Happy New year?

[Neil_F]

Only if the savings to multinationals were passed on directly to the consumer.

Your argument about increased investment in the UK is a hypothetical one.

Can you cite any developed countries where corporation tax has been reduced to zero and has led to the sort of increases in investment and earnings along with the reduction in unemployment that you mention?

It is as hypothetical as the spending increases you were calling for leading to increased demand. In fact, less so.

To zero, no, unless you count the tax havens that have built financial services industries on the back of zero taxes and secrecy (I'm not advocating secrecy. I would have even more transparent corporate reporting laws than we have now).

I will offer you Ireland though, who cut their corporate tax rate to 12.5% and benefitted from reduced unemployment, though the straight-jacket of the Euro and letting their banks run riot was less wise. There is quite a lot of evidence to suggest that cuts in effective rates of corporate tax lead to increased demand and, in some economies (typically those with flexible labour markets), reduced unemployment.

 

[Tangled up in Blue]

It is as hypothetical as the spending increases you were calling for leading to increased demand. In fact, less so.

To zero, no, unless you count the tax havens that have built financial services industries on the back of zero taxes and secrecy (I'm not advocating secrecy. I would have even more transparent corporate reporting laws than we have now).

I will offer you Ireland though, who cut their corporate tax rate to 12.5% and benefitted from reduced unemployment, though the straight-jacket of the Euro and letting their banks run riot was less wise. There is quite a lot of evidence to suggest that cuts in effective rates of corporate tax lead to increased demand and, in some economies (typically those with flexible labour markets), reduced unemployment.

Ireland is an interesting example.They seem to be the first country to have succesfully recovered after their EU bail out.They're not quite back to their "Celtic tiger" days yet though.

Meanwhile, I notice that nice Mr Clegg doesn't hold with all these Tory cuts for 2014 and that the projected date for a Tory buget surplus is currently 2019, (if they're still in government after 2015,of course).:winking:

http://www.theguardian.com/politics/2014/jan/06/tories-monumental-mistake-lopsided-cuts-nick-clegg

 

[Yorkshire Blue]

Wow - really???

You are seriously saying that the abolition of corporate income tax wouldn't by itself constitute a fiscal stimulus? The point of a fiscal stimulus is to increase aggregate demand. Eradicating corporate income tax to zero would increase investment in the UK (since returns on that investment would not be subject to tax) which would increase trend growth and reduce unemployment. It would also increase earnings given that all evidence suggests corporate income tax is borne by employees through lower wages.

In terms of what it raises, £43bn last year, which is only 10% of all taxes raised. The loss of tax corporate tax revenue would be partially offset by increased PAYE and NICs (due to higher employment) and higher VAT (due to increased aggregate demand).

So less than we paid in interest?

 

[Neil_F]

So less than we paid in interest?

indeed. In 2012/13 corporate income tax yielded £43bn and debt interest cost £47bn.

 

[Tangled up in Blue]

It is as hypothetical as the spending increases you were calling for leading to increased demand. In fact, less so.

In fact, cuts in VAT are a widely accepted quick fix in terms of stimulating demand,in the UK and elsewhere.


The abolition of corporation tax (or even its reduction),which you advocate, is nothing less than a massive red herring in terms of the idelogical cuts in welfare spending which the Tories are currently proposing.

 

[chapperzUK]

It would. Since the 10% notional tax credit on dividends is designed to avoid double taxation on corporate profits (once through corporate income tax and then again when taxing dividends) then there would be no need to retain it. Dividends could be taxed at the full personal income tax rates, which would reduce the cost of the abolition.

It would also be a dramatic simplification of the entire tax system.

Thought so.

I would have thought keeping dividends taxed at a lower rate would encourage investment in UK businesses. Making dividends tax at the same rate as other income would also increase the tax bill for a lot of individuals. It will make the tax system simpler, but I can't see many people who have their own business agreeing to it.

 

[Tangled up in Blue]

I see Boris has now joined in the fray to suggest that no departmental spending should be ring fenced.Ever the populist.



http://www.theguardian.com/politics...ublic-sector-spending-cuts-clegg-prophylactic

 

[londonblue]

Corporation tax is levied on profit not revenue. If you want to levy tax on revenue then you have to tax loss making businesses as well.

The Guardian Media Group had revenue in 2012 of £254m yet paid only £100k corporation tax. That is an effective rate of 0.39%. Is this an outrage, Barna, or does the fact that the Guardian made a loss, just as Amazon did, make a difference????

The difference is that Amazon engineer a loss to ensure they don't pay corporation tax. The Grauniad just isn't doing very well.

You can't use Amazon's profit/loss to work out they amount of tax they should pay because they engineer a loss to avoid tax. If you assume a net profit percent of, say 10%, then Amazon UK should be paying corporation tax on about 10% of their revenue, not the 0.1% they are paying, i.e. they should be paying about 100 times more than they are paying.

 

[Neil_F]

The difference is that Amazon engineer a loss to ensure they don't pay corporation tax. The Grauniad just isn't doing very well.

I repeat - Amazon made a loss globally in 2012. They may have made more of a UK profit if they sold goods from a UK company but they don't, as they are entitled to do under EU law, domestic law and the relevant double tax treaty.

 

[chapperzUK]

The difference is that Amazon engineer a loss to ensure they don't pay corporation tax. The Grauniad just isn't doing very well.

You can't use Amazon's profit/loss to work out they amount of tax they should pay because they engineer a loss to avoid tax. If you assume a net profit percent of, say 10%, then Amazon UK should be paying corporation tax on about 10% of their revenue, not the 0.1% they are paying, i.e. they should be paying about 100 times more than they are paying.

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/m03.htm

So lets say that they make a 10% net profit on the £2.9bn net sales figure in 2011 - £290m profit and using the simplest calculation they could pay up to £69.6m in corporation tax. There are a few ways to reduce this, which is available to every UK company, and I bet they have a lot of equipment in their warehouse which would do this.

Instead they are paying around £2m in corp tax, a difference of potentially £67m. We can then see that they collected £416m in VAT and have around 4,200 employees putting possibly around £75m+ into the back pockets of UK citizens. These will also pay tax as well as the company contributing to National Insurance.

 

[londonblue]

I repeat - Amazon made a loss globally in 2012. They may have made more of a UK profit if they sold goods from a UK company but they don't, as they are entitled to do under EU law, domestic law and the relevant double tax treaty.

And I'll repeat. They engineer a loss to avoid tax in this country.

For clarity, I'm not arguing whether or not they're entitled to do that, I'm just pointing out that that is what they do, and by extension your point about paying tax on profits not revenue is missing the point.

When people point out that they pay almost no tax but have revenues in the billions, what they're trying to point out is that a company with huge revenue should be paying a level of tax far greater than they do. It's just a way to try and show what they should be paying, if they weren't playing the system.

 

[Napster]

And I'll repeat. They engineer a loss to avoid tax in this country.

So they're losing money to avoid paying tax? How would they present that to the shareholders?

 

[londonblue]

So they're losing money to avoid paying tax? How would they present that to the shareholders?

Their other offices "charge" them fees to process their orders so the money is transferred out of the UK, but stays within the group. I would imagine the shareholders would be happy because it means the group pays less tax.

And once again, for clarity, I'm not for a second suggesting they're breaking any laws. I just see it as not morally correct.

 

[chapperzUK]

They paid corporation tax last year though ...

 

[londonblue]

They paid corporation tax last year though ...

Ok. So they don't engineer a loss, they engineer a very small profit.

Which reminds me of a joke I heard many years ago when I was studying accountancy.

Three people went for a job at an accountants. The first person was called into an office, was given a trial balance and asked to produce a profit and loss account, and balance sheet. He did a fantastic job with everything in the right place, and a huge profit. He didn't get the job.

The second person was then called in and given the same trial balance, and the same instructions. He also did a fantastic job with everything in the right place, and a huge loss. He didn't get the job.

The third person was then called in and given the same trial balance, and the same instructions. This person then asked, "What do you want, a profit or a loss?"

That's about as funny as it gets for accountants.

 

[chapperzUK]

Ok. So they don't engineer a loss, they engineer a very small profit.

Which reminds me of a joke I heard many years ago when I was studying accountancy.

Three people went for a job at an accountants. The first person was called into an office, was given a trial balance and asked to produce a profit and loss account, and balance sheet. He did a fantastic job with everything in the right place, and a huge profit. He didn't get the job.

The second person was then called in and given the same trial balance, and the same instructions. He also did a fantastic job with everything in the right place, and a huge loss. He didn't get the job.

The third person was then called in and given the same trial balance, and the same instructions. This person then asked, "What do you want, a profit or a loss?"

That's about as funny as it gets for accountants.

The sad part is you are right about that. Unless you're an arse like me and find it hilarious when a client does something completely wrong when they think they are being smart.

Of course what Amazon do is legal and also very cheeky, but at the same time who wouldn't do the same if they could?

If I said I could help you save £5k on your personal taxes, would you honestly say no? This is pretty much the same, but on a much bigger scale.

 

[londonblue]

The sad part is you are right about that. Unless you're an arse like me and find it hilarious when a client does something completely wrong when they think they are being smart.

We used to have a very dodgy client who would buy identical cars every couple of years, and swap number plates so that the cars' values were distorted. It got to a point where we had to check the chassis numbers instead...

Of course what Amazon do is legal and also very cheeky, but at the same time who wouldn't do the same if they could?

That is exactly my point. In fact, if I were an accountant I would be telling my clients to do the same. I may find it morally wrong, but it would also be morally wrong of me to not do the best job I could for my client, or at least give them the option.

If I said I could help you save £5k on your personal taxes, would you honestly say no?

Of course I would. If you could save me another £5k after what my accountant has done you'd probably be breaking the law! Joking aside, It really depends on what you'd be suggesting. If it's a Jimmy Carr type deal I would say no...

 

[chapperzUK]

That is exactly my point. In fact, if I were an accountant I would be telling my clients to do the same. I may find it morally wrong, but it would also be morally wrong of me to not do the best job I could for my client, or at least give them the option.

The job is to do the best by the client and it really does come down to the ethics of the accountant, and there are a fair amount of ethic guidelines for accountants.

Of course I would. If you could save me another £5k after what my accountant has done you'd probably be breaking the law! Joking aside, It really depends on what you'd be suggesting. If it's a Jimmy Carr type deal I would say no...

Well there are 2 things I can say, first is your accountant isn't very good and you need to switch* :winking: or if I increase the accountancy bill by £25k you will save £5k on personal tax - I didn't say save money overall :whistling:

*technically by saying this I am breaking several accountant ethics and codes on conducts!

 

[londonblue]

The job is to do the best by the client and it really does come down to the ethics of the accountant, and there are a fair amount of ethic guidelines for accountants.

There are indeed, although they don't cover everything. Have you ever heard of Mad Mike Hoare?

He was only struck off as a Chartered Accountant because whilst he was in prison he didn't pay his subs on time!

Hoare was a chartered accountant and member of the Institute of Chartered Accountants in England and Wales. Previously the Institute had said it could not expel him despite protests from members as he had committed no offence and meticulously paid his membership dues. His imprisonment allowed the ICAEW to expel him from membership in 1983.[3]