at the meeting at the Social Market Foundation I attended this week<\/a> HMRC director Judith Knott confirmed that HMRC have accepted another key element of right wing tax dogma - which is that companies can't pay tax and only people do. She explicitly questioned as a result why we have a corporation tax.<\/p>\nWell it's an interesting idea. So let's explore it for a moment.<\/p>\n
First, imagine there wasn't a Marks & Spencer when you went into a store marked M&S. That's what you're being asked to believe. You're being told M & S and all other companies are just make believe. You're told they're just a bunch of\u00a0shareholders. Except that's not true. You don't contract with the shareholders. You do\u00a0contract\u00a0with M&S. And you do that because there would be no M&S without there being a limited liability company. No one would have taken the risk of creating M&S but for that limited liability. So not only is it not true there is no M&S, the reality is that the company called M&S\u00a0facilitated\u00a0something no person\u00a0would\u00a0have done. It's real therefore. The claim that company is just an agent for its\u00a0shareholders\u00a0is wrong; it's\u00a0something\u00a0much more than that, and its limited liability form has an impact for beyond anything that the\u00a0shareholders\u00a0would do, so it is an entity in its own right, and not a mere agent. That makes it taxable in its own right. It has profits all of its own, not due to anyone else that should be taxed - and the\u00a0existence\u00a0of retained reserves in almost all companies is sure indication of that fact. Denying this - as Judith Knott did - is simply an excuse not to tax a form of capital that has\u00a0been\u00a0captured \u00a0by the management of these companies for their own gain.<\/p>\n
Second, no one knows who a company\u00a0represents. Most of the time a company has no idea who owns it. Some people own the shares in\u00a0companies\u00a0for\u00a0fractions\u00a0of seconds. How would we attribute profit to them to be taxed? Others\u00a0hold\u00a0their shares\u00a0through\u00a0other companies. How far do we have to go to\u00a0find\u00a0a person? Others record their ownership in tax havens to seek to avoid or evade tax. Why should we encourage them to do so? And how do we tax ownership where no person can be identified as having ownership rights - as in a discretionary trust? The argument that only\u00a0people are taxed is simple to roll out - and impossible to apply. Knott should know that and yet she offered this glib\u00a0explanation\u00a0when there is in fact one excellent reason why we must tax companies - which is that they are by far the cheapest and most effective agent to tax to ensure that\u00a0their\u00a0owners,\u00a0whoever, wherever and whatever they might be, are taxed to at least some degree on the income they derive from the company.<\/p>\n
Knott would,\u00a0presumably, rather lose the income to tax havens or tax avoidance: that's the only reasonable interpretation of her\u00a0adopting\u00a0this trite argument that looks good on a\u00a0blackboard\u00a0at the\u00a0Oxford Centre for Business Taxation and whose real world\u00a0application\u00a0is to encourage tax abuse, the shifting of the\u00a0tax\u00a0burden from\u00a0capital\u00a0to labour and from\u00a0rich\u00a0to poor and which will mightily increases the income and\u00a0wealth\u00a0gaps; all of them aims I am sure Oxford's Centre\u00a0is delighted to share. You would not consistently fail to point out the flaws in the argument if you didn't believe in\u00a0those\u00a0consequences that have to flow from promoting it if that was not the case.<\/p>\n
But it's worrying we're now hearing it from\u00a0H M Revenue & Customs too. Anyone would think they were beginning not to to want to tax Osborne's mates.<\/p>\n","protected":false},"excerpt":{"rendered":"
This budget was notable in that for the first time that I can recall we saw the Treasury subscribe to the Laffer curve. As has
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