A few more tax dodgers to add to the list

[Huguenot]

My experience with HMRC is very much along the lines described by LondonMix.

The characterisation of corporates as tax evaders and the Inland Revenue as cack-handed ineffectual administrators has little relevance to my experience of highly competent intelligent organisations pursuing government policy.

Most of the ideas that people have suggested to recover 'missing' tax revenues have already been considered and found wanting.

I've made it a matter of policy throughout the last ten years to never run a 'profitable' company - by reinvesting top line margins in staff, research, resources or facilities. This doesn't make me a tax evader.

There are exceptions to this in organisations that transfer money internationally to service franchise fees. Howevere I've made the point before and I'll make it again - these fees are negotiated with HMRC and agreed by very bright people who bear in mind all the upsides and downsides.

[LadyDeliah]

So that's ok then.

Phew.

There was me thinking we should try to make a difference, but the Inland Revenue and the Government have already thought of everything and have it under control.

Silly me!

[Huguenot]

Well, I don't believe that tax policy should be set by the media, by prejudice or by the EDF, no.

I've stressed it before, but tax legislation is a great example of unintended consequences. Taxes are not just about getting money.

They're about incentivising commerce and employment and facilitating economies.

We shouldn't be running the country by 'gut feelings' that we're being cheated. This corporation tax crisis is being fuelled by a government keen to distract public concern away from their own policy decisions to focus on 'cheats' that are either not cheating, or they were complicit in creating.

[LadyDeliah]

I agree the govt were complicit, which is why we have no option but to make a fuss. I also agree that the govt are using this as a smoke screen, but they have jumped in an already significant bandwagon of campaigns dating back years.

I disagree that tax should be about incentivising business however, as in my opinion it should be used to re-distribute wealth and provide services.

[Huguenot]

Interesting LadyD - do you see the redistribution of wealth and the provision of services as an end in itself, or do you see that as a tool to create a happier more satisfying society.

Because if you do - then you must be aware that the best way of doing this is to create a flourishing economy that can provide more wealth to be distributed and more services provided?

If you are prepared to accept that concept - then you can see that it's a serious challenge to work out whether the best way to deal with a business is to tax them out of existence, or to incentivise them to grow, to deliver popular services and employ more people?

I'm sure that you can see that challenge - which means that actually, you do understand why tax law has more importance than just 'take and spend'?

[ellieaness]

ruffers Wrote:

-------------------------------------------------------

> Maybe businesses or individuals who volunteer to

> pay more tax than they are required to?

Sorry but who would pay more tax? Surely businesses wishing to make a difference would be better off maki g direct charitable donations?

[ruffers]

Indeed elliieaness, who would pay more tax than they have to? Given we're being told it's immoral to minimise tax payments, even legally, is it a moral imperative to pay more than we have to?

[Marmora Man]

Most of us pay more tax than we have to anyway. If government spent the taxes raised more wisely it could tax us less.

[LadyDeliah]

Yep, drop trident and the imperialist wars to start with.

[Marmora Man]

There was an interesting, if frustratingly curtailed, Newsnight article on what the state should and should not provide. The introduction and hypothesis was better than the subsequent debate - but the question posed was worth considering.

http://www.bbc.co.uk/iplayer/episode/b01pbp3x/Newsnight_07_12_2012/

[Huguenot]

Believe it or not, but with 7bn people in the world and climbing, the world's a very competitive place and resources are becoming scarcer.

Running around putting flowers behind people's ears may assuage the feelings of guilt, but the chief driver of war expenditure is NOT antiquated missile systems, but the British people's insatiable desire for fossil fuels and cheap consumer durables.

You need only see the ravings of householders on the CPZ thread to demonstrate the irresponsibility and fury of the average UK consumer when someone might make their life a little less convenient.

No point in blaming the government.

It's rather besides the point anyway - government spending is on things like welfare, pensions, healthcare and education. If you want to reduce government spending, these are the only expenditures you can really target.

And of course we won't do that - so the debate is redundant.

[LadyDeliah]

Not at all Hugo. The co2 vehicle industry is subsidised by new road building rather than rail, cycling etc. the nuclear option espoused by Tories as the green alternative would take huge subsidies to get off the ground. Every outsourced service, education/transport/prisons etc takes tax payers money away from the services we need in the form of profits for shareholders. Ditto health soon.

And in relation to your statement earlier re the purpose of redistribution and society, society should be for arranged for the benefit of all the people in it, not just big business owners and corporations.

The means of feeding/housing/watering ourselves has been removed from most of our control and we have been turned from autonomous residents of earth into dependant, micro-managed, slaves to vested interests who control what rules are put in place and who our money and labour benefit.

[Marmora Man]

Hugenot said "It's rather besides the point anyway - government spending is on things like welfare, pensions, healthcare and education. If you want to reduce government spending, these are the only expenditures you can really target.

And of course we won't do that - so the debate is redundant."

But it is possible to debate how much government spends on each of these areas and what value for money its spending achieves. From personal experience I know the Department for Health is appalling at managing its resources, Defence procurement is woefully inadequate with MoD paying way over the odds for poor equipment. Additionally, there's a lot of government spending outside of these areas that could be reconsidered.

For example:

1. This weekend the Charities Aid Foundation is decrying the fact that up to 75% of British charities will suffer as government cuts its donations / spending with charities. Question: Should government be recycling taxes into charities? It may be an efficient way of targeting government support to specific recipients - I don't know but somehow it doesn't seem right to me.

2. Many question the need to spend as much on overseas aid as Britain does - circa ?7bn and rising. Personally, I believe that much of the spend is worthwhile for the "goodwill" and raised profile of Britain overseas, paying for itself in increased exports and an improved overseas trade balance - but I'd be very happy for the whole sum to be audited and the spend, perhaps, reduced.

3. As a retired military man I'm perhaps more likely to support Defence spending - but I accept it needs to be in proportion to the country's ability to pay. As a starter I'd prefer to see commitments reduced to match resources and there is a debate to be had about whether Britain needs / wishes to have a thin but worldwide presence or a more localised, and less costly, defence force.

4. Are we sure the Department for Culture, Media & Sport actually delivers anything worthwhile for its budget?

5. Ditto - Department Environment, Food and Rural Affairs?

6. Ditto - Department for Business, Innovation and Skills?

7. With devolution what significance do the Scottish, Welsh and Northern Ireland offices have?

[Huguenot]

Those piecemeal suggestions kinda prove my point.

None of your proposed targets are going to have much freedom for anything more than tweaking.

Whilst budgets in those departments may be streamlined, all of those departments deliver vital services on behalf of our community (where business and 'privatised' government would not be interested), from the Forestry Commission and flood and disease prevention, to protecting our cultural heritage.

The very existence of people who think our cultural heritage can be dismissed to the vagaries of the free market is proof of the absolute necessity of civic protection.

Much like the irresponsibility of those who wanted to let banks fail during the credit crunch, the criticisms of these organisations come from people who don't know what they do and haven't considered the consequences.

Either way, they're not going to have such a significant impact on government spending that you'd notice it in taxes.

[LondonMix]

I'm not sure I understand your ideas about redistribution particularly in relation to corporate tax. Increasing corporate taxes (depending on what the capital raised is used for) will result in fewer businesses, higher unemployment and higher prices as most industries in the UK economy are competitive (see link for explanation: http://www.eastdulwichforum.co.uk/forum/read.php?20,1010624,page=1).

The government tries to figure out the best way to maximise revenue and any extra revenue assumed to be raised by increasing corp taxes needs to deduct the loss of revenue from a reduction in business growth, reduced income tax collection due to reduced employment growth and increased benefits claims like for like. There will be a tipping point at which an increase in the effective corporate income tax rate REDUCES total government income as the negative impact is so severe it results in economic contraction. Taxes are never a simple equation of I take from you to give to others.

Certain types of gov't expenditure actually increases economic activity though so are worth doing in the medium term and others are worth doing as a "social good" even if it doesn't pay for itself economically. My list includes:

1. Spending on education that maintains existing levels of skill or that results in a more productive / appropriately skilled workforce

2. Spending on necessary infrastructure necessary for continued growth

3. Spending on defence / security / etc within limits: everyone would trade some economic prosperity to be free from the immediate fear of being killed, conquered murdered etc so we have a military, police, fire service etc.

4. Reducing the deficit to ensure the long-term prosperity of the country (though there comes a point where cuts and corp tax increases are not effective at reducing the deficit because it tips the economy into recession)

4. Certain types of welfare spending that while they reduce economic potential, represent a social good worth the cost to the economy (for everyone these things will be different as its totally subjective). For me, its universal health care, certain means-tested welfare benefits, environmental protection (which in the long-run may pay for itself anyway), conservation and planning depts to protect the aesthetic quality of our built environment, support for the arts etc...

Ineffective and inefficient, tax wasting services are not just a waste of limited resources but come at a real cost to the overall well being of the country. When the government wastes taxpayer money they actually harm the economy quite seriously. Trains running half empty, school spending that doesn't produce any improvement in results etc should be an outrage to everyone. When we contemplate demanding new services, whatever they may be, please remember that its never free money being spent. Similarly, taxes are never a simple redistribution of resources.

LadyDeliah Wrote:

-------------------------------------------------------

> Not at all Hugo. The co2 vehicle industry is

> subsidised by new road building rather than rail,

> cycling etc. the nuclear option espoused by Tories

> as the green alternative would take huge subsidies

> to get off the ground. Every outsourced service,

> education/transport/prisons etc takes tax payers

> money away from the services we need in the form

> of profits for shareholders. Ditto health soon.

>

> And in relation to your statement earlier re the

> purpose of redistribution and society, society

> should be for arranged for the benefit of all the

> people in it, not just big business owners and

> corporations.

>

> The means of feeding/housing/watering ourselves

> has been removed from most of our control and we

> have been turned from autonomous residents of

> earth into dependant, micro-managed, slaves to

> vested interests who control what rules are put in

> place and who our money and labour benefit.

[Huguenot]

I think the charity question is a red herring.

The government outsources plenty of its work because it's cheaper and more effective than recruiting, training and retaining full time staff.

Some of these outsourced organisations are charitable institutions.

It's not a case of government taking our tax and giving it to charity.

[LadyDeliah]

Hugo, on the outsourcing issue, there was a report a couple of weeks ago, I forget the details, tgat said there were no discernible cost or other benefits to outsourcing when compared to state run services.

Also LondonMix et al, your analyses presupposes that Capitalism is the only way to organise society and that even within capitalism, the systems of the exalted free market are actually in effect.

Many others, including me, do not share that view.

And before you trot out Russian Stalinism etc, that is not the only alternative view. Replacing one hierarchical structure with another and asserting it is benevolent is just as redundant.

[LondonMix]

I don't assume Capitalism is the only system. I think it is our current system and if you are making decisions about tax in our current economic system you need to take into account how the current system works. If you want to propose an overhaul not just to tax but institute a new economic system you think will work better, I'm all ears and will judge it as a coherent whole. I'd be delighted if you found a better system that can work in the real world.

Most industries not just in the UK economy but the global economy are competitive rather than monopolies / pseudo monopolies. That's a fact. However, I think we would all benefit from stronger enforcement of anti-competition laws / anti-trust laws as monopolies and cartels are terrible for everyone concerned except those businesses themselves.

[LondonMix]

Also, Lady D, I'm no hard-core free-market enthusiast. Several other strategies, like import-substitution industrialisation have worked well in certain countries (mostly Asian) and been disastrous in others usually because of politics. I support whatever helps people though and can recognise that increasing the effective rate of corporate income tax collected may not actually do that based on how our economy works. There's no point adopting an ideological position that will in effect harm the people you purport to care about.

[Huguenot]

Hee hee, I suspect LadyD's vision is of a prelapsarian agricultural anarchy - an approach somewhat incompatible with our population size.

The main problem I find with many 'alternative' systems is that they tend to be so disrespectful of human nature.

[Marmora Man]

Hugo,

You position appears to be that there is nothing that can be done?

I agree completely that LadyD's version is impractical and, despite my libertarian tendencies,I do not advocate totalitarian free market capitalism. However, to suggest that there are not areas of government spending that can be reduced, trimmed or completely dispensed with is just ridiculous.

Yes it's lovely that DCMS is prepared to subsidise an arts group on Merseyside / Norwich / Clapham or some public art in Newcastle and a dance group in Tottenham or wherever - but to suggest that proposing to reduce such spending is "proof of the absolute necessity of civic protection" is hyperbole and plain wrong. Since the 50s we have been gradually taught to rely upon the State rather than ourselves and to look to the State for far too much. Now we are in a position where the State cannot afford current spending - let alone future spending as demographic changes skew the age profile of the population.

If you acknowledge that the country is currently spending more than it is raising in taxes and that it is subsidising this continued structural spending by borrowing then it becomes paramount that spending and taxation must, over the medium term, be balanced. Since taxes are already high, and getting higher the only answer is to reduce the spending.

I agree that trimming a bit here and cutting back a little there and fudging future spending plans by reducing the rate at which it grows are not enough. Which is why a more fundamental zero based budget approach and discussion would be helpful. It has been done before and the appointment of Mark Carney may signal such an approach to come post the 2015 election.

[Huguenot]

No, my point isn't that these cuts can't be made - it's that the vast majority of work these institutions do is vital, not headline grabbing whacky fringe theatre stuff.

Where cuts can be made to projects like that, the impact on overall government expenditure will be insignificant. This is like Romney taking the knife to Big Bird.

Tory election promises of 'cutting the quangos' had no meaningful impact on expenditure either - they're just silly ploys to grab headlines and infuriate conservatives.

To rework government expenditure in any meaningful way it's only to be done through tackling the sacred cows: health, welfare, education and pensions.

[Coman]

LondonMix Wrote:

-------------------------------------------------------

> The point is all governments intentionally allow

> the effective tax rate to be dramatically lowered

> via various mechanisms because of the benefits

> (growth and lower prices).

It is widely known that big businesses tends to use their international base to avoid corporation tax. Nevertheless, I estimate that they end up paying considerably more in (employers' and employees') national insurance and VAT, than the average small business.

[LondonMix]

Yes, I am neither criticising businesses or government for the tax situation. I am only saying its hypocritical for the authorities to pretend they are "shocked!" by what's going on now. Government certainly take into account the income tax, VAT and national insurance revenue generated by the business community in determining what they think is the most beneficial tax policy for the country.