You may have heard of UK Uncut? They’re certainly good at attracting attention: forcing their way into Barclay’s bank the other week and managing to close a branch of TopShop temporarily.
But what they have in noise they lack in substance. New research by the Institute of Economic Affairs exposes how the ‘grassroots movement’ want Vodafone to pay tax in the UK on the profits it makes in Germany. It’s a reasonable principle – taxing companies based on where they are domiciled is fine. But they also want Boots, a Swiss company, to pay tax in the UK on the profits it makes selling items to Britons, from British shops. You can have one principle or the other, but not both – not unless we want businesses to locate elsewhere. In fact, corporation tax systems are carefully designed with reciprocal agreements between countries for the very purpose of ensuring that profits are taxed once and not twice.
The truth is that tax in this country it too high; and it is also too complicated. Corporation tax is the worst of them because it has the largest deadweight cost. In a world where capital is highly mobile, high rates of corporation tax drive away potential capital investment, and therefore reduce productivity and lower wages. And of course, corporation tax isn’t really paid by corporations, but by the owners of corporations – shareholders, beneficiaries of savings plans and prospective pensioners.
Read the rest of the article on the Spectator Coffee House blog.