tobyaw: (Frogmarch 2002 - Whitby)
posted by [personal profile] tobyaw at 10:16pm on 06/11/2012 under , , ,
There have been news stories over the past weeks about large, usually multinational, companies, and the paltry amounts of corporation tax that they pay in the UK. It strikes me that there are two things at play here.

Firstly, corporation tax is an incentive not to make profits. Corporation tax is payable on trading profits and capital gains, after investments and allowable expenses. So if an organisation wishes to invest in growing its business, it makes sense to incur the costs of doing so rather than to make a taxable profit.

Secondly, with our European single market, it is normal for international companies to have their business based in a country with favourable tax rates, and to declare all of their profits there. Unless tax across Europe is harmonised, there will always be an incentive to base a company in a low-tax country. Indeed, countries compete to be the European base for international companies, and the need to offer more competitive tax rates explains why the corporation tax rates in the UK have been falling in recent years.

Multinationals might be trading — and might be profitable — in the UK, but much of their value can be created overseas, whether through manufacturing or through intellectual property, and it seems right that their costs follow their value.

Mind you, I’m not too worried about whether or not companies pay their corporation tax in the UK — while the revenues are significant, it is nowhere near that raised by income tax, National Insurance, and VAT.

Tax on profit is abstract in a loss-making world. I’m much happier with keeping companies honest with a tax on employement (PAYE) and on trade (VAT).
location: St Andrews, Scotland

Links

June

SunMonTueWedThuFriSat
        1
 
2
 
3
 
4
 
5
 
6 7
 
8
 
9 10
 
11
 
12
 
13
 
14
 
15
 
16
 
17
 
18
 
19
 
20
 
21
 
22
 
23
 
24
 
25
 
26
 
27
 
28
 
29
 
30