Earlier this week, The Taxpayers’ Alliance published a policy brief that I wrote on corporation tax. The report looks at the efficiency, fairness, simplicity, and predictability of the corporation tax system and finds it failing on all counts. The recent furore over various UK Uncut campaigns are used to argue that the corporation tax system is not understood by either the general public or journalists. Bottom line: corporations don’t pay tax, people do. And not necessarily who you think.
Oh dear oh dear. The right wingers have got themselves into a real muddle over corporation tax. For sure, higher corporation tax rates in one country probably depress wages relative to a country with lower corporation tax, so (the right wingers argue), we ought to cut corporation tax so that ‘the workers’ are better off.
1. I hope you realise that the tax on gross profits (VAT) raises three times as much as the tax on net profits (corporation tax) and that only about half of economic activity is subject to VAT, ergo, for those businesses which pay VAT, it is six times as damaging as corporation tax.
2. If it were just a question of boosting wages, then the obvious tax to cut first is Employer’s National insurance.
3. Clearly, people work for their net wages, they are indifferent between £60 tax free and £100 taxed at 40%. So it can easily be argued that PAYE in its entirety is borne by the employer.
4. So… would any sane person say that corporation tax is borne by workers and the workers’ income tax (PAYE) is borne by employers? For sure, legal and economic incidence of taxes are two slightly different things, but by an large, they are not worlds apart.
@ Mark – as the author of the report I take offense at your use of the term “right wing”. It suggests that you’re more interested in casting aspersions than considering the actual arguments. This is a real shame.
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