Bank of England noted yesterday<\/a>, \u00a0they use an intense myopic \u00a0tendency within financial markets at present. \u00a0They have always taken a short-term view, \u00a0but that trend is becoming increasingly prevalent. \u00a0I suspect that the Microsoft \/ Skype \u00a0deal is indicative of this. \u00a0Microsoft, like most large businesses, is sitting on a massive pile of cash, hidden somewhere in the world, as far away from a tax authority as possible. There is good reason for this.<\/p>\nFirst, \u00a0it seems that businesses run out of any ideas \u00a0about what really \u00a0to really invest in. \u00a0I stress, in this regard Microsoft buying Skype is not an investment. It is simply a change of ownership. \u00a0investment involves the creation of new products and services, new infrastructure, new training, and so on. \u00a0Because it is not investing it is sitting on a massive pile of cash.<\/p>\n
Second, businesses like Microsoft are sitting on a massive pile of cash because they will not take cash back to the USA where it might be taxed. There business investment criteria are being completely messed up by their paranoia about making a cash return to the governments that underpin their viability, and which give them their licence to operate. \u00a0I have little doubt that the funding for the Skype deal will come from outside Microsoft USA, \u00a0which is one reason why Microsoft is willing to pay so much more for the company than it might be worth, and a good reason why the shareholders of Microsoft should question the judgement of the management who would rather overspend on buying assets at excess value than \u00a0return funds to shareholders.<\/p>\n
Third, as this shows, far from business needing more tax cuts to encourage innovation and investment, they are actually so awash in cash, and enjoy such low tax rates, but they are now unable to work out what to do with their money. Despite this our government is giving tax cuts to UK business, even though everyone else in society will be seeing tax increases. \u00a0All the rhetoric of business supports this, but all that rhetoric is utterly untrue. The reality is that big business is bankrupt of ideas, but awash with cash, and pays little or no tax, a combination that results in the market failures that the Bank of England have so accurately described.<\/p>\n
So what's the conclusion?<\/p>\n
1) \u00a0Tax incentives for big business to buy and sell other enterprises should be removed. This is simply wheeler dealering, and adds no value to society.<\/p>\n
2) \u00a0There is no justification for tax cuts for big business, \u00a0so they should be cancelled.<\/p>\n
3) \u00a0There is no prospect whatsoever of big business creating the investment that will fuel growth in our economy. All the incentives to invest already exist. They have the money (although small business has not). They are facing low interest rates, low wage rates, low property costs, a government willing to waive rules to let them establish new activities, and yet they won't. \u00a0So let's face reality, there is no prospect of private sector fuelled growth in the UK, or right now, just about anywhere else ( Germany excepted).<\/p>\n
4) \u00a0In that case there is only one \u00a0prospect of economic recovery in the UK, and that comes from government spending, funded by increased tax charges on business, \u00a0largely by closing the loopholes they are using to generate large piles of cash \u00a0hidden in tax havens.<\/p>\n","protected":false},"excerpt":{"rendered":"
Microsoft has bought Skype for $8.5 billion. I declare an interest: I use the products of both companies. And I declare another interest. I agree
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