A Branch of Barclays Bank. Spawn of the devil, apparently.
So yesterday various indignant people who are not regular readers of the Telegraph were rather chuffed that they had closed a number of branches of a private business that had, in their opinion, not paid enough corporation tax. Strangely though, as far as anyone can tell, no tax inspectors took part and the action was not sanctioned by HM Revenue and Customs.
These non-core customers of the soap industry were very upset at the news that Barclays Bank had only paid 1% of its profits in corporation tax. Apparently the bank had used an evil slippery tax loophole whereby they had set some losses against tax. Yes, the same principle that allows any business to gain tax relief for years in which business is poor, or where they’ve taken the government up on their incentives to invest in equipment, or on the extended loss relief rules introduced when the recession was looming.
In fact, and predictably (on both counts), the Grauniad have made a number of other errors in compiling their figures, and the actual reasons behind the apparently low figure are more complex. We are indebted to others such as Christie for taking chargeable time out to summarise these.
Yet of course, the protesters are hardly motivated by esoteric arguments informed by the pages of Tolley’s. It’s an evil bank*, so anything short of publicly flogging the girl behind the counter is fair game. I mean, these people have such a tenuous grasp of business, the economy and the public finances, that they actually believe the banks were to blame for Gordon Brown notching up over £1 trillion in public debt.
Anyway, there is a simple solution to this whole messy problem. It will ensure that no corporation will be able to fiddle their taxes, legally or otherwise, and so the protesters can go and
do something constructive for society find another excuse to cause criminal damage and avoid growing up.
It is this: abolish corporation tax. After all, all corporate profits will eventually end up in the hands of individual taxpayers, trusts, pension funds, etc, where they will receive an appropriate tax treatment. It may be in the form of salaries, dividends, other forms of debt servicing, etc, but all such income is taxed, so why have the complication of siphoning off some of the tax earlier in the process when a massive simplification could be achieved by scrapping the corporate tax framework? Then think what it would do for the UK’s attractiveness to foreign investment.
I’ve not looked at the detailed figures, of course, but it must be possible to adjust the personal tax rules to make the changes revenue-neutral to the Treasury (and that’s without considering the Laffer curve effects on future revenues). For example, without corporation tax, the implied tax credit that is carried by dividends will finally become redundant. One could envisage dividends being taxed at the marginal rate of tax of the recipient, as they used to be. One would imagine that the additional tax incurred would be negated by the higher dividend rates being paid as a result of higher distributable profits.
Not that I can be sure without any detailed analysis being carried out, but in that respect the idea is still some stages ahead of the economically and financially myopic activism of the ukuncut mob. They will naturally be horrified that someone could suggest that ‘big business’ be given such a tax break. Need I point out however, that any business, regardless of size, is ultimately a collection of people earning a living? That by definition they must be doing something that is contributing to the economy and thus society? Perhaps some of the ukuncut acivists should try it sometime.
* As opposed to nice fluffy banks like the Co-op, who paid a whopping … err… 1.9% (h/t Christie again).