back to article Attention dunderheads: Taxpayers are NOT giving businesses £93bn

So I was a little surprised to be told by The Guardian that corporate welfare in the UK is, by a conservative estimation (obviously not a Conservative one, for it would be doing the victory dance if this were true) some £93bn a year. I was told this by that graduate of modern history, Aditya Chakrabortty, someone I have …

  1. Anonymous Coward
    Anonymous Coward

    The Truth of the Matter is this...

    ... that the burden of taxation and expenditure has fallen on individuals to fund tax breaks for large Corporations.

    This is why our children no longer have free University Education and will have to fund Off-Sheet balance items such as PFI for generations to come.

    Rather like Greece, except the Bubble still has to burst.

    1. The Axe

      Re: The Truth of the Matter is this...

      If you read any of Worstall's stuff and any economics stuff you would find that the burden of taxation always falls on individuals, never on corporations. Corporations are paper entities run by humans for the benefit of humans. They are just a contractual method of organising people. It is the people in the corporation and those who use its output (profit -> shareholders, product -> customers) who pay for the tax that the corp collects. The proportions are what economics people argue over, that employess, shareholders and customers pay the tax is not under dispute.

      1. P. Lee Silver badge

        Re: The Truth of the Matter is this...

        > ... the burden of taxation always falls on individuals, never on corporations. Corporations are paper entities run by humans for the benefit of humans.

        The first sentence is true, the second requires caveats.

        Taxation falls on nearly all the population, but Corporations are paper entities which concentrate wealth in the hands of shareholders and executives. They also tend to be anti-competitive, by which I mean they seek to use the legal system to block competition by other entities, particularly new entrants. Multi-nationals are also able to move profits around by operating outside government jurisdictions and moving money around fast than governments can update the law.

        Personally I suspect a large dose of xenophobia might be in order. The current legal system seeks to maintain a level playing field for local and foreign corporates. However, rather than playing fair, this just encourages all corporates to play the field and move profits and cost-centres around to circumvent the intent of the law. If we biased the tax system in favour of those obviously keeping operations and profits (and therefore taxes) within our own country then perhaps corporate tax receipts would be higher.

        I have no idea, for example why the UK government is so enamoured with MS (or any other foreign high-IP-value corporate), when it sucks so much value out of the UK economy for so little in return. You don't need to put up tariffs, but they could do more to encourage those who keep all their profits and tax receipts at home.

    2. Anonymous Coward
      Anonymous Coward

      Re: The Truth of the Matter is this...

      This is why our children no longer have free University Education

      No it isn't. There's two reasons why our kids no longer have fully funded higher education. The first is that a certain grinning war criminal decided that 50% of school leavers should go into further education. Unfortunately, instead of useful subjects and apprenticeships, this meant a vast increase in the number of people studying, and unfortunately most of these additional places were for Medicated Izal degrees - sociology, journalism, hair dressing, sports science, media studies and the rest. It was this same Labour government that introduced tuition fees, because this massive increase in tertiary education couldn't be funded despite Blind Gordo's enthusiasm for shovelling billions of pounds of debt onto future generations (like the PFI that you mention).

      The second reason why we don't have free further education is because that puffy faced lightweight we've endured as prime minister for the past five+ years decided that handing £12bn a year out as foreign aid was a better way of spending what limited resources we do have, and that despite a range of tax increases to try and reduce an unsustainable budget deficit, it was better to further increase tuition fees. I select foreign aid because it was a decision taken at the same time as increasing tuition fees, and because it has a similar quantum as a fully funded tertiary education system would have.

      This has nothing to do with corporations, and everything to do with a political elite who for fifty years have been busy drawing up the ladder they themselves climbed, whilst pissing money away on crap. So the grammar schools were largely abolished by Labour party tossers who'd benefited from them. Maggie (IIRC) started the abolition of student grants (having enjoyed a scholarship at Oxford). Labour came back with tuition fees, with Blunkett loading debt onto graduates, unlike his own fully funded degree at Sheffield Uni. The current shower of piss have made things worse still (with the support of the now-extinct Liberal Democrats), despite all enjoying state support for their education.

      So, make no difference which party you thing represents you, they all think the same, and they've all shat upon our higher education system, and in particular on the poor buggers going through it. Bastards the lot of them.

      1. This post has been deleted by its author

        1. Anonymous Coward
          Anonymous Coward

          Re: The Truth of the Matter is this...

          As a result we have been doing the same to our own former colonies, depriving them of skilled people.

          If your logic were correct, then it would be a zero sum game, and it wouldn't matter that UK graduates went overseas, because the colonials we hired in their place would be paying taxes anyway. In net terms the UK benefits in tax terms from international mobility because so many major businesses are based here, so we have more graduate-standard job opportunities for our grads, and foreign grads coming in to take jobs also pay taxes here.

          And at the end of it all, even if there were a net outflow of graduates it wouldn't affect funding both because there is bugger all hypothecation in UK tax and spend, and because we are significant net exporter of education, particularly higher education.

      2. Naughtyhorse

        Re: The Truth of the Matter is this...

        Correction;

        the 50% target was introduced by the grey faced pea appreciator not the grinning war criminal.

        Also;

        Any and all references to fixing any problem by cutting foreign aid automatically qualify your post as a loss under the Godwin principle... only in this case you are the looser AND the nazi.

        1. Maty
          FAIL

          Re: The Truth of the Matter is this...

          'Any and all references to fixing any problem by cutting foreign aid automatically qualify your post as a loss under the Godwin principle... only in this case you are the looser AND the nazi.'

          It's Godwin's Law, and the general interpretation is that the first person to mention the Nazis is the loser. So you can add ignorance of Godwin's law to ignorance of economics and ignorance of spelling.

          On the bright side Sir, think of all the room you have for improvement!

      3. mathew42
        Thumb Up

        Re: The Truth of the Matter is this...

        > The first is that a certain grinning war criminal decided that 50% of school leavers should go into further education.

        This is the greater of the two reasons. A similar issue exists with the pension system whereas people live longer more people are entitled to a pension.

        The other issue with 50% having a university degree is that way too many people are trained in fields (e.g. law) for jobs that simply don't exist.

        1. JohnMurray

          Re: The Truth of the Matter is this...

          The problem with the state pension is that it was never intended that everyone receive it, only the middle classes.

          When it was started it paid two bob a week at age 75+.

          The life expectancy of the lower classes was 46 years at that time.

          THAT is the source of the state-pension problem, it pays-out to the lower classes now.

          1. Tim Worstal

            Re: The Truth of the Matter is this...

            Umm, no, not really. Life expectancy of the lower classes at birth was about that, sure. But life expectancy of someone at 14 or 16, about when they would start work and be paying taxes for a future pension, was rather higher....

      4. LucreLout Silver badge

        Re: The Truth of the Matter is this...

        @Ledswinger

        decided that handing £12bn a year out as foreign aid was a better way of spending what limited resources we do have

        It's not aid. It's bribes. If we just called it what it is, cash to private individuals for access to their countries markets, people would better understand what the money is for and why paying it is essential. It allows our largest companies direct access to markets they'd not otherwise have, and to repatriate profits here which fund large chunks of our public expenditure.

        And that, very much, is of greater value to the country than some new law graduates, or further "Medicated Izal degrees". Which is a wonderful term I intend to co-opt and make use of.

    3. tom dial Silver badge

      Re: The Truth of the Matter is this...

      It would seem that the Greek problem is that they never managed to reach a primary surplus or put forward a remotely plausible plan to do so,. That would lead naturally to the conclusion that they could not repay any amount of debt in a finite number of years, something that quite understandably concerned their debtors. The reason for failure, whether government giveaways, tax fraud, or other corruption, appears to a first approximation quite immaterial.

      1. veti Silver badge

        Re: The Truth of the Matter is this...

        @tom dial: the Greeks did reach a primary surplus, quite a large one, from 2012 to 2014. It was purely their debt repayments that turned that into a deficit. And then came their current crippling depression. Any government that runs a primary surplus while it's got 25% unemployment is a government that's simply not doing its job.

        But that is precisely the requirement the donor nations have laid on Greece. And while one can see their point of view - everyone wants to get their money back - I for one can't help but think, this is pretty much the same as the obligation that got laid on Germany in 1919. And I can't see the outcome being any happier.

        1. Tim Worstal

          Re: The Truth of the Matter is this...

          Necessary to be a little careful about that Greek "debt burden". Because there's two different things here.

          There's the total amount: €320 billion or so. Which is indeed unpayable in any conventional sense.

          Then there's the actual cash flow: Around 2% of GDP, rather lower than most other EU nations.

          For the debt burden has been alleviated. We all understand that a 50 year mortgage at 0.1% is much easier to pay than a 10 year one at 5%. And the maturities of the Greek debt have been pushed out (up to 50 years on some of it). and the interest rate cut to the bone (some tiny number of basis points about Euribor I think). The net effect of which is that the net present value of that debt is about half the headline figure.

          If we're honest about it Greece could pay that debt back. Without all that much of a squeeze. Simply because the terms are so favourable.

          If only the place had it's own monetary policy so that it could get growth going again.....

          1. codejunky Silver badge
            Thumb Up

            Re: The Truth of the Matter is this...

            @ Tim Worstal

            "If only the place had it's own monetary policy so that it could get growth going again....."

            Careful Tim your heading into little englander territory. Its kinda like the days when we were called eurosceptics but before we were so blindingly proven right that the word dropped out of use.

    4. LucreLout Silver badge

      Re: The Truth of the Matter is this...

      @AC (the first poster)

      The irony being there is simply not one ounce of truth or accuracy contained within your post. Not one.

      This is why our children no longer have free University Education

      When university was free it was for the best and the brightest. Roughly 10%. You can't extend that system to literally half the country without financing it. Since all the tax money was lashed up the wall on public sector wages, and a shed load more borrowed money to boot, the only people left to pay for this were the students themselves.

      have to fund Off-Sheet balance items such as PFI for generations to come

      Much as Ed Balls and Gordon Browns grasp economics were as disastrous as they were comical, their PFI hangover will only take about 30 years to clear, rather than several generations. You're too harsh on them, which is not something I'd ever expected to write.

  2. Anonymous Coward
    Anonymous Coward

    You missed off tax credits allowing companies to pay lower wages although this is now being changed at the expense of those people it was designed to help because there is no way companies are going to increase wages to cover the shortfall. How much did/does that amount to?

    1. Tim Worstal

      Tax credits is a difficult subject really.Paper of mine discusses it here:

      http://www.adamsmith.org/research/reports/abolish-the-poor/

      Benefits that are paid only conditional upon being in work *could* be subsidies to employers. Benefits that are not subject to a work requirement *cannot* be, in fact they operate to raise wages, not reduce them.

      As it happens the general view is that some 25 to 30% of working tax credits does end up as a subsidy to employers. but the influence of the benefits system as a whole is very definitely to raise wages.

      1. Mark 65 Silver badge

        So does that mean that the Tories capping benefits acts to reduce wages? Does that then necessitate that they will try raising the minimum wage to compensate, putting a higher floor under the unit cost of labour, and thus reducing the number of jobs at the bottom?

        I'm guessing benefits cause wage increases as you need to pay more money to entice someone away from their Sky TV subscription.

        1. codejunky Silver badge

          @ Mark 65

          "I'm guessing benefits cause wage increases as you need to pay more money to entice someone away from their Sky TV subscription."

          Or pay someone who came to this country to work the lower wage which is still more than in their home country.

      2. LucreLout Silver badge

        @Tim Worstall

        Any chance you could do a future article on the Guardians tax avoidance, initially via the Scott Trust, but then onto and beyond their offshore structures with the venture capitalists? By my back of a fag packet calculations, they've avoided about £250M to 300M using one loophole alone.

        If they wish to campaign on issues of tax, then they should first be whiter than white.

        1. Tim Worstal

          Re: @Tim Worstall

          That's about right. But then I applaud them for doing it (not the hypocrisy of course). Because people tax dodging lowers (yes, lowers) the rates the rest of us have to pay. Government watches people avoiding and realises that they'd better not raise rates because more will do so.....

        2. Cynic_999 Silver badge

          Re: @Tim Worstall

          "

          ... they've avoided about £250M to 300M using one loophole alone.

          "

          There's no such thing as a tax "loophole". A "loophole" implies using a rule to your advantage in a way that the rule was never intended to be used. The government get to change the tax rules in pretty much whatever way they like every year. If therefore they *still* have not managed to draw up a set of rules that work as intended (despite the use of the same "loopholes" year after year), it would go far beyond incompetence and be completely ridiculous. The only reasonable conclusion is that the way the rules are being used was fully intended and foreseen by the rule-makers.

          Unless you also believe that whenever you are not charged VAT on a loaf of bread, you are making use of a tax "loophole" and you should really be *insisting* on paying it.

  3. Anonymous Coward
    Anonymous Coward

    I agree that taking people out of taxation and removing the employer's tax would potentially solve the problem however I do wonder if the loses of tax would be too big a burden for the government to cover because the way I see it the influx of cheap labour has driven a lot of industries wages down. I've seen that first hand in various roles working in different industries from the fork lift truck drivers through to general office staff. There's also outsourcing of IT/Analyst departments which then lowers the wages for anyone left as backup to cover the UK part of the business as generally and from my experience they go for the junior staff to cut the wage bill. In my opinion it's all a complicated subject that isn't helped by politics, it's a shame that can't be taken out of the equation.

  4. Anonymous Coward
    Anonymous Coward

    Interesting from your briefing paper about housing benefit, I didn't actually realise the point that it actively encourages employers to raise wages higher due to the fact that any small wage rises would be meaningless because the employees housing benefit would be offset. Which in effect leads back to the 93bn because eventually even if that figure was correct it would reduce over a period of time due to the employers wanting to keep their good employees.

  5. bitmap animal

    Interesting writeup

    That is quite an interesting write-up, refreshing to see someone explaining and challenging the shock tactics of some journalists.

    As the article explains there is no way a tax break is handing the company money, if allows them to keep trading and building the economy. People have tax breaks too, that is what your tax code is all about, you can save tax by investing in an ISA – that is a mechanism for people to avoid paying tax.

    Companies also pay many other taxes, a point often ignored. Business rates for example, I just did a quick search and found a 1600 sq ft shop in Lean St, Covent Garden. Business Rates were £69,000 p/a for 2012, that is for a small shop and Business Rates are just another tax and they get nothing for it.

    1. Tim Worstal

      Re: Interesting writeup

      Business rates are really paid by the landlord, not the renter.

      The shop is "worth" x to the person renting it. That's what they're willing to pay, in total, for the use of it. Whether 1% of x or 50% of x goes in tax or rent doesn't make any difference to that perceived worth.

      The landlord cares a great deal about what that percentage is.

      1. bitmap animal
        Thumb Down

        Re: Interesting writeup

        Tim, I do not agree with that. Business rates are a very direct cost to the business. Is that like saying the cost to a company of an employment agency is paid by the employee because to the company it's all part of the total employee cost to their business. I think that is very flawed.

        1. DaveDaveDave

          Re: Interesting writeup

          Rates don't add any value. Recruiters allegedly do. But clearly, there's a split incidence when it comes to their fees. Certainly, I've been in negotiations with a candidate already known to the business, where the lack of recruitment fee was a bit of extra cash in the pot to be split between the company and the applicant (however the split was negotiated), so it does work out in practice.

      2. phil dude
        Boffin

        Re: Interesting writeup

        @TimWorstal: Business (Non-domestic) rates are paid by the business in a property not the landlord.

        Business rates are payable even if there is no business in a property, which was introduced to force renters to rent - plenty of loop holes I am sure....

        Please fact check better.

        P.

        1. DaveDaveDave

          Re: Interesting writeup

          "Business rates are payable even if there is no business in a property, which was introduced to force renters to rent - plenty of loop holes I am sure...."

          Payable by and incident on are not the same thing. All PAYE taxes collected are actually handed to the Revenue by employers, for example, but you wouldn't say they're paying their employees' taxes for them, would you?

          Business rates are widely accepted to be incident on landlords, not tenants, because the businesses will only pay a certain amount to occupy any given property. If the tax is higher, the rent will be lower. So the tenant hands over the cash to the local council, but it's the landlord who's really paying in that she's receiving lower rent.

          1. Anonymous Coward
            Anonymous Coward

            Re: Interesting writeup

            I'd argue there's a certain level of elasticity in that argument though. If I occupy the premises because I consider it just about offers me value and then the council smash up the business rates and I choose to stay then you are always going to argue, inherently, that I have re-evaluated their worth and thus opted to remain a tenant. I, however, would argue their worth to me has not increased but that rather there is a large cost of relocation. It is the inherent friction of changing that warps the argument. In the absence of relocation costs, both physical and business, then your argument carries more weight. As with much in economics "absent of transaction fees" is not an appropriate stance and items cannot easily be substituted as often hypothesized.

          2. phil dude
            Boffin

            Re: Interesting writeup

            What are business rates?

            These are taxes charged on non-domestic properties – such as shops, offices and pubs – to help pay for local services. You will have to pay business rates if you are using a building, or part of a building, for anything beyond just living there. Business rates based on the value of the property.

            From this article, in clearer English than the govt speak

            P.

            1. I ain't Spartacus Gold badge

              Re: Interesting writeup

              phil dude,

              You're still wrong though. Even if you have done your research.

              Who pays the tax is not the same as who suffers the tax. That's tax incidence.

              I'll be paying out £20k to the VAT man in a few days. Sadly the company's cash, not mine. But neither I, nor the company, is actually paying that tax. Nor (at least to my knowledge) are any of the companies who we invoiced - and got paid that VAT money in the first place. We're somewhere deep a chain of business transactions, many invoices away from the poor customer - who actually gets to swallow that VAT bill. All of us bill it, all of us claim it from what we buy, and all of us pay the difference back to HMRC.

              As another example it's widely considered in economics that companies do not bear the cost of Employers Contribution to National Insurance. They have to pay it of course. They also hand over the money for employees NI contribution and income tax - and deduct that straight out of the pay packet. But the assumption is that in two countries with identical personal taxation and economies, but one where no employers NI had ever existed, the same total amount of cash would get paid out in wages and payroll taxes, it's just that wages would be higher in the country without employers NI. That's the amount of money employers want to hand over to their staff, and that's what they'll pay, it's just the government is intercepting a bit more of it. Obviously when you change an already existing system, things won't change smoothly.

              The same is considered to be true of business rates. Companies can afford a certain amount for their premises, and a working market will eventually bring them to roughly that. Because what markets do is to ration scarce resources. So if you're not willling to pay as much as other people, you won't get the shop you want. Or won't keep it for long. Therefore if the government is taking some of that cash companies have to spend on thie premises - that's coming from the landlord's share.

        2. Tim Worstal

          Re: Interesting writeup

          Economic incidence of a tax and cash incidence of a tax are not the same thing. Your employer hands over the cheque for your income tax with held. Anyone think that your employer pays your income tax?

          The economic incidence of business rates is on the landlord.

          And of course Davedavedave has beaten me to it. And the friction argument has some merit but that's at the margin, not the main point.

  6. James Anderson

    When I read the article

    My immediate though was Tim will have a field day with this.

    While they may have had a point about not collecting enough tax from business they totally blew it by their ridiculous assertions.

    They actually totally missed the real point. Its not not governments are generous with tax breaks to multinationals. Its more a case of however hard they try whatever cash box they try to raid always turns out to be empty.

    1. Eric Olson

      Re: When I read the article

      Yeah, even the raging left-wing loon I am understood how that part of the article fell down and Tim was right to point out the absurdity of it.

      And to the point of tax breaks, it is hard to discuss them in a forum such as this. I would define a tax break as a subsidy in a like-to-like scenario: If Widget Producer A and Widget Producer B were headquartered in the same tax jurisdiction and the same sector manufacturing the same widgets and they both had comparable financials, but one had a reduced tax bill, that is a subsidy. A real-world (though United States-based) is when looking how a state or even city works to lure a company to expand or relocate. This is often done by providing a refund for or an exemption from state taxes on profits, the same to property taxes, or special credits for certain types of purchases, wage levels, or things like that. Things that a competitor would not be able to get, even if they were located next door because they didn't bother to pit various states or cities against each other for an expansion.

      In some situations, like the enticements to a company to invest in a distressed area, might in fact be more beneficial to the economy, a tax jurisdiction's general fund, or both. But others, like the sales, property, or profit taxes, are often done with little consideration to what it will look like it 10, 15, or 20 years when that exemption or agreement runs out.

      In the US at least, those can be very expensive and have arguable benefits (a company will expand when there is demand for it, regardless of enticements by the government; it just might have picked a different jurisdiction). Texas is notorious for this and in 2012 alone refunded or exempted $14.9 billion in state taxes. That's just madness, as in most cases, the companies reaping those rewards still would have done what businesses do.

  7. Will 28

    So how didn't he get it?

    I often wonder with your articles, if they didn't get your point, or if you didn't get theirs. It's not that I disagree with your article, we just haven't seen his response to you, or any indication of "how" he hasn't understood what you're saying.

    Depreciation of assets isn't a complicated concept, we learned about it in GCSE business. The tax rules surrounding that, and the concept of only taxing profits are so simple, that I struggle to believe that when you're directly explaining this to a researcher that has been doing a research paper in this area, he is left scratching his head. Did he in fact make some other argument for why these should be considered subsidies, or did he flat out not get the concept of time?

    1. DaveDaveDave

      Re: So how didn't he get it?

      There was a bit of back and forth on Tim's personal blog.

      http://www.timworstall.com/2015/07/08/bwahahahaha-15/

      Don't think it's all there, but the start is. You want to ignore almost everyone except Tim himself and the chap going by 'Pellinor'. The rest is sheer blather.

      As far as I can tell, this Farnsworth bloke is entirely ignorant of how the tax system actually works - he thinks capital allowances are paid in that amount to companies, rather than being deductible from profits before tax is paid on those profits, for example. He has no intention of listening when anyone tries to explain it to him. He's either malign, or enjoying the money/attention he's currently getting, or someone's useful idiot. I'd go with a combo of the last two: he's believed a bunch of myths because they fit his prejudices, and now he's getting fame for regurgitating them.

      1. tom dial Silver badge

        Re: So how didn't he get it?

        It has been popular here in the US for some years to state as fact that anything the government does not take in taxes constitutes a government "tax expenditure". Thus, the dependent exemption on the personal income tax form, or the mortgage tax exemption is transformed into a "tax expenditure", especially when the deduction claimant has above-median income. This is the stuff of the Guardian article.

      2. Tim Worstal

        Re: So how didn't he get it?

        Pretty much it. And Pellinor is a tax lawyer by profession.....

    2. Anonymous Coward
      Anonymous Coward

      Re: So how didn't he get it?

      Depreciation is easy to understand once you get the idea of assets on a balance sheet.

      Suppose you start with £1m in cash. You then buy a £100K lorry. Your business now owns:

      * £900K in cash

      * a lorry worth £100K

      In total, the situation hasn't changed: you haven't made a "loss" of £100K, you have simply swapped one type of asset for another. In principle at least, you could sell on the brand new lorry for £100K to someone else.

      The lorry is going to reduce in value as it gets older (and used), and that's what the depreciation reflects. If you were to sell the lorry in a year's time or two year's time, you would get back less.

      That's the only sort of "loss" or "profit" which matters: the decrease or increase in your total assets. And that's what the government taxes. As the article explained, a "capital allowance" just lets you offset the entire cost of the item against this year's profits, instead of spread over several years.

      If a supposed tax expert doesn't understand this, then heaven help us all.

  8. James Anderson

    The point where I concluded this guys an idiot.

    Was the 15 billion or so attributed "to airlines and other industries not paying fuel tax"

    Well its actually "road fuel tax" and its a tax targeted at people driving on roads. Its partly a simple tax to fund the enormous expense of building maintaining and policing our busy roads, and, partly social engineering to try to encourage people to cycle, take the train, walk anything but drive a car (a goal most Garniad readers would approve of).

    If they did tax aircraft fuel the same a filling station fuel. Then you would probably end up driving to Paris or Amsterdam to catch a flight to New York. It would simply be uneconomic to operate an aircraft from the UK because no other country in the world taxes aviation fuel.

    Incidentally if you are plowghing a field, pottering about on a canal, digging a hole, fishing for herring, consuming gin on your floating palace then you will also be receiving this "gift" from the taxman.

    1. Anonymous Coward
      Anonymous Coward

      Re: The point where I concluded this guys an idiot.

      Road tax collects 25 billion. The government spends 5 on roads. This is just another way of forcing Joe Public to pay a greater burden of tax than billion dollar companies should be doing.

      1. JonP

        Re: The point where I concluded this guys an idiot.

        Road tax collects 25 billion. Except there's no such thing as road tax. There's vehicle tax, but that's a tax on the, er, vehicle based on its size and emissions and such. Companies that buy lorries, cars etc pay the same tax as everyone else.

      2. Anonymous Coward
        Anonymous Coward

        Re: The point where I concluded this guys an idiot.

        There are perfectly credible calculations showing how the government subsidises the use of private cars, though it's hard to say by how much as it depends on exactly how you do the calculations. Building and maintaining the roads is a relatively small part of the total cost of road transport. There are also medical costs, damage caused by pollution and the cost of policing, for example. There are also things that are almost impossible to put a figure on, such as the loss of personal freedom for children and the elderly who can't drive and can no longer safely use a bicycle because of the traffic. It's also very difficult to assess how much of that loss of freedom is due to road transport and how much is due to the neglect of other forms of transport. In some cases they could have, and still could, put bridges over a motorway, but they don't bother. In other cases cars have taken over all places where a footpath or cycle path might have been located.

    2. Anonymous Coward
      Anonymous Coward

      Re: The point where I concluded this guys an idiot.

      If they did tax aircraft fuel the same a filling station fuel. Then you would probably end up driving to Paris or Amsterdam to catch a flight to New York.

      Already works like with air passenger duty, although people don't drive, they just fly short haul to somewhere civilised (like Schipol), and take the long haul flight onward from there.

    3. JohnMurray

      Re: The point where I concluded this guys an idiot.

      Fuel used to propel a boat on inland waterways is taxed at the full rate, and liable to vat.

      Fuel used to HEAT the boat is rebated. In fact the tax is applied based on a formula that allocates a percentage of fuel purchased to propulsion and heating.

    4. Joel 1

      @James Anderton

      "Incidentally if you are plowghing a field, pottering about on a canal, digging a hole, fishing for herring, consuming gin on your floating palace then you will also be receiving this "gift" from the taxman."

      Actually, if you are pottering about on a canal, you now have to pay duty on the diesel you use. If you also use diesel for heating, then you get that without the diesel - you have to allocate a percentage of your fuel that you use for heating.

      Thus, liveaboards pay little duty, but cruisers pay much more.

  9. Anonymous Coward
    Anonymous Coward

    The majority of UK Tax burden is not being paid by companies...

    ... the bill is being paid by regular employees from their wages and daily spend.

    I did the maths on my wages using my last personal tax contribution a a regular employee earning 50k before tax. Then 100 people like me pay more tax than the billion dollar Amazon company!

    Their schemes to move money and hide profits means they contribute fek all to the tax pot.

    When are you going to do an article on how much tax normal working people pay(e) via wages and daiky tax (vat, fuel, booze) compared to those billion dollar companies who apparently earn nothing so pay nothing.

    1. diodesign (Written by Reg staff) Silver badge

      Re: The majority of UK Tax burden is not being paid by companies...

      "When are you going to do an article on how much tax normal working people pay"

      Tim's covered this. See Reg passim.

      C.

    2. DaveDaveDave

      Re: The majority of UK Tax burden is not being paid by companies...

      "Then 100 people like me pay more tax than the billion dollar Amazon company!"

      You pay more tax than an entity which makes no profits? Do you also object to paying more tax than homeless guys begging for small change?

      1. Naughtyhorse

        Re: The majority of UK Tax burden is not being paid by companies...

        To be fair the homeless guy is genuinely skint, Amazon.... not so much.

        which kinda points to the breakdown of the all taxes land on individuals argument, thieving bastards like amazon and starbucks et al are syphoning money out of the economy reducing the overall tax take, and hence the opportunity for the govt to invest (debatable as to whether or not this is a bad thing) and don't tell me that if amazon had to pay the appropriate amount of tax that would increase cost to the consumer, because that is bollocks.

        The costs would be the same to the consumer, and there would be a shitload more schools and hospitals in this country.

        1. bitmap animal

          Re: The majority of UK Tax burden is not being paid by companies...

          Firstly that is just looking at one type of tax, businesses pay many taxes.

          Secondly, as an employee you work out how much money you need to take home to survive. Income tax and NI are effectively paid, in most cases, by the company in order to give you X amount of cash in your pocket. Because you can have several income streams and to appear to spread the burdon of tax it's calculated at the person, but paid by the company.

        2. DaveDaveDave

          Re: The majority of UK Tax burden is not being paid by companies...

          Skint? What's skint got to do with it. Amazon don't make a profit, so they don't pay tax. When they do make bigger profits in future, they'll pay more tax in total. That's not a bug, that's exactly how the tax system is intended to work. (And of course anyone paying UK tax selling shares in the interim will pay CGT on the gain in value.)

          " thieving bastards like amazon and starbucks et al are syphoning money out of the economy reducing the overall tax take"

          OK, how about we leave the thinly-veiled antisemitic conspiracy theories out of it for today? They'll only complicate things.

          "don't tell me that if amazon had to pay the appropriate amount of tax that would increase cost to the consumer, because that is bollocks"

          You can't just make up your own facts when the reality isn't convenient.

          "The costs would be the same to the consumer, and there would be a shitload more schools and hospitals in this country."

          Because those dirty, dirty jooz are gouging the hard-working gentiles, right, and if we just have a few pogroms we can take their vast hoards of cash and use it to give the good Christians back what those dirty, dirty jooz stole from them...

          1. Anonymous Coward
            Anonymous Coward

            @DaveDaveDave - Re: The majority of UK Tax burden is not being paid by companies...

            I find it amazing how Amazon can thrive and grow for decades without making any profit at all. Now in a total unrelated matter, can I please be taxed on my profits and not on my income ? Or should Amazon be taxed on income like I am ?

            1. DaveDaveDave

              Re: @DaveDaveDave - The majority of UK Tax burden is not being paid by companies...

              "I find it amazing how Amazon can thrive and grow for decades without making any profit at all"

              Really? Because reinvesting profits is a hard idea to understand, or because deliberately encouraging companies to reinvest profits is a hard idea to understand?

              "can I please be taxed on my profits and not on my income ?"

              No pensions? Paying voluntary tax on the untaxed portion of your income? Why/why not?

            2. Sigfried

              Re: @DaveDaveDave - The majority of UK Tax burden is not being paid by companies...

              Christ, don't be f***** stupid. If you levy a turnover tax or perhaps a value added tax, then that gets added to the price YOU pay. Recognize that with VAT ? Ultimately all taxes are paid by individuals and only individuals benefit. "Amazon" don't need no schools, hospitals, etc, it's owners, employees and customers do, and they're the ones that ultimately pay (and in some cases benefit from) taxes.

              Amazon doesn't make serious profits simply because it's business model is to keep on growing and approximately break-even in terms of profits.

              This whole corporate taxation "thing" is quite simply a bit of misdirection applied by socialists and others who love to take other people's money to distribute so they can claim to be the generous ones. Real people pay all the tax ultimately, but politicians just love to target indirect taxation like company tax so they can pretend that you (as a customer or employee for example of Amazon) aren't being taxed, whereas of course you are but in many small amounts so you don't notice, or even blame the intermediary rather than the root cause. But get this, however levied, you are ultimately paying.

              1. Mark 65 Silver badge

                Re: @DaveDaveDave - The majority of UK Tax burden is not being paid by companies...

                Amazon et al need a functioning legal/policing system and all its associated costs to keep people from just looting their warehouses and stealing whatever they feel like, breaching copyright etc etc. Best they contribute towards that at least.

          2. John Brown (no body) Silver badge

            Re: The majority of UK Tax burden is not being paid by companies...

            "OK, how about we leave the thinly-veiled antisemitic conspiracy theories out of it for today?"

            WTF? Are you saying that the primary shareholders/board members of Amazon and Starbucks are Jewish? Seriously? Does anyone commenting here actually care enough to look into the religious background of these people and and choose to single out these companies based on that? Or are you finding "conspiracies" where there are none?

            I personally have no idea what, if any, religion Bezos follows but would be interested to know a ball park figure for his income tax considering the value of his cars/planes/boats/houses and what they cost to buy, operate and maintain. Maybe he just "borrows" then from the company? Do people in the US pay tax on "goods in kind" or "use of company resources", eg I pay extra tax for "private" use of my company car.

            1. DaveDaveDave

              Re: The majority of UK Tax burden is not being paid by companies...

              "Are you saying that the primary shareholders/board members of Amazon and Starbucks are Jewish?"

              No, of course not. What kind of antisemitic loon would you have to be to think such a thing? What on earth does it have to do with what I wrote?

          3. LucreLout Silver badge

            Re: The majority of UK Tax burden is not being paid by companies...

            @DaveDaveDave

            I agree entirely with the economics of your post, but unless I've missed something (hey, it happens), the person to whom you were replying didn't seem to mention race/religion. Why is it relevant?

      2. Steve Davies 3 Silver badge

        Re: The majority of UK Tax burden is not being paid by companies...

        To be more correct,

        They (individiuals) pay more tax than a foreign owned entity that has adopted the 'Hollywood' accounting method where even the biggest blockbuster makes no profit yet the Studio owners don't seem to be filing for Chapter 11.

        Everything is relative. The likes of Amazon do make a profit otherwise how else can they stay in business? Oh yes, the slight of hand accounting and cough, cough dubious licensing.

        1. DaveDaveDave

          Re: The majority of UK Tax burden is not being paid by companies...

          "The likes of Amazon do make a profit"

          Not a taxable one.

          "otherwise how else can they stay in business?"

          Because they're reinvesting the profits year after year. And our tax system is deliberately designed to encourage them to do that. The idea that they're screwing the honest worker by finagling the system in some way to avoid paying their fair share is an old antisemitic conspiracy theory with a thin layer of makeup smeared on it.

          1. Adrian 4 Silver badge

            Re: The majority of UK Tax burden is not being paid by companies...

            I have certain expenses in order to live, work and generate profit. Such as having premises to operate from (a house), fueling my body with food, and getting to work by car or public transport.

            Without spending this money I would not be able to earn anything.

            Why, then, are they not offset against tax ?

            1. gotes

              Re: The majority of UK Tax burden is not being paid by companies...

              I have certain expenses in order to live, work and generate profit. Such as having premises to operate from (a house), fueling my body with food, and getting to work by car or public transport.

              If all your living expenses were tax deductible, I would imagine the personal allowance would be abolished.

            2. 9Rune5

              Re: The majority of UK Tax burden is not being paid by companies...

              "Why, then, are they not offset against tax ?"

              In Norway, the taxes are offset against you... (alright, that joke fell flat)

              Last year I sold my apartment where I used to live. So the tax man sends me a letter explaining very carefully that since it wasn't my primary residence I should be prepared to pay a hefty amount of taxes on the profits.

              So I had a good rummage around the ol' rule book. Turns out that I still work in that city and I commute over a long distance (360km). I used that apartment when I was too lazy to go back home in the evening. There was a huge list of things I could suddenly deduct... A food allowance was indeed one of these things. Oh, and of course the distance I have to drive is a deductible as well. All this comes on top of the standard deductible which is already set pretty high. Utility bills? Deductible!

              Instead of paying extra taxes on the profits from selling my apartment, I ended up cashing a "subsidy" (harharhar) of more than 3000 pounds.

              Personally I think this is ridiculous. Had I paid the extra taxes, the government would have pissed it away on nonsense. Instead I had to put in extra effort in order to save myself some cash AND save the government from becoming even less efficient (apparently that is possible).

          2. DocJames

            Re: The majority of UK Tax burden is not being paid by companies...

            OK, how about we leave the thinly-veiled antisemitic conspiracy theories out of it for today? They'll only complicate things.

            This statement of yours is probably why you were asked if Amazon and Starbucks are predominately Jewish organisations. It's pretty obvious when reading the thread. You introduced it; you were asked by puzzled commentards about it.

            The idea that they're screwing the honest worker by finagling the system in some way to avoid paying their fair share is an old antisemitic conspiracy theory with a thin layer of makeup smeared on it.

            Thanks for the explantion. However I think that this idea has a broader history than just antisemitism. And although there are conspiracy theories around, I also think that there is truth in some assertions that companies avoid tax, hence screwing the honest worker who has to either 1) live in a less salubrious environment as there is no money to pay for upgrades or 2) pay more in tax themselves in order to allow the government to invest in society.

        2. tom dial Silver badge

          Re: The majority of UK Tax burden is not being paid by companies...(Hollywood Accounting Method)

          The studios make a profit on the services they sell to the independent entities that produce the film. The (natural person) partners of the producing entity collect salaries or purchase the bonds of the producint entity. Simple bookkeeping takes care of ensuring there is no "profit". While this is partly made up on the spot, and the actual structures in use surely are more subtle and complex, it is clear that rivers of cash do not imply a profit.

      3. Jagged

        Re: The majority of UK Tax burden is not being paid by companies...

        "You pay more tax than an entity which makes no profits? Do you also object to paying more tax than homeless guys begging for small change?"

        - Is that sarcasm? Not sure :/

  10. David Roberts Silver badge
    Coat

    Get those figures higher!

    As a taxpayer I pay tax on my whole income. I don't get any allowance for expenditure necessary to keeop me clothed, fed, warm and housed. So this policy of only taxing profits is a massive subsidy to business from every tax payer! I do get a tax fee allowance but this in no way reflects my essential annual expenditure.

    Mine's the one with the empty pockets.

    1. Mage Silver badge

      Re: Get those figures higher!

      Clue is in the name "Income Tax". It's not a tax on "profits".

      There ARE allowances against Income Tax.

    2. Anonymous Coward
      Anonymous Coward

      Re: Get those figures higher!

      As MD of a business with a turnover of about £1.2 million, employing 11 people, I feel constantly burdened by tax. VAT, Employer's NI, business rates, Corporation Tax.... it's never ending.

      We do get an R&D tax break, which reduces the Corporation Tax bill. We also pay dividends as a salary top-up for directors, but unlike salary these don't reduce your CT, so the company still pays tax on the full amount of profits and the individual pays tax on the dividends... you eke out a SMALL saving. And, if we eventually sell the business, we'll have significant Capital Gains Tax to pay (hopefully mitigated by a bit of Entrepeneur's Relief).

      The point is, the bulk of our profits AND any savings we make on R&D are ploughed back into the business to generate growth (we hope), so we employ more people, all of whom pay tax and generate higher profits, on which we pay tax. Any good business will reinvest profits this way and it's an engine of growth for the economy. Sure, there are greedy multinationals, but that's far from the whole story.

      We pay very reasonable wages and export our software services. If we were taxed much higher, we'd be stagnant. Britain needs small businesses like ours and it needs us to grow and invest. Don't tax us out of existence.

    3. Richard 12 Silver badge

      Re: Get those figures higher!

      You get, at a very minimum, £8060 absolutely tax-free. (NIC primary threshold)

      Then the next £2k at 12% (NIC only)

      1. John Brown (no body) Silver badge

        Re: Get those figures higher!

        "You get, at a very minimum, £8060 absolutely tax-free. (NIC primary threshold)

        Then the next £2k at 12% (NIC only)"

        Apart from the fact almost everything you buy is taxed, even using that "tax free" income. Some is even even massively "double" taxed, VAT on fuel duty, VAT on alcohol duty etc. And the lower your income, the more, proportionally you pay since there's none left at the end of the month to save or put in an ISA to earn more tax free income.

        1. DaveDaveDave

          Re: Get those figures higher!

          "And the lower your income, the more, proportionally you pay"

          There's a lot that people on low incomes buy which is not vatable. A way to make VAT a more progressive tax would help, though it's going to be complicated - we'd have to track people's vatable purchases and then charge a percentage relating to income.

    4. David Roberts Silver badge
      Joke

      Re: Get those figures higher!

      Just to note (returning to the thread and re-reading the expanded comments) that I had assumed the coat icon would suggest humour and possibly sarcasm.

      I was amazed to see that some people were actually taking it seriously. I agree with Tim's analysis and was trying to suggest the original author had missed a trick when artificially inflating the figures.

      Seriously, if my living expenses were set against my income for most of my life I wouldn't have paid much income tax. Obviously revenue would have had to be collected via other routes.

      Icon update? --->

  11. BobRocket

    Facilitating Evasion

    Allowing legitimate business expenses to be tax deductible also facilitates tax evasion (think personal use of company stationery/vans etc.).

    If there were no deductibles the comany would pay tax on all purchases, make less profit and pay less corporation tax (net neutral) but no privileged individuals (those with access to company property) would have an advantage.

    Whilst I agree with the ASI that tax thresholds should be higher to remove those on the minimum wage from paying tax, that is not ideologically acceptable to some politicians (community charge v domestic rates)

    1. James Anderson

      Re: Facilitating Evasion

      Corporation tax is a tax on profits.

      Profits = the money you made selling something - the cost of making and selling it.

      "tax deductible" just means you are allowed to claim it as part of the expense of making or selling your goods or services. So for a bakery the flour, sugar, water, electricity, rent, advertising, running the delivery van, wages are all "tax deductible".

      If nothing were deductible then corporation tax would be a tax on sales and not a tax on profits. At which point most small businesses would think sod this and shut up shop. Large businesses would move to somewhere with a saner tax system, and you would be paying twice as much for psudo bread at the big supermarket.

      There is a massive amount of case law about what is tax deductible and what is not and it is constantly changing at the margin. If you drive your bread van home in the evening is this a legitimate expense of baking bread or are you getting a free ride home?

      1. bitmap animal

        Re: Facilitating Evasion

        "If nothing were deductible then corporation tax would be a tax on sales and not a tax on profits"

        Example of why tax on company turnover will not work, two companies both turning over £1M to make this simple.

        Company one has to buy bricks/mortar/vans/sub contractors, spends £950k per year on all that thus making £50k profit. 10% tax on turnover is £100k. BANG, no company

        Company two is one chap in his bedroom selling whizz-bang software. Costs are £20k per year. 10% tax of £100k leaving him with £880k.

        Not a bad situation for Co #2 but totally destructive for Co #1

        Companies MUST be able to deduct costs from their tax bill.

    2. BobRocket

      Re: Facilitating Evasion - correction

      I fear James Anderson and bitmap animal have got me bang to rights there on the first two paragraphs and I was wrong.

      I stand by my third paragraph (that is until someone pulls that to bits as well)

      1. David Dawson

        Re: Facilitating Evasion - correction

        I fear James Anderson and bitmap animal have got me bang to rights there on the first two paragraphs and I was wrong.

        I stand by my third paragraph (that is until someone pulls that to bits as well)

        ---

        Well played!

        As a pragmatic libertarian (if there is such a thing), I have a loathing of tax being seen as a 'good thing'. I agree that it's necessary for a high functioning civilization, but is still fundamentally theft applied via the states monopoly on force. So I certainly don't embrace it and shiver whenever the state is invoked to overpower a section of society for the 'common good', whatever the intentions.

        The bit that is missed in this discussion (about income tax brackets) is VAT. VAT is applied at every point in the value chain. It is then ultimately charged to consumers, individuals. Since this doesn't take into account relative income, it falls disproportionately harder on lower income individuals. I'm convinced (although I have no proof to hand) that this has a larger effect that income tax.

        There are a variety of VAT exemptions designed to mitigate this. From a certain point of view, they could be seen as tax breaks one stuff needed to live, food, childrens clothes etc. I see it as the government not demanding it's pound of flesh in certain circumstances.

        Also, it turns those of us that own/ run businesses into unpaid tax collectors operating on behalf of HMRC, on pain of fine/ jail. Do not annoy the VAT man, he is far less forgiving than the other side of HMRC.

        1. Greg 16

          Re: Facilitating Evasion - correction

          Levying VAT is a requirement of being a member of the EU. Even more annoying is that the EU take a percentage cut of it. They also impose all kind of rules about how it is applied - for example, the UK wanted to make ECO products VAT free, by the EU said no.

  12. John Sager

    Residual value

    The other thing that's missing is that plant usually has a residual value even when it's depreciated to zero. Though Rodney trashed the gearbox after 4 years, a new gearbox is a few grand and even unrepaired, the lorry could be sold for £50k perhaps. That comes straight back to the company as income to be added to profits & therefore taxed. So Farnsworth's argument holds even less water.

    When I stopped being a self-employed consultant, I had to look at the kit I had bought - server, UPS, laptop, etc - and written off in the first year under capital allowances. It still had residual value so I had to nominally pay myself the value of it and that went into the business accounts as income to go into the tax calculations.

    Of course, as Tim says, the "£93Bn subsidy to business" is now a Lefty article of faith, and won't readily be dislodged by rational exposition from Tim or anyone else:(

    1. JulieM Silver badge

      Re: Residual value

      If the lorry is still worth £50 000 after 4 years, then maybe the tax relief should be on the £50 000 by which you would still be down after buying it and selling it?

      Though even such a system isn't totally abuse-proof (since you can never get two people to agree on the value of anything), and adds administrative costs (since someone has decide what everything is worth, and someone else has to go around checking up on that). It's possible that we could all be worse off under an expensive-but-fair system than under a slightly-unfair one. (The Penny Post principle: if you charged for postage according to distance travelled, you might pay less to send a letter across town than someone in London sending a letter to Glasgow; but with the increased complexity of working out the postage, it would still be more than the penny you would pay under a simpler, fixed-price-anywhere-to-anywhere system.)

      Anyway, it's hard to make a profit without selling something, and that sale probably will attract VAT (since adding value to raw materials by using your labour to turn them into finished goods is pretty much the definition of business). So [i]some[/i] tax does get paid somewhere, and that already depends on sales as opposed to profitability -- and it ultimately gets paid by the same people.

      1. DaveDaveDave

        Re: Residual value

        "If the lorry is still worth £50 000 after 4 years, then maybe the tax relief should be on the £50 000 by which you would still be down after buying it and selling it?"

        It is done that way, at least as far as that depreciation curve is known in advance.

        You're right that there's a limit to how complicated there's any point making the system, and in fact that's roughly the approach the taxman takes _on this specific issue_. At the end of the day it doesn't make much difference at all whether something is depreciated in a way that exactly reflects the way the value changes over time, as long as the total depreciation is accounted for at some point - it's merely a cashflow issue (plus, as Tim noted, the value of that cash coming in sooner or later, which is pretty minimal in comparison).

  13. Dazed and Confused Silver badge
    Facepalm

    capital allowances

    Errr don't companies pay tax on profits? I know that's what the tax man hits me for.

    Capital allowances are a way for the taxman to stop me claiming back all the cost of the things I need to buy to run a business and provide work for other people etc, all in the first year. If I need to buy something expensive I have to find that money from somewhere, but I can't then write that off against my profit for the year.

    Capital allowances in most cases aren't a form a support the taxman gives me, they are yet another form of support that I give to him.

    Whether banks can find a way to make money out of them I don't know, but for small businesses they are a method of increasing the tax take.

  14. Anonymous Coward
    Anonymous Coward

    Depreciation

    Accountants rules for depreciation of assets are a joke because they assume that assets last X years and, in simplistic terms, depreciate by 100/x% per annum. Perhaps OK for fax machines, not for large machine tools.

    In reality capital plant may last many years and be subject to frequent upgrades as well as maintenance. I've visited companies where 40 year old machinery was running alongside state of the art stuff because for some jobs it was still the best. Of course, like the long lived axe, it might have had several heads and several shafts in that time.

    Being allowed to offset capital spend against tax in the year in which it is incurred has the merit of simplicity.

    1. Naughtyhorse

      the merit of simplicity

      Making tax simple and transparent is the last thing business wants, hence all the bollocks about tax on profits. If tax on income is good enough for the workers then it's good enough for the company, with suitably adjusted rates and allowances.

      The argument that 'most small businesses would pack up and quit' don't hold water, as I dont see that many individuals, who are taxed in exactly this way, making that choice.

      1. gnasher729 Silver badge

        Re: the merit of simplicity

        You are saying "tax on income". For employees, their income _is_ their profit. Well, it is in Germany where employees can deduct any cost they have to pay because they are working or trying to find work from their taxes; Britain is a bit behind there. Still, your income _is_ almost the same as your profit.

      2. codejunky Silver badge

        Re: the merit of simplicity

        @ Naughtyhorse

        "Making tax simple and transparent is the last thing business wants, hence all the bollocks about tax on profits"

        Your kidding. I can see accountants liking a complex tax system but it is the gov (especially last labour gov) who loved the tax system with as much complexity as possible. Nobody could figure out who owed what and HMRC loved sending me the wrong tax code for years in the hope of robbing me blind. Then there was the many ways to beg for welfare (beg for the money they just stole from you) that was so complicated that people had no idea what they should and shouldnt get, and neither did the various welfare bodies!

    2. gnasher729 Silver badge

      Re: Depreciation

      So what? Say I buy a machine for £100,000 and write it off over 4 years but it lasts 20. All that happens is that the writeoff happens a bit faster. If the machine is written off after 4 years, but still worth £75,000 and I sell it for that money, the £75,000 is profit that gets taxed. Rightly so. If the machine is written off after 4 years, and I use it for another 16 years, that means no capital deductions on that machine for 16 years.

      The fixed years rules are just there to simplify the calculations and to avoid endless arguments between companies and the tax people.

    3. Anonymous Coward
      Anonymous Coward

      Re: Depreciation

      The depreciation is supposed to be calculated over the useful life of the plant in question.

      If you depreciate a machine over 10 years and in year 12 you have it rebuilt so it can give another 5 years then you are doing it right.

      If you depreciate over 10 years and it happily runs on with nothing other than a squirt of oil every day, then you did it wrong.

      The tax authorities will have the expected life in a table somewhere. As well as the rules for calculating the worth and tax paid of the repair/rebuild/upgrade.

  15. Rol Silver badge

    Let's see..

    Food, clothing, rent, power, water, council tax, transport, five years of my life in higher education, many more years earning a pittance to attain that coveted crown called experience, entertainment, toiletries,etc. That is no way close to being an exclusive list of costs I have, and have had, to endure to be here today, but as far as the revenue people are concerned, only about £10,000 is considered.

    £10,000 ticks off the first 5 elements of my list, so why can a company tick off every minute cost it can conjure up yet I, as an individual, can't.

    Or is it a case of fool me, I should have incorporated years ago.

    1. Martin Summers Silver badge

      Re: Let's see..

      I've always wondered what would happen and even if it is possible to run your household as a Ltd company or such. I imagine it's too bloody complicated but the thought of claiming all the vat back and claiming food for the family and energy bills etc as a business expense is quite appealing. Has anyone ever done this or is it really only a pipe dream?

      1. DaveDaveDave

        Re: Let's see..

        Do you think the taxman's _stupid_?! The benefits received from your Ltd - free rent, feeding your family, etc - would be taxable.

        Aside from that, any transaction of no real substance can be ignored by the taxman. You can't do business with only yourself.

        1. Martin Summers Silver badge

          Re: Let's see..

          If you don't ask questions then you never find things out. I'd rather ask questions that people think I'm stupid for asking than remain in a state of ignorance.

          As for taxable benefits, surely there's a loophole Jimmy Carr style that would allow you to receive the taxable benefits. What if the family were treated as guests of the company or were perpetually loaned the use of facilities etc or even paid a loan they never had to pay back?

          1. DaveDaveDave

            Re: Let's see..

            I don't think you were stupid, but you weren't thinking there. The first question that should come to your mind when considering such matters is 'am I likely to be the first person to think of this?'

            "What if the family were treated as guests of the company or were perpetually loaned the use of facilities etc or even paid a loan they never had to pay back?"

            I'm pretty sure those are all specifically covered as BIKs. Loans below market rates certainly are. And when it comes to thinks like guests, or even cheap rents, the taxman will ask whether the deal is available to anyone else, or just to certain favoured people. If the latter, then BIKs again.

          2. Greg 16

            Re: Let's see..

            "What if the family were treated as guests of the company or were perpetually loaned the use of facilities etc or even paid a loan they never had to pay back?"

            There was a similar tax loophole that has recently been closed:

            http://www.accaglobal.com/za/en/technical-activities/technical-resources-search/2014/october/offshore-loan-schemes.html

            Basically a 'business' could set up an offshore 'employee loan scheme' - which gave 'loans' that were never intended to be paid back.

        2. LucreLout Silver badge

          Re: Let's see.. @DaveDaveDave

          You can't do business with only yourself.

          That's not wholly accurate... I can't expand on why publicly, but its not wholly accurate.

          1. Martin Summers Silver badge

            Re: Let's see.. @LucreLout

            "That's not wholly accurate... I can't expand on why publicly, but its not wholly accurate."

            There's always AC ;-)

  16. Christian Berger Silver badge

    Wrong first assumption

    We all pay taxes, therefore we all are taxpayers therefore our money is taxpayers money. Assuming that there is a fundamental difference between giving companies money directly or via the government is wrong.

    Of course you might say that you have less control about government money as you have to pay taxes. However you also have to pay for licenses for software you'll never use when you buy a new computer. Or you need to pay for DRM, even though that's the first thing you'll get rid of.

  17. Anonymous Coward
    Anonymous Coward

    Capitalism v2.0

    It's like first version but with a hefty dose of PR bullsh$%@#: poor profitless large corporations are being taxed to death while normal individuals (shame on them) roll in dough. There is no government who would not fall for this.

  18. Roland6 Silver badge

    Tim omitted the obvious explanation...

    Whilst I agree with what Tim wrote, I think he omitted an obvious explanation for the headline figure and why it is being framed as "Taxpayers are handing businesses...", namely, because the sums involved are known.

    I've seen exactly the same logic, as used in the Guardian article, to justify cutting back on tax allowances, pensions tax relief, etc. where monies are notionally, or actually, collected by HMRC and then "given back". This message goes down well in those quarters where people either have no aspiration or wear their social conscience on their sleeve and disengage their critical faculties... Obviously, applying exactly the same logic to tax credits and benefits just isn't done...

    Whilst there is some validity in looking at the amounts of money given out or back, there is a danger of taking this to the next step and say that a business offering a discount to it's customers is costing the taxpayer and hence that business should be paying taxes based on some notional GRRP (Government Recommended Retail Price) rather than on the actual amount invoiced and receipted...

    1. DaveDaveDave

      Re: Tim omitted the obvious explanation...

      "I think he omitted an obvious explanation for the headline figure and why it is being framed as "Taxpayers are handing businesses...", namely, because the sums involved are known."

      But the figure is inane bullshit. No such sum is 'known', because the whole thing is fiction.

      1. Roland6 Silver badge

        Re: Tim omitted the obvious explanation... @DaveDaveDave

        I suggest you read the Guardian article, the headline figure is based largely on sourced numbers (either directly or through calculations based on such numbers), hence the number hasn't just been plucked out of the air. However, what is questionable is whether the total figure has any meaning or validity and the interpretation being placed on this total figure, namely this is tax revenue monies the government would of been able to collect (and use otherwise ie. for welfare and benefits) if it didn't 'fund' all these subsidies to 'rich' businesses...

        1. Richard 12 Silver badge

          Re: Tim omitted the obvious explanation... @DaveDaveDave

          The total is based on counting the same coins multiple times as well as counting stuff that cannot possibly be considered a "subsidy". (Which is also counted at least twice, though I'm not a tax accountant so it might be more than twice)

          However, several of the numbers they added up are simply completely wrong - based on false premises.

          Anyone can get really big numbers that way, but the result is always meaningless.

          I got a tax allowance of £10k and a NIC threshold of £8k so I got £18k subsidy from the government!

        2. DaveDaveDave

          Re: Tim omitted the obvious explanation... @DaveDaveDave

          "the headline figure is based largely on sourced numbers (either directly or through calculations based on such numbers), hence the number hasn't just been plucked out of the air."

          Even if that's true, they've got the calculations wrong and misunderstood their source numbers. The guy responsible doesn't understand how capital allowances work at all. If you are allowed to offset depreciation against your profits, you only save the percentage of your profits that you pay in tax, for example. He hasn't even got the basics right. The number is ex recto, no question.

  19. DougS Silver badge

    Laffer Curve

    The bit at the end about the Laffer Curve made me chuckle. The Laffer Curve is obviously correct, that is there is some point where raising tax rates will cause revenue to decrease. The problem is, we have no idea exactly what that rate is, so we don't know what side of the curve we're on (especially since we have an overly complex tax system, with tax rates higher than they need to be, offset by deductions more generous than they need to be)

    The Laffer Curve is sort of like quantum mechanics. It is obviously correct, but it can't help us answer any questions about the actual world in which we live where taxes aren't flat and we don't interact with individual atoms and photons.

    1. Tim Worstal

      Re: Laffer Curve

      Yes....true about the rate. It's really only there to make the point about geese and ganders. Very high rates for rich people are counter-productive. And so are very high rates for poor people.

    2. MonkeyCee Silver badge

      Re: Laffer Curve

      "The problem is, we have no idea exactly what that rate is, so we don't know what side of the curve we're on"

      Actually we do, as there has been quite a bit of research on the Laffer curve :) It just depends on whether it's personal income tax or corporate tax you are looking at.

      In general, all countries are on the left of the apex of the curve for personal income tax, where "common sense" still applies. In other words, raising taxes (or increasing compliance) results in greater tax revenue, reducing taxes reduces government revenue. The inflection point is roughly 65% marginal rate. In otehr words, even when you have to earn two bucks for the government and get to keep one, then you'll still keep working.

      So a maximum marginal rate of 95% is not a good thing (apart from encouraging musicians to write songs about it), but anything under 65% should be fine.

      Now for corporate rates it's a lot harder, because they are almost always not a simple flat rate tax, so you get differing values for SMEs and bigger business.

      The biggest problem with the Laffer curve is that most people use it to justify what they want (higher/lower tax rate leading to higher returns) without actually following through with checking the data.

  20. This post has been deleted by its author

    1. Tim Worstal

      Re: off-topic article request - Grexit

      I can certainly do that. The problem is of course that the story is moving so much that anything I write today for publication tomorrow will be out of date.

      I might also not be quite, exactly, the right person, as I'm an extremist even by Ukipper standards. Thinking as I do that the EU itself is a bad idea, let alone the euro. So my conclusion is pretty much ordained.

      Will add it to the queue though, won't be this week: might work best as a counter-factual once we see what the deal is going to be.

      1. Greg 16

        Re: off-topic article request - Grexit

        "I might also not be quite, exactly, the right person, as I'm an extremist even by Ukipper standards. Thinking as I do that the EU itself is a bad idea, let alone the euro. So my conclusion is pretty much ordained."

        An article on the supposed 'costs' of us leaving the EU would be amusing. The Europhile view that every single job related to EU exports will be lost if we leave, is on about the same level of absurdity as the Guardian article.

        1. codejunky Silver badge

          Re: off-topic article request - Grexit

          @ Greg 16

          "An article on the supposed 'costs' of us leaving the EU would be amusing."

          He has already done that I believe. I seem to remember a while ago but I cant find the link. Have a look through his previous works it is there I am sure.

          1. Tim Worstal

            Re: off-topic article request - Grexit

            Indeed it is. Somewhere in there

  21. Tim99 Silver badge
    Trollface

    It''s simple?

    If Tim and @The Axe are correct with the idea that "the burden of taxation always falls on individuals, never on corporations" why don't we legislate that corporations do not pay tax?

    Any profits paid to individuals would be taxed at their normal tax rate. Profits shipped abroad are taxed at the highest rate of personal taxation. Foreign purchase/lease arrangements where a company gets product from another (foreign) division of the same corporation for sale within its home country by buying the product from a country with a lower tax rate is a current problem - The company is acting as a private individual might act to avoid paying VAT or corporation tax, so incoming purchases could be subjected to an import duty (just like a private individual who buys an expensive item while on holiday). Profits that are banked for more than a year within the country could be taxed at the VAT rate too.

    Ideas: I've got a million of them. Good ideas are another matter.

    1. Tim Worstal

      Re: It''s simple?

      "Any profits paid to individuals would be taxed at their normal tax rate. "

      That's pretty much what some countries do do. And pretty much everyone does that with interest.

  22. Hasham

    Question for you, Tim

    If investment in Plant and Machinery, and general scientific research etc, is such a good thing for the economy (and it undoubtedly is) why is there a cap on capital/research allowances at all?

  23. flangeorificial

    A benefit scrounger by any other name, would surely attract no wrath,.

    There's always the large sum of tax credits, paid to the poor people getting bent over a barrel by corporations not paying them a decent wage, or giving them enough hours to avoid paying their NI, pensions etc. Then, add the offshore "we're not making any money here, honest gov" methodology of shirking responsibility to support the people and infrastructure of the country you ARE making tons of money in, and they are the biggest benefit scroungers on the planet.

  24. Anonymous Coward
    Anonymous Coward

    What is the purpose of a Nation State? Read the articles and comments and it is clear many believe and argue that it is to maximise profits for the elite, an increasingly international Elite. If a person thinks that Nation States exist for the Elite (and IMO there are good reasons for such a thought) then, of course, the cost of running a Nation or at least the majority of the cost of running a Nation, should be carried by citizens, paid for by citizens.

    Today it is clear to many that Nation States do not exist for citizens. Citizens are seen as expenses. Resources belong to corporations, who graciously share some of their value with citizens via jobs and even by paying a small overall tax rate.

    A small over all tax rate when compared to the overall tax rates applied to the income and assets of citizens, but though small still so exorbitant that even those taxes are considered too high by some.

    Should any Nation State question the deference given to industry and business they will be reminded of who they answer to and why.

    Even the simple act of pointing out who and what carries a Nations tax load will result in a response. A response implemented and stated by those citizens who also believe Nation States should answer to the Elite, even when they are not part of that Elite.

    Which I think is the most interesting part of this issue. Why do so many argue against their own interests? I suspect politics and religion is part of that answer as they have always been irrational and a major tool in keeping people in line.

    1. Greg 16

      "Today it is clear to many that Nation States do not exist for citizens. Citizens are seen as expenses. Resources belong to corporations, who graciously share some of their value with citizens via jobs and even by paying a small overall tax rate."

      What are corporations and who owns them? Do you have a pension?

  25. Anonymous Coward
    Anonymous Coward

    As an accountant with a sociology degree, I'd like to know much El Reg subsidises Worstall for this. There are a number of errors in Worstall's rebuttal, first and foremost being the ad hominem attacks he makes on Chakrabortty and Farnsworth.

    Social policy isn't sociology, but being a sociologist doesn't necessarily discount you from knowing anything about economics or taxation. Nor does being a history graduate. And clearly, from the error-strewn response, Worstall being an economist means that you don't have to actually know about economics to write pop, and you shouldn't confuse economics with accounting.

    1. Tim Worstal

      As an accountant therefore you know that capital allowances simply are not a subsidy, yes?

      And as I repeatedly say, I am not an economist.

  26. Greg 16

    Ten out of ten for trying, but....

    Tim, I can understand your frustration, but it's best to just ignore them and let them live in their weird little world. They don't even understand the difference between profit and turnover, so despite how well you explained your point, their eyes will just glaze over and you'll be accused of being an evil racist kipper or something like that.

  27. Dave 15

    Tax system

    Indeed the tax and benefits system is just plain broken.

    I as an individual pay tax on the money I am given... why are companies only paying tax on 'profit'? Why can't I write off the cost of my car, fuel, transport, clothes, training (degree) etc?

    The current situation allows large companies to offshore their profits to low tax countries... not illegal but hardly fair - I can't offshore my salary to pay no tax.

    What we need is a simpler system.

    A single flat benefit for all people legally in the UK

    A single flat tax on all earnings/takings for people or companies in the UK.

    This would be simple, transparent and so easy my laptop could run the system from the corner of the kitchen. I would not need to have a huge paper shuffling group of people processing benefits claims and tax.

    Further doing it this way would allow people to go fruit picking in the summer, or take low paid jobs (allowing us to ditch the minimum wage) and to take a chance on a business idea without worrying their family would starve. It would also mean that those with only benefits would move from London etc. to cheaper areas so balancing the cost of housing over the country.

    1. gnasher729 Silver badge

      Re: Tax system

      You can become a contractor. Start a one man limited company. Don't get income anymore but send bills to the people you are working for. You won't have to pay one penny of income tax anymore if you don't want, just tax on profits.

      Guess what: Your "profits" are all the money your company makes, minus the salaries that it pays, minus the cost that is directly used for the business. Buying tools for the business is tax deductible. Paying the rent for your home isn't.

      (Now there are countries where any cost that you have because you are employed or because you try to find employment is tax deductible. Like transport to work, training that you pay for yourself etc. )

  28. Anonymous Coward
    Anonymous Coward

    Ideological pundits ranting about "corporate welfare"

    "I've no doubt there's similar nonsenses being perpetrated by people I sometimes agree with as well..."

    Indeed. For example one T. Worstall, a month and a half ago:

    http://www.theregister.co.uk/2015/06/03/worstall_on_wednesday_elon_musk_spacex/

    "This week, the LA Times has done us all something of a favour by totting up how much Musk and his companies have got from the various tax pots lying around the political terrain — and it's billions!"

    Holy crap! Taxpayers are literally paying billions of dollars to Elon Musk!

    If you're paying attention and know what to look for, 8 paragraphs later you find him walking it back:

    "Yes, this does include the rebates that people get on buying an EV, the grants to install solar panels and all, and that's not money that flows directly to the companies. But..."

    But then in the second last paragraph he goes back to screaming:

    "...then selling that idea and those companies back to the bureaucracies that write the cheques."

    Holy crap again! A bureaucrat is literally writing a cheque for billions of dollars and just handing it to Elon Musk!

  29. Anonymous Coward
    Anonymous Coward

    So can someone help me?

    I've read the article and the comments, and I can't tell whether my hard-earned cash is literally buying cocaine and Bentleys for idle and semi-psychopathic CEOs of global companies who hate our beautiful land and want to force us all into mindless consumption of over-priced branded Chinese sourced tat, or am I indirectly funding terrorism? And is there any correlation with the rise of house prices in my area?

    1. I ain't Spartacus Gold badge
      Pint

      Re: So can someone help me?

      It's simple. If you're pirating music or films then you're funding terrorism.

      However, if you're legally buying films and music, then you're funding cocaine and Bentleys for idle music execs.

      If you're buying Apple, then you're being hypnotised by the reality distortion field and become a mindless consumer of cheap Chinese tat.

      If you've read the article, and all the comments, then that's ten minutes of your life that you'll never get back.

      My suggestion is to say "sod all this for a lark" and drink copious quantities of beer.

  30. Sulky

    Still Banging on about the £93 billion!

    Or actually it's just £89 billion now, they've just said on PMQs they won't remove green energy investment (tax breaks, subsidies, hand-outs) take your pick!

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