"@d3vy - nope I'm not suggesting you put income tax up just stop some of the "creative" ways big companies and governments for that matter get around "paying" their top direct and indirect staff so that their income tax bill is drastically reduced.
>> But your suggestion was to "Instead make sure you tax the employees", you didn't specify only the top earners. I may has mis-interpreted your intent, It sounded to me like you were proposing removing UK corporation tax and increasing the tax employees pay, basically shifting the tax burden onto the people who cannot take advantage of the tax loop holes.
There are lots of reasons for basing your company on the UK instead of East Elbonia, not least of which it's hard to get your top talent to relocate to a mud hole.
>> Agreed, but I used Elbonia as an example, replace it with Deli.. or Shenzhen Plenty of talent there and low rates.
A higher wage bill can be money well spent. Also if UK companies paid no company tax it would remain an very attractive place to head up your business even if the employees couldn't avoid tax on their pay and shares.
>> You forget that with an increased wage bill the company becomes liable for more payments too.
Employers NI, PAYE and pension contributions would all increase as a result of a wage increase (not to mention the increased cost of sick pay, Maternity, Redundancy).
As for the numbered questions:
1 Freed from the burden of company tax small companies should do well. The tax is just shifted to the dividend paid to the shareholder.
>> The types of small business I was thinking of the "Company" and the shareholder would be more or less the same. Think small family run shops.. A husband and wife running a shop 50/50 share split, all you have done there is remove their corporation tax and increase their income tax, probably by similar amounts, no one is better or worse off and the shareholders of whichever FTSE100 company you want to mention STILL doesnt pay anything as they are not resident in the UK.
2 Freed of their tax burden the companies will make more profit that goes back to the shareholders as a bigger dividend.
>>See my answer above, youve just moved the tax burden from one entity to x individuals.
3 Fine if they are living in the Caymen islands, they can have their bank accounts there and pay tax there but if they are tax resident in the UK they will be taxed on their foreign earnings.
>> Ok... But that kind of goes against your point as facebook are based overseas, youve basically just said OK let them stop paying Corporation tax (the only tax we do get from them) and let their shareholders pay tax in their country of residence - which isnt the UK. So the UK still fails to collect any tax from any of their business activities.
The moderately well of people don't bother with off shore accounts. They are too busy getting on with life to ever get around to minimizing their tax bill.
>> I dont think thats entirely accurate. There are plenty of ways that "Normal" people can avoid tax and Im fairly sure a decent number of people do it.
The problem is, as always, TAX is complicated. Making a change to benefit one group often requires another group to take a hit somewhere... We could get rid of corporation tax* but then without imposing restrictions on how employees and shareholders and remunerated** its just going to mean less tax paid to HMRC.
* Being a contractor Im all for that, I'd get another £15k a year - but HMRC wouldn't see a penny - It would go straight into my pension.
** Which as stated above could be almost impossible given the shareholders will not always be employees/actual people (the shareholder could well be a pension fund).