Don't wanna pay taxes
Don't use the facilities e.g. roads.
eBay is not paying enough tax in the UK because it sells everything through PayPal Luxembourg. So the Sunday papers tell us, adding to the stream of stories about how Starbucks ain't payin' enough tax, Google ain't, Apple isn't and... well, we're being taken to the cleaners as a nation, aren't we? We provide this lovely country …
Don't use the facilities e.g. roads.
Corporations themselves do not use the road. The truckers do :) OK, kidding...
On a more serious note, in any case, the idea to remove corporate tax altogether is actually sane. They are avoiding it anyway we might as well stop trying to chase them.
However it must be complemented with unavoidable, blanket, uncoditional no-tax credit taxation on everyone, including the corporation owners. The real ones. The ones who have boats parked along the Antibes marina in Cote-d-Azur (mostly with British flags by the way).
Frankly, we are more likely to see Lucifer driving a snowplough to work than this happening.
Companies don't use schools'n'hospitals.
But they benefit from their products and care. Without these their workforce would not be educated to a basic level or healthy.
Don't call the police or the fire brigade when your offices are torched by looters!
"Don't use the facilities e.g. roads."
In the US there's already taxes collected for that already. Between the states and the feds there are taxes on fuel, truckers vehicle registration fees, interstate tractor and trailer licenses and God knows how many toll booths and weigh stations. And that is still not enough to take care of the highways. Somebody doesn't know how to spend taxpayers money. More taxes will be just more money to be pissed away while still nothing gets done. Things can't be that bad in the UK?
Corporations use public roads, rely upon the Federal Government to enforce their copyrights and patents, benefit from police and military protection. People forget the reasons behinds those in early 1900's for calling corporations evil. They still are. Apple does not put much of its business overseas because of taxes as much as hiring cheap labor in third world nations to do their business. The people of the United States benefit little from the operations of Apple. Many other corporations are just as greedy as Apple.
In the 1950's when corporations and the rich paid their fair share of taxes, the US became the wealthiest country in the world. Now the upper 1 percent and greedy corporations are rolling in cash, the bottom 99 percent are suffering!!!
I've shared a similar sentiment on this before. Get rid of corperation tax, increase minimum wage. Businesses still lose out on money to the people, and the people are actually far more likely to put that money back into the economy..
That and it still seems rediculous that I get paid the same wage to do a programming job out in the sticks as some highstreet shop employee with no education in London.
They do although indirectly.
The people who work for companies are assets just like the computer systems, buildings and machines used in those businesses. The health system provides for the people exactly what the maintenance companies provide for the other assets, maintenance services and support to make sure the company assets are capable of being used to allow a return on investment to be achieved through those assets.
Schools are like the people who create the computer systems, buildings and machines. They put out the items that companies will procure as assets in order to operate as part of the business.
Imagine what would happen if people didn't pay for software (or don't just read the register and see what they report on this subject).
It is important to consider all aspects of the issue and not the immediate links.
"But they benefit from their products and care".
Companies don't benefit from anything. Only the stake holders (shareholders and employees) benefit.
Those pro company tax seem to be trying to tax "rich fat cat" company owners, forgetting that they will be getting taxed when they draw dividends from the company.
But they miss the fact that company tax reduces jobs so also in effect taxes the employees too.
If you really want to punish the "fat cat" company owners then just increase the high earner tax rate. tThat makes far more sense.
> Companies don't benefit from anything. Only the stake holders (shareholders and employees) benefit.
By ditching corp tax, you add incentive to move shareholders (personal and corporate) to tax havens as they immediately gain corptax% extra income.
You're then down to trying to track how people re-import the money into the economy. They might just be sucking it all out and planning on living it up in Monaco or retiring to a beach somewhere. No tax taken at source, no tax payable later on. Or they might just be using a credit card, sipping small amounts of cash as they want it.
Now you've gone from a big lump sum (if slightly disadvantageous) payment from an easily identifiable source to tracking the lifestyles of individuals.
If you really want to people to do well, you need to clamp down on the mortgage market. Restrict the amount people can borrow. Mortgages work like taxes on income. Take out the house-price competition between purchasers - that will hurt a lot for existing owners, but in the long run, property prices will drop, people will have more cash and you can raise government taxes without taking food out of their mouths. A lower cost of living makes industry more competitive to do as workers need less cash to live and you can actually make things that people want rather than relying on financial and "IP" jiggery-pokery because that's the only thing that will fund your high-cost economy. Currently, 50%+ of income goes into inflatable house prices which benefits the banks (higher, longer borrowing). Its an unnecessary cost. Paying twice as much for a house doesn't double its benefit.
When will people learn that borrowing is bad? It is piling up future costs and eventually that bird comes home to roost. "It doesn't matter as long as we can service the debt," is an irresponsible attitude that pushes people far closer to the edge than they should go. House-price competition is a different animal to tomato-price competition and its evil to generalise to a theory and suggest its all the same.
Police and fire come out of rates: which businesses do pay.
Removing tax on corporations is regressive.
More tax on employee income, higher prices for consumers, less state spending.
That funds higher dividends to investors, those with private pensions and offshore interests.
Just another bubble to leach wealth fro many to few imho.
It's a choice. If you want an American system where you transfer vast amounts of money from lower income individuals to companies, then go ahead, this is the way. But explain your policy and let people vote for it.
It's similar to the argument that income taxes should be regressive:
A rich person uses services [roads, schools, hospitals, police] to a much smaller extent (relative to income) than a poor one. If you make say 5M a year there's just no way you use more than say 100K worth of government provisions so a fair tax rate would be 2%.
My personal view is that this is a strawman argument. I think the only reason you are making 5M a year and living in a relatively tranquil place, is because there's millions of customers that live in a relatively tranquil and well-run place. So the 50% (or 40%) income tax you pay (if you have a crap accountant, not hiding anything) is what allows your entire business model: you're buying an ordered society that lets you become filthy rich. [A possible alternative is a chaotic narcosociety where you can be even richer plus have a medieval power over the locals as well as be judge, jury and executioner; however you have a good chance of dying at a rival's hand, and you cannot travel outside your local powerbase or you get arrested and extradited to the US on trafficking charges... On the bright side, you pay no income taxes.]
The article's choice is with the "tranfer money to companies, then the little people who are stockholders benefit" camp, which is of course hogwash as you can only be stockholder with leftover money. Money you cannot count on to, you know, buy things or services (and hence let the economy grow), because stocks can go down or up at any moment; they're nest eggs that can turn out to contain either twins or nothing.
Road Tax? & fuel duty? you know, those taxes there to pay for the roads?
"Don't use the facilities e.g. roads."
A more useful facility provided by government for the purpose of taxing corporates is willingness to adjudicate contracts through the civil courts. Corporates and everyone else could be made to pay taxes based on money not legally transferring in respect of contracts becoming enforceable until a transaction tax is paid. A flat rate on each transaction could be taken by the financial service provider at point of payment, unless the recipient is a charity. This doesn't sit too well with continuation of use of cash, but the latter is getting as obsolete as the idea corporations shouldn't have to pay taxes because they can offshore if you ask them to. Corporations don't like handling cash anyway, so if the Tobin tax rate on transfer of payment is low enough (say 1% or less) this won't cause a large shift to using cash due to the security costs being greater than this for heavy cash users.
This would begin to rectify the injustice of the Forex dealer paying a tiny fraction of 1% on what he sells in taxes while the woman who cleans his floor paying 40-50% in taxes and loss of benefits for every pound she earns.
Vehicle Excise Duty and Fuel Duty are general taxes, everyone pays for maintenance and construction of the road network including those of us who don't drive a car or ride a motorbike. Vehicle Excise Duty hasn't been ring-fenced for road maintenance or construction since 1937 in the UK.
Now you know.
"A more useful facility provided by government for the purpose of taxing corporates is willingness to adjudicate contracts through the civil courts."
The commercial courts break even (more or less) on the fees companies pay to use them.
What a load of bollocks!
A fine example of a recursive post, I.e. your post is bollocks.
Now go and read the Dummies guide to Economics, then go and read the Dummies guide to posting on El Reg
Wow! I read Mr Worstall's article with interest and was swayed by his argument. But then, upon checking to see what El Reg's world-famous group of commentards had to say about the issue, I came upon your concise and thoroughly well-researched rebuttal which has completely changed my mind. Thank-you sir for preventing me from becoming misinformed about this complex issue which you have rendered so simple in my mind.
Dummies guide to economics - that will be the one that, like all the fucking economists, that didn’t predict the last few bubbles bursting.
Until economic theory matches economic reality - i.e. its not written by deluded capitalists who will blame everyone but themselves for the bust that matches every boom - you can take your books and use them as a cheaper method of heating than free market oil and gas.
Nice refutation. Did you win the school debate contest with that?
...and they keep using economic ideas from the 1700s, with ideal little villages where there are 10 cobblers and you (the customer or worker) can just as easily go to another one if your regular one is misbehaving. Kind of hard to believe that type of thinking is still applied to another planet. I'm sure much else has been added to it, but still.
Also, corporations and capital can move around freely and much more easily than physical people. Might seem counterintuitive, but think about it.
And finally, if the EU corporations are not burdened by the costs of the corporate tax described, I imagine their workers must be better off there and the corporations' products must have a lower price (before sales tax, VAT, whatever) than in the UK. I don't know if that is the case, but I seriously doubt so.
Everyone knows that economists have correctly predicted nine of the last five recessions.
If all the ecconomists in the world were lined up in a row, would they even reach a conclusion?
Lots of people saw the bubble coming. Captain Capitalism who used to be a US banker was one I remember, but also Simon Heffer wrote often about the UK's infatuation with debt (gov, personal and corp) many times while people were saying how great it is to be 'high geared' (i.e. hold lots of debt, like private equity firms). Simon Heffer in particular expended a lot of column inches on Gordon Brown's policy of inflating house prices to make people think they were getting richer. Heffer seemed to have a personal vendetta against Brown in his prose, but his numbers were probably right.
But since markets are actually people, markets are not rational, so while people can spot bubbles through simple ratios very easily (e.g. house price to earnings, which could well spell worse doom in China than here), it's much harder to predict when said bubbles will burst. And you can tell people the sky will fall in all you like, but if they keep borrowing and bringing forward the moment of collapse, what can you do? In fact there's a certain logic about following the herd even though you know it could all go pear shaped at any minute, because it might not happen to you and if it does, everyone else will have the same problem anyway, and it's even better if you get to be 'too big to fail'.
American here (Texan in fact, but an Austinite, so all is forgiven) Markets are not people. Corporations are not people. This is a legal fiction intended to allow, well, corporations to exist per se. That said, yes, corporations can be insane. Hum, OK let's go with not rational. Less loaded. It seems that the Ayn Randian meme that corporations (and people, for that matter) will behave in their own best interest is something that has infected far too many people. Our best use of government is to keep things from behaving irrationally. That might even make for a good definition. I am not sure quite where I am going here, but I consider myself a fiscal conservative and a flaming social liberal. I think that Lincoln's Gettysburg Address where he states "Of the people, by the people and for the people" is the most concise definition of socialism that I have ever run across. We here revere that without having a clue (/sigh). Shouty just simply because I am probably screaming into the wind.
I voted you up for your second paragraph, but I have to strongly disagree with your first.
People always moan and gripe, the fact that a few people were berating others economic policies is not the same as predicting a crash. Neither is predicting a crash any more credible than astrology if it lacks real explanatory power.
Almost all economists and observers got it wrong. Some people were lucky and they attribute this to economic savvy, some people simply had better principles and money which meant they were going to be fine whatever, but the majority really had no choice but to go along with the madness.
People have their own economic cycles - it's called life - and some were positioned to benefit and get out, some couldn't get out and others couldn't get in.
The problem with bubbles is not that they burst, but that if you don't get in you are geared into relative poverty, because even when they do burst there will be many people that got out and lets face it, people only care about the rich.
"Yes, corporations are legal people, this is true"
Erm, no. Maybe in America, but not in most of the world. So if you are talking about the EU, you shouldn't. Or you could just shut up generally and let non-extremists talk about tax in a grown-up way.
Yes, of course there is corporate legal personality. That's what a corporation is: a legal person.
And it very definitely applies inside the EU as well. It's actually been referenced in various directives and court decisions. For example, one of the reasons that a corporation can move domicile is because the EU says that both natural and legal persons have the freedom of movement.
Heck, I've actually got a little dormant company purely for the purpose (under the REACH regulations) of providing a legal person for the EU to sue if they should wish to.
I think you're confusing legal personality with the right to contribute to election campaigns.
" Or you could just shut up generally and let non-extremists talk about tax in a grown-up way."
He seemed fairly grown up. We may not agree with his argument, but the grown up way to discuss it is to counter his argument point for point, whereas telling someone to shut up is playground talk.
The concept of legal entity status for a business is actually implicit in the terminology used: "corporation". The root word is (ultimately) from "corpus", the Latin word for "body".
The US even goes so far as to refer to "incorporated" businesses – "to form into one body".
All businesses are just collections of people operating as one unit.
It's a shame etymology is so rarely discussed, let alone taught, in our schools. It would certainly stop all these ignorant assertions that "businesses are not legal entities". They really are. And the reason for it is, in programming terminology, "code reuse": if you can define a business as a legal entity, all the laws that apply to actual people can be applied to businesses too, thus we don't need separate sets of laws to stop businesses going around murdering people with impunity.
Granted, that's not how it ended up: the UK has such a Byzantine mess of tax codes, it's clear that there are serious flaws in the nation's tax system. When a system is that complicated, with such a terrible UI, it's a sure sign that it's very, very broken and needs to be fixed.
Corporate Tax makes no sense in light of the above. Business never pay taxes, because they're just avatars operating in "business-space" and have no physical existence in our own universe. They are artificial constructs for accruing profits and making their owners money. Their owners pay the taxes. Said owners react to those taxes by reducing operational costs – e.g. lower wages; fewer stores; less investment in R&D, etc. – to make up for that overhead.
The LibDems used to tout an alternative that was effectively automated: "Everyone pays 10% on their income." Banks would handle it automatically: any income that came into your account would be taxed at 10%. That's it. No tax relief. No complicated bollocks. I think they suggested a minimum income level threshold, but that's just detail. VAT would probably continue too, but, aside from making a lot of accountants redundant, it was effectively a flat percentage system. Very easy to manage. Very easy to understand. The simplest UI possible.
Naturally, given how many of the current generation of politicians have an accountancy background, it was binned at the earliest opportunity.
Shut up? It's quite amazing how stupid people think that shouting down smarter people is how rational debate works.
Sean Timarco Baggaley "Corporate Tax makes no sense in light of the above."
I agreed with you up to that point. In the UK, a limited company is an entity that shares many legal rights and responsibilities of a real person e.g. own property, shares and other trading instruments, sue others, be sued by others, buy and sell property or services. The last part means that limited companies and real persons, can make profits and therefore, pay taxes. If companies don't pay corporation tax, it offers a potential avenue for individuals to avoid taxes - for example, a politician living in a property owned by an offshore company.
Not surprising when "Prime Minister's Questions" is often the most reported "debate" in the British media.
Even though corporations are legal entities, in Europe (and in most civilized countries with a half decent legal system) the DO NOT enjoy the same legal standing as a person.
This happens in the US due to corporate sponsored decisions by the supreme court which lead to the aberrations we see in America today. Where corporation have most of rights of a natural person but manage to avoid a lot of the responsibilities.
"Banks would handle it automatically"
I can't think of what could possibly go wrong with that system...
"In the common law tradition, only a person could sue or be sued. This was not a problem in the era before the Industrial Revolution, when the typical business venture was either a sole proprietorship or partnership—the owners were simply liable for the debts of the business. A feature of the corporation, however, is that the owners/shareholders enjoyed limited liability—the owners were not liable for the debts of the company. Thus, when a corporation breached a contract or broke a law, there was no remedy, because limited liability protected the owners and the corporation wasn't a legal person subject to the law. There was no accountability for corporate wrongdoing.
To resolve the issue, the legal personality of a corporation was established to include five legal rights—the right to a common treasury or chest (including the right to own property), the right to a corporate seal (i.e., the right to make and sign contracts), the right to sue and be sued (to enforce contracts), the right to hire agents (employees) and the right to make by-laws (self-governance).
Since the 19th century, legal personhood has been further construed to make it a citizen, resident, or domiciliary of a state (usually for purposes of personal jurisdiction)."
"However, these deadweight costs vary depending on what type of tax we use to raise revenue. A handy OECD chart is excerpted here"
last but 1 para on page 1. That last word 'here' should be a link to the OECD chart.
Which means they are practically useless. Correlation, not causation, etc.
It is exactly like saying: see, people who have the highest salaries tend to live in places where income taxes are low. So if we lower income taxes, the people living here will automatically get a salary raise.
Correlation does not equal causation, certainly.
However, that does not mean that correlations should be discarded.
A strong correlation between two things is indicative of a relationship, and could deserve further investigation to discover if there is, in fact, a causal link rather than just a statistical anomaly.
Yeah, I think they've thought it through a little more than your I-didn't-bother-to-read-it-myself-but-I'm-so-smart-I-didn't-need-to opinion.
Nice table, love the waterfall effect that it has in the lower half but, and this I think is quite important, it is only a table with no explanation of the figures, has more asterisks than a French comic book and the methodology associated with the reported data is not provided. On that basis I think the the table is, in the context, of your argument useless.
Gah, apologies, Tim. I'm not sure what went wrong there. I probably made a note to include a link during the proofread stage, but forgot to sort it out by the time I got to the end - so engrossed was I in the material.
The link is in there now.
Back to yourself, at an inflated price so you can record a loss on your UK books, tax compliance. I'd call that very aggressive tax avoidance.
Are they selling to themselves, or are they franchises?
Sounds to me like the brand makes all the money while the UK shop owners get stiffed.
"Sounds to me like the brand makes all the money while the [local franchisees] get stiffed."
Is there a successful corporate franchise operation where that isn't the case?
Those big serverfarm outfits gotta do something with their off peak capacity.