I am wholly and utterly committed to low tax and efficient regulation. However, tax and regulation must above all be fair and equitable - that means low tax and light regulation for all. Our complex system has increasingly delivered a system that burdens SMEs, and firms with no significant exports, and favours global corporates. The cost of compliance with EU regulation is a case in point; a multinational can afford an entire department churning out environmental, risk management, human relations and equal opportunities policies, method statements, sustainability assessments and reports on complex systems of internal monitoring. A maker of hand-built sports cars operating out of three small industrial sheds in Suffolk, with one girl on reception and another in the back office, can't hope to churn out the same box files of redundant officiousness.
Likewise tax. A firm with a plant, a site, skilled workers, resources and substantial investment in the UK will always be at a disadvantage to the tax gypsies - the global corporates - who can pitch up in their generic Richard Rogers corporate HQ, install temporary staff and a few lawyers, and stay just as long as they're not bothered. The EU's senior unelected official was thrown out of office in Luxembourg (a small European nation about the size of Seattle) for encouraging corrupt tax avoidance that allows global corporates to harvest rich profits from one EU nation but pay minimal tax in another. And the scam isn't confined to the EU.
The advantages enjoyed by the global corporates mean they are crowding out national competition, enjoying supernormal profits and creating global oligopolies. The rest of us, meanwhile, pay taxes to build the transport and communication networks, the courts and legal systems, the schools and universities that they use for free without responsibility or care.
It may be legal, but it's wrong. And most folk can't console themselves that their pension funds are investing in these rootless and amoral firms and enjoying the profits - and those that can, may care to calculate that the potholed roads, the city centres lost to armed gangs and a generation that can't afford to buy their own homes just aren't worth the return.
ReplyDeleteSimplicity is the key - one rule for all.
A standard, flat-rate tax paid across the board by everyone for everything (with possible exceptions as per genuine social requirements) would be easily enforced, unavoidable and fairer for everyone.
Getting rid of vast swathes of tax lawyers would be a bonus too.
There are many reasons why people voted to leave the EU. We might in a quiet moment, reflect on whether we were being waysist, populissssssssst, xenophobic, or any of the other epithet carelessly spat out by the average dumb wemainer.
ReplyDeleteFor instance Boris has just sent a message to TCINT (the "something" in number ten), which demonstrates that he isn't concerned at all about the above, but does believe that the EU is bad for business, and that his immaculate use of our language will net him the premiership. He is a brilliant campaigner, and the tories might be about to "topple tressa", in order to "webuff wobbins", but in general... win for his party and himself, which ultimately is the goal.
Personally, I am not even sure that companies that operate wholly within the UK tax zone, with the exception of importation of raw materials, should be paying any corporation tax at all.
For me this is all about the choices offered by a democratically elected government (that we can chuck out), rather than those unelected crooked creeps in brussels.
To be brutally straight, membership of the EU has been responsible for an influx of costly poor immigrants from former communist countries, but compared to the massive quantities of young men arriving from african hellholes, for which OUR government is wholly responsible, it is a drop in the ocean.
In essence, if we want to alter the corporation tax regime, and charge more for those that are foreign owned and staffed and just use us a market place... If we want to, and if a campaign by say... "the 99%" manage to persuade us, we should be able to act. While we are at it, we can remind them where their Nikes and iPhones come from.
It's all about sovereignty and democracy, it is the best we can manage.
Juncker is about to be replaced by Selmayr, and that will be the full realisation of the german empire... Of that we should be really scared.
I would like see a 10% tax on all income, all sales. No ifs, buts, exceptions and exemptions. 10% of whatever money from whatever source belongs to the state. No varying tax rates and applied to all donations to charities too.
ReplyDeleteWhy tax companies at all? The tax ultimately falls on people, the customers, the employees, the shareholders.
ReplyDeleteA lot of problems arise by considering a company as a corporate 'person' when clearly it isn't. We are often told that the senior officers of a company carry heavy responsibilities and that is why they are 'compensated' so much, yet, when things go wrong, it is 'the company' that is liable i.e. the customers, the employees, the shareholders. Punitative damages should be based on and taken from the directors' 'compensation', only restitution for damages should come from the company's accounts.
"I would like see a 10% tax on all income, all sales. No ifs, buts, exceptions and exemptions. 10% of whatever money from whatever source belongs to the state. "
ReplyDeleteWell done, you've just closed overnight every business with less than a 10% profit margin. Indeed any with a profit margin of below 15% suddenly become marginal businesses, and if they fall into lower profitability may never recover.
A friend of mine runs a small restaurant, it turns over 150-200k/yr, her profit will be less than 10% of that turnover. So is she going to continue to run her business on no personal income, or is she going to close up and put all her half dozen employees out of work?
Do you have no idea of the difference between sales and profits? That sales can be in the hundreds of thousands yet profit in the low tens of thousands?
You could make an argument that while the global corporates may not be paying tax directly to governments they are still 'paying' an impost of sorts - all those paper shifters, policy coordinators, and compliance managers happen to be paying tax to the government on their individual incomes. They are also removing themselves from the costs-to-the-government of being unemployed.
ReplyDeleteSo while there is an imbalance between the global corporates and their smaller competitors the real 'winner' is the government, like the EU. Globally governments tax individuals, tax small companies, and make big companies their bag-carriers, all to spend governmental profits any damn way they choose.
Amongst the many reasons why I voted to leave the EU was the control of taxation of large multinational corporations. Leaving the EU means they can't pay corporation tax in Luxembourg, they have to pay it here in the UK.
ReplyDeleteThe reason I want a "proper" exit from the EU and not the measly watered down exit in the chequers deal is I want the majority of Business to be free from EU interference. Only 15% of UK GDP is earned by trade with the EU, so why will the other 85% be hamstrung by EU rules and regulations? Why should a business that does absolutely no trade with the EU have to produce goods to EU standards or use tools made to EU standards? Are British standards not good enough?
I voted to leave to remove the anti-competitive and unfair regulations imposed regulations imposed on small and medium businesses.
If I was in power I'd also scrap IR35 that imposes unfair restrictions on the supply of services by self-employed individuals. That's nothing to do with Brexit, but a tax introduced under Blair to help his corporate IT chums who didn't like self-employed contractors outperforming and undercutting them.
Mission-creep has seen it start to cause problems in the NHS now. The IR agressively taking individuals to court even when they pass all the tests for self-employment.
It's not quite that simple
DeleteJohn Smith Coffee house imports coffee beans on the open market bat 5p a cup, sells them for £1 a cup and makes a 95p gross profit
Starbucks UK buys coffee beans exclusively from Starbucks coffee holdings (grenada) for 95p a cup and sells them for £1 a cup, making a 5p profit
Businesses have a huge amount of control over where they pay tax and will quite reasonably avoid onerous taxation
One thing that pisses me off is our treatment of "charities" - and so they've taken full advantage of the benefits bestowed upon them.
ReplyDeleteNo business rates on their shops in Scotland and only 20% of business rates in England. That includes all their premises, like warehouses and the like.
Of course they pay no tax on their income and the "not for profit" outfits can - and do - make sure their admin staff get paid generously.
I could rant on for pages, but I'll keep this one short. It's a beggars muddle that's way past time for sorting - with a machete.
I once worked for a charity
DeleteOur CEO won regional CEO of the year and a £10,000 prize
All it cost was a £5,000 entry fee, a £10,000 expedited judgement fee and £20,000 of additional 1:1 coaching and guidance.
Do you have no idea of the difference between sales and profits?
ReplyDelete-Sobers
As BrexSShite put me out of business (micro biz with a lot of sales but very slim profit margin which was killed by the £ going down like a $20 whore), or rather was the final straw, yes thank you I am well aware of the difference between the two. I should have been clearer; the 'sales tax' would replace the VAT and be levied across the board from carboots to tampons, on all goods and services sold with no exceptions. I haven't been in a restaurant in the yuK since restaurant owners told me they didn't need, want nor value my custom , so i have no idea if restaurants here charge VAT on meals/services but i suspect they do...and probably at more than 10% ? So there would be no difference for your friend there.
My big oversight however was saying 'income tax' and not specifying that it was a 'personal' income tax. As someone above me notes taxing companies is somewhat of a golden goose meet axe affair. I'm not saying companies (and I use the word 'companies' to mean pretty much all 'business' before anyone else picks me up on that) shouldn't be taxed but that the paradigm badly needs rethinking.
Domo - is there nothing we can do in the face of this legal but unfair market manipulation?
ReplyDeleteA well-signalled windfall tax on the level of normal profits expected to accrue from a given sales volume, for large avoiders only?
Starbucks turns over £400m annually ... small beer in global terms, but making coffee is a business with few barriers to entry, and is an industry sector that should create employment, fill the high street AND pay a fair wedge in tax.
Agree with all, except the gypsy/pikey language - that's a gift to distractioneer finger-waggers.
ReplyDelete"I should have been clearer; the 'sales tax' would replace the VAT and be levied across the board from carboots to tampons, on all goods and services sold with no exceptions."
ReplyDeleteSo would a business be able to claim back sales tax paid in the course of trade and net it off against sales tax received from customers? As happens now with VAT, it being a tax on 'Value Added'? Or would every business have to pay 10% more for its supplies and charge all its customers 10% which would then go to HMRC?
Because if the former all you've done is reduce VAT to 10% across the board, and abolish the zero rates, meaning a huge transfer of tax burden from the wealthy to the poor (the wealthy pay VAT at 20% now on many of their purchases (cars, consumer goods etc, while the poor pay none on their food and 5% on their heat and light. You would put the bills up for the poor and down for the rich).
And if the latter then you've just put a 10% tax at every stage of the business supply chain - thereby favouring vertically integrated companies over specialised ones. For example - a person who milks cows and makes butter and cheese and sells it to the public would only charge 10% sales tax when someone bought a pint of milk or some cheese. But a block of cheese that is sold several times through the production process (Farmer sells milk to milk processor, 10% sales tax, milk processor sells processed milk to cheese maker, 10% sales tax, cheese maker sells wholesale cheese to supermarket, 10% sales tax, supermarket sells cheese to consumer, 10% sales tax) would end up being taxed multiple times and costing many time what it does now. Exactly the same product would be taxed entirely differently depending on how many independent entities were involved in making it. Given specialisation is what drives productivity, you've just reversed the economic growth incentive - you're subsidising low productivity (but vertically integrated from production to consumer) businesses over high productivity (but stand alone) ones.
On top of that you've then got to police every small trader and self employed craftsman who currently earns under the £85k VAT threshold, which in itself would be a massive disincentive for people to set up in business , and also a huge incentive to evade taxes........
The rich actually pay less VAT than the poor, being far better positioned to avoid it.
Delete@sobers the former option (obviously! I would have thought that went without saying ) . Sorry I don't buy into the 'protect the poor' line of argument -probably being the poorest of the poor myself its a bit of a chimera IMO.
ReplyDeleteAs to the policing of it, I would've gone into that a bit more but your original comment reminded me that Raed's topic was about global corporations not so much private taxation. I would rely on the honesty of shops/small businesses/private individuals (with absolutely draconian prison sentences for those who seriously abused that trust- the 'if your name is above the door you go to prison, tough shit if it was one of your minions' option)because one of major drawbacks to any tax system is the cost of collection and policing it. For example a paypal app payment after the car boot sale to your personal tax accountant for 10% of whatever you took that day. Collection costs to the tax payer almost zero . I would envision all those unemployed Chartered Accountants and Bookkeepers could be offered jobs in HMRC carrying out on the spot checks on businesses and private individuals: *flashes HMRC ID* "please show me your note of what items you sold at the car boot today sir and your paypal receipt for the payment to your tax account". NB I use 'paypal' merely as an example. Dishonesty will always feature in any taxation system, but especially if people feel unfairly taxed(leaving aside the issue of people being pissed at what their taxes are misused to fund).
Papers please! It would seem that JK's taxation utopia will offer job opportunities to some lovely people.
ReplyDeleteSackerson - quite right. Haste and anger. Now edited to remove the puerile bits.
ReplyDeletePapers please! It would seem that JK's taxation utopia will offer job opportunities to some lovely people.
ReplyDeleteI did say they were Chartered Accountants.... :P
Let us go back to what happened before VAT: Purchase Tax.
ReplyDeleteLevied on the wholesaler in most instances, or on the manufacturer or importer if they sold direct to retail or end user customers. Levied only once, Not reclaimable further down the line. Surely much more simple. Services are not directly taxed, but all their supplies are.
Equally for income tax let's consider a flat 20% rate levied on everyone when they have earned more than the tax free allowance. That way you can apply your social justice principles in the size of the tax free allowance, thereafter everyone is taxed fairly and equally.
Both of these proposals will require fewer tax collectors, and bring greater revenue by reducing the opportunity for evasion or fraud.
"Let us go back to what happened before VAT: Purchase Tax.
ReplyDeleteLevied on the wholesaler in most instances, or on the manufacturer or importer if they sold direct to retail or end user customers. Levied only once, Not reclaimable further down the line. Surely much more simple. Services are not directly taxed, but all their supplies are. "
Impossible to police nowadays. How are suppliers to know who is a business and who is not? Especially in these days of self employment and micro-businesses and internet sales? I can buy something in a shop for my business (tools say, I often buy the cheap stuff in Aldi/Lidl) and I can claim the VAT back on them via my business VAT return. Joe Public buying them for his garden shed can't. How does the supermarket discriminate between the two of us? Similarly when I fill my truck up with fuel its a business expense, Joe Public filling his car up isn't. How do they know who to charge purchase tax and who not?
Face it, VAT is actually a very well designed tax, IF you want to have a consumption tax. The onus of charging it is universal on all qualifying businesses regardless of who they sell to, so no deciding if a customer is business or not, but input tax can be offset against output tax so there is only a net payment every quarter. HMRC only have to police the registered businesses (about 2.5m VAT registrations exist) and can concentrate on the sectors that face the public so less than that. And there is a decent qualifying threshold which allows micro businesses and tradesmen selling predominantly labour (builders/plumbers etc) a decent living without falling into the system.
The main problem with VAT is a) the zero rated items, which is a political decision, and b) the cliff edge change from being exempt to registered for VAT, which is a problem with cutoff points, and there's not much that can be done - you can't be 50% registered for VAT. Other than that you'd struggle to make it much better.
VAT works much better here where there is no minimum turnover - if you buy and sell as a business, you can reclaim VAT on your inputs and must charge it on your outputs. It allows microbusinesss, part time hobby business and value-added farm produce conversions to be viable - until the point comes when you have to employ someone. It's employment taxes that kill business here.
ReplyDelete"Domo - is there nothing we can do in the face of this legal but unfair market manipulation?"
ReplyDeleteThere are laws on "transfer pricing" but they are haphazardly enforced and easily circumvented.
I once worked for a software company, we owned an Australian subsidiary.
We paid their costs plus 1%, the 1% was taxed, and paid back to us.
We didnt export the software to the subsidiary, allow them to put a 50% mark up on it, and pay tax on the 50%
"A well-signalled windfall tax on the level of normal profits expected to accrue from a given sales volume, for large avoiders only?"
Maybe, but its a "cant pay and nothing to take away" situation, if we stick with Starbucks, the IP is all held overseas, the property is all rented.
And we are not so important that people cant or wont leave
https://www.indiatimes.com/
What happens when Google and Apple pull out, and 99% of the mobile phones in EUrope wake up one morning and say "this software is no longer supported within the EU", with all the functionality of a brick.