ConDems: we don’t want to tax business

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David Gauke, the Exchequer Secretary said on Tuesday:

As a Government we’re not interested in large hikes in business taxation.

They are for everyone else, but not business.

Now you know where you stand.

And why did he say this:

B[ecasue] higher business taxes will ultimately be paid by a combination of employees (with lower wages and salaries), consumers (through higher prices), or shareholders (with lower dividends).  And in an open economy, such as ours, it will probably be the employee who loses out.

This is nonsense. First this is based on some very dodgy economics by Mike Devereux at the Oxford Centre for the Non-Taxation of Business, which in coming to the conclusion that labour pays corporate taxes makes such amazing assumptions as a business that faces a strike can move all its [production to another country for the duration of the strike at no cost and with no disruption and can return afterwards with the same condition applying. A real world scenario, very obviously.

Second, this ignores the fact that if business is not taxed then the profits flow out of the UK to not be taxed elsewhere either — because a significant part of the holding of stacks and shares is now located in funds in tax havens. So the alternative is not tax business or labour, as Gauke implies, but total tax lost which then ha to be paid by labour. Something very different indeed, that he forgot to mention. Odd that.

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