Common Sense on Corporation Tax?

System is at fault for low tax receipts

Despite the idiotic ramblings of tax avenger, Margaret Hodge, who once claimed that Google’s approach to tax meant “it did do evil”, two Conservative MP’s have pointed the finger at the country’s “Dickensian” tax system as the reason for the low amount of corporation tax paid by big business.

The amount of corporation tax that is paid by large businesses has become a personal crusade for Hodge and has been aided by a media frenzy with revelations that companies such as Amazon, Google and Starbucks have been paying little or no tax in the UK.

According to figures obtained by law firm Pinsent Masons additional corporation tax generated through tax investigations into large businesses has dropped to its lowest level since 2006/07.

In 2012/13 HMRC’s Large Business Service, the department that deals with the UK’s largest 770 businesses, collected an additional £3.17 billion in tax arising out of investigation work. This however was 8% lower than the previous year and a 25% decline in comparison to 2010/11.

Andrea Leadsom, Tory MP for South Northamptonshire blamed HMRC for its inability to raise more tax revenue from big business telling a fringe event at the Conservative Party conference that the problem was “our own incompetence” which required addressing.

Ms Leadsom’s Tory colleague, Kwasi Kwarteng, MP for Spelthorne, Surrey, backed up her opinion saying, “our tax code is Dickensian” and called for the tax system to be simplified.

12 Comments

  • BOB says:

    Are you trying to suggest that the reason that Amazon, Google, et al pay pitiful amounts of tax is that the poor dears cannot understand our tax regulations? Of course they understand them all too well — it’s precsely because they understand them very well that they manage to wriggle out of paying fair amount of tax. I agree that HMRC should try harder to get taxes paid by big businesses but clearly, as the government has recognised, this also requires some inter-governmental co-operation in the cases of some of the most blatant tax avoiders.

  • Jon says:

    i don’t think it’s idiotic to criticse companies like Google, who profit from the British labour force and but contribute nothing back to our infrastructure

  • Andrew says:

    BOB, I think Kwasi is implying that a tax system that distinguishes between a cake and a biscuit encourages a similarly combative industry to exploit the difference. Kwasi’s is a siren call for a simple tax system so payments are fair and transparent to all. Labour sadly went the other direction overseeing more tax law and left this nation addicted to concealed, punitive and redistributive taxation adding inefficiencies and pushing up prices. For political reasons, the current administration is in no hurry to reverse course.

  • Simon says:

    This isn’t news, it’s just an anti-tax rant. The only thing idiotic is that a company which generates so much profit in this country pays so little tax. That tax pays for running the country which everyone including Google then benefits from. Most of us pay it, why should only the rich be exempt, they certainly expect an equal cut of the rewards.

  • Jon says:

    Andrew, all tax regimes in democratic nations worldwide incorporate a redistributive element and only the most rabid, Ayn Rand thumping neoliberals have any objections to that basic principle.

  • Glennn says:

    Contribute nothing hmmmm you overlook the employment of many people and subsequent contributions to the economy seemingly forgetting this country is still in a recession.
    Of course you can increase taxes 5 fold and illegally force IR35 like the justice ministry, just don’t complain when they up stakes and move to the Czech Republic etc. who are willing to concede because jobs/economy are what matter.
    Meanwhile the hypocrisy of Hodge’s tax avoiding family is conveniently disregarded. This country has repeatedly embarrassed itself with peerages, expense scandals etc. while trying to turn Jimmy Carr into public enemy #1 for using LEGAL loopholes.

  • Chris says:

    Some really strange comments here.

    #6 Glenn – this country in NOT in recession and hasn’t been since 2009.

    #5 Jon. The only thing that is ‘redistributive’ is the fact that tax systems work on percentages rather than flat amounts. In an ideal world we would decide how much we need to run a country and we would share the burden in equal AMOUNTS. But… all countries do this, not only democracies.

    #1 Bob. You missed the point and were properly steered in the right direction by #3 Andrew.

    I agree with the article. Simpler tax codes lead to less avoidance. Also, in the modern global world we need simple rues that prevent profit-shifting across national boundaries. This may need to be some form of tax based on the profit on transactions involving British-based entities. I.e. if you sell a widget to a Brit then you pay tax on the profit from that transaction. If you give a bank loan to a Brit, same applies.
    The calcs are complex, but costing is a standard enough model and no more difficult than the accountancy we already do in large corporations.

    N.B. By “costing” I mean a method whereby the costs of a firm are broken down and distributed across the functions that use/incur the costs so that the sale of lawnmower on Amazon conatins an element of purchase of the lawnmower, warehousing & distribution, the heating, lighting, office space and phone costs etc etc of the people involved and so on.

    Simple rule, complex calc, but, as I say, a standard one.

  • Bryson says:

    I think what was meant was that certain companies contribute so little in taxes that it could be called nothing. Of course they employ people, but employing people is not intended by any government in the world to be instead of paying corporation taxes (except for some special deals sometimes to attract investment).

    Jimmy Carr’s tax affairs caused disgust for the same reason that Google, Starbucks, Amazon etc cause disgust. To any person with normal moral values, it is wrong to seek ways, even legal ones, to reduce your tax bill to a level that is derisory.

    There is, though, a body of neoliberal opinion, represented by a minority in this discussion thread, that simply believes that taxes are themselves morally wrong. It’s a preposterous point of view, and it’s shared by almost no-one in the general public, but people who hold it are not going to argued out of it.

  • Suramar says:

    [quote name=”Bryson”]I think what was meant was that certain companies contribute so little in taxes that it could be called nothing. Of course they employ people, but employing people is not intended by any government in the world to be instead of paying corporation taxes (except for some special deals sometimes to attract investment).

    Jimmy Carr’s tax affairs caused disgust for the same reason that Google, Starbucks, Amazon etc cause disgust. To any person with normal moral values, it is wrong to seek ways, even legal ones, to reduce your tax bill to a level that is derisory.

    There is, though, a body of neoliberal opinion, represented by a minority in this discussion thread, that simply believes that taxes are themselves morally wrong. It’s a preposterous point of view, and it’s shared by almost no-one in the general public, but people who hold it are not going to argued out of it.[/quote]
    It is illuminating that the only arguments given in favour of tax is to ridicule its opposition’s views as “ludicrous” or “Randian neoliberal thumping” or whatever. Such immature nonsense. I guess in this country we still regard fallacies like arguments from popularity or authority, or ridicule, as sound arguments. Scary.

    Not everyone agrees on the redistributive principle in regards to taxation. This is not just because it is a bad principle, but also because governments use the funds in ways which taxpayers either cannot agree or disapprove. They may deliver -some- valuable services, which they monopolise so we can’t even say only they can provide them (historically most have been provided by alternative means), and thus we resort to the redistributive heart-tugging principle, which is based on what appear to be intuitions more than anything else.

    Those masochists who wish to pay more tax can do so freely, right now. Enjoy it when the government spends it on whatever idiotic causes it feels will garner it more power or pelf.

    I’ve little to say on Hodge, other than the usual regarding those in glass houses… let the piggy get her nose dirty in the trough whilst the going is good, though. Yeah sorry, I have no sympathy for that woman; maybe she and her family should undergo a full blown tax investigation.

    Agree perfectly with Glenn – the UK economy will weep tears when businesses just decide it offers them little of value for the tax it demands, and contractors simply up and leave due to idiotic schemes like IR35 – of what use is NI to most young people nowadays? What are they getting for this amount? And if they are getting something, why is it assumed the government is the best means of providing this? It is a hefty cost to both employees and employers. All it does is throw a wrench in the fluidity of the UK’s employment market, which is buoyed by the flexibility offered by contractors and temps.

    Let the government freely tender its services on an open market, and we’ll soon see how much they are truly worth.

    A lot of interesting questions, but the answers from those who simply denigrate anyone who favours lower – even much lower – taxes as a “neoliberal” or “rand thumper” or whatever other idiotic terms one chooses to employ are unlikely to be of interest.

    “i don’t think it’s idiotic to criticse companies like Google, who profit from the British labour force and but contribute nothing back to our infrastructure”

    Prove it. They offer value to their consumers, employees and shareholders. If the government feels they are not “contributing” enough, it should devise a way to charge them directly – up front, no commissions, no proportional charges etc. – for their use of these.

  • John Galt says:

    [quote name=”Suramar”]
    Prove it. They offer value to their consumers, employees and shareholders. [/quote]

    if you really believe that unfettered free markets deliver anything approaching value, let alone an equitable society, the burden of proof right now is *very* much on you mate. otherwise it’s just magical thinking. wooOOOOooo!

  • David Morgan says:

    Big companies pay about 0-3% of turnover in corporation tax by using methods like buying buildings for £100s millions of pounds in cities; R&D offsetting.

  • Andrew Harrison says:

    It is a well established principal that anyone is allowed to use legal means to minimise their tax bills. I think this is the only way it can be. So it is up to governments to arrange the laws so that any legal wriggling still leaves appropriate tax being paid. (Insert here any amount of vicious opinionated views on what is “appropriate”). For the majority of people there is very little legal wriggle room. For multinationals there is transfer pricing and similar tricks to make sure that the profit pops up in tax havens. Dismantling these legal loopholes requires a restructuring not just of national tax laws but also of international treaties and this would have to be done against an orchestrated lobbying from the multinationals and the major tax advisors and accountants. Don’t hold your breath.

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