{"id":15195,"date":"2012-04-22T21:22:18","date_gmt":"2012-04-22T20:22:18","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=15195"},"modified":"2012-04-22T21:22:18","modified_gmt":"2012-04-22T20:22:18","slug":"cbi-tax-misinformation-the-amount-of-tax-paid-by-companies-over-time-is-not-falling","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2012\/04\/22\/cbi-tax-misinformation-the-amount-of-tax-paid-by-companies-over-time-is-not-falling\/","title":{"rendered":"CBI tax misinformation – the amount of tax paid by companies over time is not falling"},"content":{"rendered":"

It's time to look at yet another piece of gross misinformation provided by the CBI when\u00a0launching\u00a0its new tax report 'Tax and\u00a0British\u00a0Business - Making the Case'<\/a> (which it\u00a0spectacularly\u00a0failed to do). The CBI claimed:<\/a><\/p>\n

The long view is a revealing one. In 1982-3, the main rate of corporation tax was 52 per cent and yielded tax revenues equivalent to 2 per cent of GDP. In 2010-11, the corporation tax rate was 26 per cent, half what it was, but yielded\u00a02.8 per cent of GDP, almost half as much again.<\/p><\/blockquote>\n

The\u00a0implication\u00a0was clear, as they said:<\/p>\n

The argument that tax competition is a race to the bottom in the long term is not supported.<\/p><\/blockquote>\n

What they wanted people to believe, very clearly, is that UK business now pays more in tax than it did in 1982. The claim was certainly that the\u00a0proportion\u00a0was not falling.<\/p>\n

But the claim, as with much\u00a0else\u00a0that they have said, is misleading at best. There are two good reasons. First, Nigel Lawson reformed the tax base when cutting\u00a0corporation\u00a0tax rates in the 1980s. In the process he eliminated\u00a0automatic\u00a0100%\u00a0first\u00a0year capital allowances and he abolished\u00a0stock\u00a0relief. As a result taxable profits skyrocketed overnight. It's just not possible to\u00a0compare\u00a0tax\u00a0yields\u00a0after that radical reform with those before it -\u00a0corporation\u00a0tax before and after that event were\u00a0utterly\u00a0different, and there were those like John\u00a0Whiting\u00a0at the CBI\u00a0event\u00a0who knew that. The claim to make a\u00a0comparison\u00a0was then severely misleading.<\/p>\n

Second, the proportion of profit in the\u00a0economy\u00a0has increased dramatically. Now admittedly, I can't find the data tonight and it's tedious to\u00a0extrapolate\u00a0it form the ONS web\u00a0site\u00a0(which is a nightmare). So I'll quote from Howard Reed writing on\u00a0this\u00a0issue for the TUC instead,\u00a0who\u00a0looked at pretty much the inverse ratio, the wage share<\/a>\u00a0over time:<\/p>\n

Central to these shifts has been the role of the wage-share. Figure 1 reveals two distinct\u00a0characteristics of the post-war behaviour of the proportion of national income going towage-earners. First, there is a link to the economic cycle with the share first rising and\u00a0then falling, with a lag, during recessions. For example, it rose slightly in both 1974\u20145and in 1990\u201491 before falling back. This may be because at the onset, profits are more\u00a0sharply affected than wages. Eventually however, the wage share falls as unemployment\u00a0continues to rise, firms continue to cut costs and profits recover.<\/p>\n

\"\"<\/p>\n

The second and most significant trend is of a sustained decline since the mid-to-late\u00a01970s. The wage share held its post-war level at between 58\u201460 per cent until the\u00a0early 1970s and then rose to a high of 64.5 per cent in 1975. It then started drifting\u00a0downwards reaching a post-war low of 51.7 per cent in 1996, largely as a result of\u00a0the rise in unemployment in the slump at the beginning of that decade. From then it\u00a0recovered slightly to reach 55.2 per cent in 2001 before slipping back to 53.2 per cent\u00a0in 2008 \u2014 close to its post-war low in 1996.<\/p><\/blockquote>\n

Taxes on profits as a\u00a0proportion\u00a0of GDP have been broadly static.<\/p>\n

But since profits are rising as a\u00a0proportion\u00a0of GDP that means tax a a\u00a0proportion\u00a0of profit is falling and that does not support the CBI claim - it contradicts it.<\/p>\n

The labour share on the other hand has seen its share of tax rise as its share of GDP has fallen.<\/p>\n

All this the CBI failed to point out, peddling another\u00a0pack\u00a0of misinformation instead and\u00a0making\u00a0claims about the race to the bottom that cannot be justified.<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s time to look at yet another piece of gross misinformation provided by the CBI when\u00a0launching\u00a0its new tax report ‘Tax and\u00a0British\u00a0Business – Making the Case’
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,64,1],"tags":[],"class_list":["post-15195","post","type-post","status-publish","format-standard","hentry","category-cbi","category-corporation-tax","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/15195","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=15195"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/15195\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=15195"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=15195"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=15195"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}