David Cameron has said this morning:
In the highest offices, the plushest boardrooms, the most influential jobs, we need to think about the example we are setting.
Moral decline and bad behaviour is not limited to a few of the poorest parts of our society.
OK, start with these five ideas:
1. Sign a tax code of conduct
I've designed one - but let's keep it simple, shall we? Let's say companies should agree to seek to pay the right amount of tax in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes. As a result they'd agree to
i) not use any artificial structures not explicitly encouraged by law
ii) not use tax havens
iii) always err on the side of caution when in doubt about the ethics of an arrangement.
2. Publish their accounts on a country-by-country reporting basis
This is so we can see exactly how much they make in the UK and elsewhere, how much they record in tax havens, and how much tax they pay where. Being honest is a key part of being ethical and country-by-country reporting is about being honest to the societies where you work.
3. Agreed to pay top to bottom pay ratios.
It's fundamentally unethical that the pay differentials we now see in this country exist. A top to bottom pay ratio of more than 20 is hard to justify in any company: 30 and we're moving into the realms of obscenity but this is small bear in many companies. Reform is essential.
4. Stop lobbying for tax reductions.
Vast numbers of companies - and almost all the FTSE 100 do this, all the time. Well stop it. You've got the best deal in the country. Now shut up and let society heal itself.
5. Advertise responsibly
Don't promote consumerism. Don't promote a lack of respect to the family. Don't sell violence. Don't sell abuse. All too many do, far too much. And that's the cause of the moral malaise.
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I worry about this recurring theme of 20 to 1 pay ratios. It’s always the top figure that is in people’s mind when discussing this issue. What about the 1? What if, for various reasons, you can only get the job that pays the 1? That means no holidays, no owned home, no certainty, it means permanant social inferiority, everyone will know you’re a 1 by what you wear, what you own, and where you live. The thing is even 20 times the 1 is way too much. Those who earn the highest amounts see no punishment for failure because they either have their monetary cushion or their business networks to help them out. And then there’s the 1…plodding along, sinking deeper into hopelessness. Yet these are the same human beings. What amazes me is that after all the advances in technology, all the tricks of organising work efficiently the norm is still to work for 8 hours plus a day…is a better system really beyond our wit?
I hope something way better than what we do now is within reach
But those at the top have to make sure those on the bottom do better if there is a ratio
If there is no ratio then there is no incentive
My forthcoming book does I hope offer the better system….
I think it is helpful to explore the concept of a pay ratio but recognise that it would not be easy to determine . People tend to overlook the fact that in the UK there are many people in employment whose earnings are deemed to be low enough to claim tax credits and housing benefit. This amounts to a subsidy by general taxpayers to firms, many of which are without doubt able to pay a better rate for the job. How can people in these low paid jobs find a place to live and establish the family relationships which Cameron considers to be the bedrock of the good society? The causes of the riots, looting and other social problems much in the news are complex and will not be analysed by a PR soundbite. There is plenty of research evidence about the problems emanating from an unequal society and we should have taken notice earlier.
Full employment is the driver for better wages. Full employment should be the number one objective of any government. It is not within the scope of government to control morality but they do hold the main levers to control the economy.
What is full employment in an economy that has a benefits system that doesn’t require someone to move in order to take a job. Take for instance London where hundreds of thousands of jobs were created, but mostly filled by immigrants prepared to move for work, rather than the unemployed from the rest of the UK not required to move to take a job. So unless you can create jobs exactly where people need them (very difficult to do with out using subsidies, in which case are they then real jobs) or require the unemployed to move for a job (but socially and politically unpalatable), it is unlikely full employment can be achieved.
No one says it’s easy but good economic policies are what economists get paid for formulating. Rather than concentrate on other equally difficult objectives, like inflation or debt payback, they could try concentrating on something more directly for the benefit of all.
One thing which would help SMEs to grow and provide employment is to withdraw the tax privileges which are available to the big companies – unfair competition – when the smaller companies may be far more efficient.
Another is to introduce full land value taxation and abolish all other property taxes. This would make it more advantageous for businesses to locate in low value, i.e. high unemployment, areas.
Public expenditure on good infrastructure renewal provides not only jobs but increases local land values which (with LVT) would provide increased revenues – a virtuous circle.
Correct me if I am wrong, but don’t small companies pay tax at a lower rate than large companies already?
I agree that we should have proper land/property taxes based on the value of the property. I find it hard to accept that we have foreign billionaires owning £10m houses in London and barely paying any more in property taxes than I do.
You’re wrong
Headline rates are lower
Real rates are higher
Tax avoidance and all allowances and reliefs geared to large companies
I believe even David Cameron spoke in favour of the 20:1 ratio but this does depend upon setting a fair and workable minimum wage which encourages job-seekers to step out of the benefits safety net. There could be an upper limit of 20 x minimum wage which would be paid and taxed through the PAYE system. Any additional special remuneration could be paid in the form of special bonuses or dividends but taxed at a special rate. These could be for inventors or those who have deilvered a service which considerably enhances society’s well-being.
Those not happy with this system could simply be self-employed
What reliefs are available to large companies that aren’t to small? Please be specific?
I struggle with the concept of “tax reliefs not specifically encouraged by law”. The tax rules are the tax rules. If you ignore them then it is evasion. If you comply with them it is legal. I fear this part of your code is too vague and therefore unworkable
I think you are trying to say “do not enter highly artificial tax schemes” but again what is artificial?
Please read The Missing Billions by me for the TUC
Why not review tax deductability of interest for large and particularly multinational business organizations
If we agree SME are dependant on bank finance to start, grow and healthy for competition, then it follows we should encourage it. Once companies are able to access Capital Markets then debt finance should not be encouraged beyond a % above its equity capital.
We would need some transition but i cant help thinking that equity finance is more stable in funding business in any case.
If i may at the sites discretion link a recent proposal on the role of banking was submiited had some interesting aspects to it.
NEF-Southampton-Positive-Money-ICB-Submission.
http://www.positivemoney.org.uk/wp-content/uploads/2010/11/NEF-Southampton-Positive-Money-ICB-Submission.pdf