ConDem Fail on Corporate Taxes

It’s a pity that the ConDems, who claim they want to make the UK the best place for corporates in the G20, haven’t bitten the bullet and done what needs to be done – which is to abolish corporation tax.

Ok, there’s a little matter of the £40bn hole it would leave in the budget, but abolishing corporation tax doesn’t mean going without the tax that they currently pay.

There are several reasons companies shouldn’t be taxed. First off, they don’t have a vote – and it’s wrong to tax non-voting entities. We lost some quite valuable colonies a few years back because we didn’t get that particular point.

Secondly, and much more important, corporation tax is regressive.  We shouldn’t tax companies on their profits, we should tax shareholders on what they get out of the companies they invest in.  Not all shareholders are fat cats – ultimately, when you disintermediate the  pension funds – most  are either pensioners or people saving for a pension. Fat cats should pay tax at the appropriate  rate for fat cats, and pensioners should pay tax at the appropriate rate for pensioners. But if you tax the company, you tax them all at the same rate, which is regressive and wrong.

You may think that most corporations are scum – and some, like Shell in the Niger Delta are – and that therefore they shouldn’t get such a big tax break.  But that’s an irrelevant value judgement; because this isn’t a proposal about whether y corporate profits should be taxed, but how and where the tax should be paid – and that’s the answer to the £40bn hole: it would have to come from income and capital gains tax. It would be much fairer if it did.

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