Has big business captured government?

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Andrew Goodall is a professional tax journalist who writes for the Tax Journal. He also has his own blog, which is fast becoming compulsory reading.

Take his latest blog, posted yesterday. As he put it:

This extract from Robert Peston's blog appeared in Tax Journal news (29 March):

Press watch: 'Big business and Treasury capture government'

‘It looks to me like the triumph of big business — or rather the triumph of the Treasury's view of what big businesses need and want ... it is trebly true of the cut in the top rate of income tax, the accelerated reductions in corporation tax and the reform of taxation for multinationals based here (the controlled foreign company rules).

‘Now many of these policies have been desired by the official Treasury for years: they were developed under the last Labour government as required to improve the competitiveness of the British economy but are only now being implemented by this coalition.

‘Some of the measures, such as on corporation tax, can be identified with the personal preferences of George Osborne, but most pre-date him. So, to use the jargon of the City, there has been a reverse takeover of the government by the gents (yes they are mostly of that gender) of the Treasury, the officials not the elected politicians.’

Robert Peston, Business Editor, BBC News (27 March)

Peston was not the only leading commentator to question the direction of UK corporation tax policy after the Budget. Martin Wolf, chief economics commentator at the Financial Times, wrote in his column 'A Budget without economic significance' (21 March):

'Vastly more dubious are the cuts in corporation tax ... Zero-sum competition among governments to attract mobile headquarters cannot make sense. Nor is there any reason to suppose the fiscal and economic benefits will be large. Meanwhile, the reduction in corporate tax will encourage retentions over distributions, while doing nothing to raise investment. A far more sensible proposal would be to increase investment incentives and maintain — or even raise — headline rates. The broad aim would be to make the system neutral between retentions and distributions while encouraging investment, which is extraordinarily low.'

Two years ago politicians argued that 'Britain should try to wean itself off financial services and rediscover honest manufacturing and small and medium-sized enterprise', according to a leader in The Economist (24 March). But the Budget 'sends a different signal', The Economist said. What the country is good at is 'financial services and luring foreign investment; in short, milking globalisation'.

Does dependence on financial services justify further cuts in corporation tax for the biggest companies? And if the UK and other major economies were to engage in a corporation tax race to the bottom ... what then?

I won't borrow one again - but this gives some evidence of Andrew's style.

I recommend it.