has put in place to stimulate investment, create jobs and build economic stability. These are not loopholes - these are properly policed business reliefs.

Well, let's be clear. A 0% rate of tax on a profit is not a fair share. No one can claim it is.

And if those capital allowances and deductions that create this outcome are inappropriate because they constitute an unnecessary use of government money to subsidise already successful businesses and so redistribute income from those less off in our society to those best off in our society (and I make clear that this does include private pensioners as shareholders by proxy since most of them are in the top 10% income band) then these might be properly policed business reliefs but they're also bad economic policy, which is the point I made.

I also find it almost ludicrous that the PR department at the Treasury has bought the PWC argument that corporation tax is only one of a number of taxes paid by businesses, including business rates levied by local councils and national insurance contributions, meaning by implication that avoiding it is OK in that case. I show how ludicrous this argument is elsewhere today.

But you know the Treasury are quoting dodgy stats when they suggest how competitive the UK is because it was the largest recipient of foreign direct investment (FDI) in the world in 2005. This is complete nonsense. The investment in question arose because we sold the UK's ports to Dubai, its airports to Spain and the sale of Boots to private equity has no doubt figured in FDI this year because its new parent company is in Gibraltar. Selling the family silver is not something to shout about. It's a sign of weakness.

In which case a little less hyperbole by the Treasury and a little more calm reaction of the sort I provided might suit the occasion better I think. Because nothing I said was ridiculous. Not least because 0% tax is not fair.

Case proven, I think.