The business lobbies want lower taxes

I do not always agree with business lobbies, who often argue the case for larger and well established businesses at the expense of innovation and new competitors, and who often favour bigger government than is ideal.

Today the business voice seems united in saying we need lower tax rates to allow more business and jobs to grow in the UK. I entirely agree. They could add to their case that that would be the best way to increase tax revenues. If we carry on with Labour’s tax and pillage policies more and more companies will go abroad, cut their activities in the UK, be deterred from new investment or will simply not start up. 28% is an uncompetitive Corporation Tax rate, 50% an uncompetitive higher income tax rate, and National Insurance is a substantial tax on jobs when we need to be encouraging jobs.

A government keen to promote jobs and growth, and keen to cut the deficit, would cut the rates of tax on earning and making profits.

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26 Comments

  1. Lola
    Posted March 8, 2010 at 8:43 am | Permalink

    20% flat tax now! (Working towards 10%).

  2. shiney
    Posted March 8, 2010 at 9:15 am | Permalink

    John

    At last – someone who regards the big business lobby as not all together healthy.

    I run a small business and would love to pay corp tax at the rates some larger organisations enjoy – my marginal rate of corporation tax is over 30% because of the transition from the small company's rate. Being small I can't 'offshore' any of my activities. NI is going up, business rates (by 7% !!!!) are up next year, the currency rate increases my material cost and all I can see coming down the track is more tax rises.

    In the face of ALL of this we are growing, creating jobs, investing in new kit (this year capex will be 300% of 2009 profits). I don't want any govt handouts or support – I just need them to get out of my way and allow me to create the wealth that will put us back on track.

  3. Richard
    Posted March 8, 2010 at 9:23 am | Permalink

    This is the answer to those – like Gordon Brown – who argue that the key to growth is not to cut public spending & debt. The death of Michael Foot reminds us of the nonsense talked by the left of the Labour party in the 1970s and early 1980s. Brown is using the same arguments on public spending & debt as was used by the Bennites in the 1970s – even against Healey & Callaghan. Sustainable growth is the only route out of the mess into which Labour have plunged the Country. That needs simpler and lower taxes, confidence that inflation will not ruin savings and distort investment decisions and a limit to the ever-expanding size and scope of the public sector.

  4. Kit
    Posted March 8, 2010 at 9:25 am | Permalink

    Why don't you just cut regulations and scrap the minimum wage?

    • Simon
      Posted March 9, 2010 at 12:58 am | Permalink

      With you there buddy ,

      Regulations are the big obstacle to start ups .

      Companies should be concentrating on their core business not having to employ personnel managers and administrate pensions .

  5. Brian Tomkinson
    Posted March 8, 2010 at 10:08 am | Permalink

    I agree entirely. Now please get you front bench colleagues to make this abundantly clear to the electorate.

  6. Stronghold Barricade
    Posted March 8, 2010 at 10:46 am | Permalink

    The one tax reduction that would help the smaller innovative businesses is on Business Rates

    They proportionately hit the smaller business

    I'm not fully conversant with Corporation tax, but isn't there a threshold? Like these:

    Who is not subject to Corporation Tax requirements
    Businesses and organisations that are not subject to Corporation Tax requirements include:

    sole traders – one-person businesses that are not operating through a limited company
    traditional partnerships
    limited liability partnerships (LLPs)
    local authorities
    local authority associations
    investment clubs
    allotment and garden societies
    health service bodies
    London Organising Committee of the Olympic Games Ltd and the International Olympic Committee
    If your business or organisation is not subject to Corporation Tax, you don't need to meet Corporation Tax deadlines and requirements.

    This doesn't mean your business is exempt from all taxes as you may have to complete a Self Assessment return.

    So effectively a cut in Corporation Tax would actually help those larger businesses, not the smaller ones just starting out.

    I think the National Insurance is a good idea to pick up, as this can actually be an effective "stall" on hiring new folk, but there are ways around this by taking people on as self employed contractors who pay their own NI.

  7. Stuart Fairney
    Posted March 8, 2010 at 11:22 am | Permalink

    JR really, employers national insurance is not a tax on jobs, it is a stealth tax paid by the employee. Nothing more or less.

    The employer doesn't much care how he is forced to divide the cost of employing someone, it is the overall cost that is the concern, thus, employers NI simply acts to depress the amount of his 'cost-of-employment' and employee is allowed to keep.

    • Tim Carpenter (Liber
      Posted March 8, 2010 at 8:06 pm | Permalink

      Stuart,

      Both parts of NI and income tax are a tax on employment/labour/jobs, for that is where the tax lands.

      If you end all such taxes and tax consumption, then import sales are taxed equally to domestic sales. It is a tax on sales that falls equally on all goods sold regardless of source.

      Domestic manufacturers can choose to employ machines/capital or people without the distortion of job taxation. Charitable donations can occur without the State taking and then being asked to refund it, including informal charity to ones own family.

      Taxation should be about raising revenue, not effecting social change. And no, the LACK of taxation is not the same as its imposition!

      • Stuart Fairney
        Posted March 9, 2010 at 10:57 am | Permalink

        Yes, I see your point to some extent and agree that any "employment tax" is unjustifiable.

        Are you (the LP) putting up any candidates in the election?

        • Tim Carpenter (Liber
          Posted March 9, 2010 at 1:23 pm | Permalink

          Stuart,

          We are putting up one only this time, Nick Coombe in Devizes, as we feel it is basically a "get rid of Labour" election this time around.

          However, we are intending to stand in various local elections around the country now and next year.

    • a-tracy
      Posted March 9, 2010 at 11:12 am | Permalink

      Employer's NI is a tax on PAYE jobs paid by the employer. As an employer I care that I pay this tax without it being clearly appreciated what it is for! The amount contributed per year by the Employer is no longer on the P60 that is presented to the employee each year – so they are often not completely aware of just how much money is contributed on their behalf towards, as I believe, their state pension and their healthcare (if it is not for these purposes then why does the Employer pay it as a % of gross earnings) and when did the purpose of national insurance change.

      To add insult to the increasing cost imposed on employers, they have moved the state pension out of the reach of the employees until they are 68 years of age (there are suggestions for further increases). Well what other contributed pension is just moved out of reach like this, what about the extra eight years of national insurance contributions the employer has been making on female full time workers behalf. The public sector employer doesn't pay this 12.8 to be 13.8% contribution it is netted off. The self employed don't contribute this amount, just what is the PAYE worker getting more than the self employed, part-time earning (under the lel so they're not paying ni) and the public sector worker?

      • Stuart Fairney
        Posted March 9, 2010 at 12:13 pm | Permalink

        Yes, I agree entirely ~ you are forced to pay this to employ someone but the employee does not often appreciate just how much it costs to employ them and effectively the public sector don't pay this as it is just an accounting exercise.

        Ergo, let's have tax honesty and have one employment tax which simply amalgamates employee and employer NI with income tax and let the politicians honestly say to the low paid

        "give me 40% of your money, even before you pay a myriad of sales taxes which probably mean we take more than half of your income"

        If the tories were honestly a low tax party, they would support this, but like Labour, they prefer high tax-and-spend statist sophistry. Apart from the obvious pragmatism, inertia and power-lusting, I think this stems from a failure to adequately define what the scope, function and critically ~ limitation of government should be.

  8. William Grace
    Posted March 8, 2010 at 11:41 am | Permalink

    Lower taxes might actually help me get my company going…

  9. A Griffin
    Posted March 8, 2010 at 11:53 am | Permalink

    John, I think this first paragraph is the key to everything.
    Does capitalism only work in the middle? The banks were so big that they could not fail and banker's bonuses make ordinary people sick. In what way have our banks been different to a large state monolith? There needs to be enough competition to encourage innovation and good working practises. Might some of our supermarkets or oil companies now be too dominant to be safe for society? You keep telling us that the failed banks must be broken up and this makes absolute sense to me, but in the same way that banks were too big to fail perhaps tesco schould also be broken up. Many people think the supermarkets have destroyed market towns and farming but we still all use them. Does the danger come from sucessfull as well as failed companies that are too big? Imagine Japan without Toyoya or Germany without VW or America without Cola. I am sure that each of these countries governments would stand behind their companies but that isn't healthy for their taxpayers. I wonder what China and India's winner takes all and too big to fail companies will be? Perhaps we need 10 supermarkets and 20 banks?and massive support( ie. freedom) for small businesses.

    Reply: No, I do not want Tesco broken up. It is a successful company which has expanded by offering the public what they want. It is not allowed to buy extra market share in the UK through acquisitions, which is the right policy. Unfortunately RBS was allowed to buy up rival banks- thatw as the wrong policy

  10. Steve Cox
    Posted March 8, 2010 at 1:04 pm | Permalink

    Just a question – how much has the BoE's zero interest rate policy cost the Treasury in tax revenues? Ordinary people like me pay 20% income tax on their interest, which is now 20% of zilch. I would guess that the majority of savings are held by relatively well-off folk who pay tax at a rate of 40% on their interest. And 40% of zilch is also zilch. So the government is short of revenue, and yet what must surely be a major source of income has dried up at their own behest. Perhaps they should think about tightening the inflation target so as to get the BoE to increase interest rates, and we savers will finally get some interest that is worth taxing?

    (Of course, as they have done over QE, they could just send the heavy squad around to have a quiet word with the MPC members so that they will do as they are told, or else.)

  11. Ian Pennell
    Posted March 8, 2010 at 2:36 pm | Permalink

    FROM: Ian Pennell, Nenthall, ALSTON, Cumbria. CA9 3LQ

    8th March 2010

    Dear John Redwood

    Excellent diagnosis of this country's problems, Sir!

    Whilst I agree that the Conservatives have some great policies on reducing business taxes in order to encourage enterprise and economic growth in this country, whilst the direction of travel over spending restraint by government has been broadly mapped out specifics are what is needed. I have said this before, but the Conservatives are terrified of spelling out the specific cuts that are needed to fund the tax cuts, the reductions in debt and other existing policy commitments; for fear of alienating the electorate.

    What is infact going to alienate the electorate is Labour making headway by suggesting that the Conservatives will pay for their policies by cutting spending on frontline services; and with nothing concrete to refute such accusations Labour's nasty allegations will stick. David cameron DOES need to take on VERY QUICKLY that he cannot be "all things to all men"!! Bellow at him to make him realise this, if need be!

    Borrowing must be cut, the economy is not in a healthy state; so in order to provide tax cuts to help the economy and provide other electorally-appealing policies to the masses (some policies like a referendum on EU Membership actually cost very little to enact!), we must be prepared to state something like "£100 billion, identified by the Taxpayers Alliance as waste will be eliminated over a Parliamentary Term", or "we will cut all quangos and Whitehall Depts to a quarter of their present size" to pay for tax cuts, reduce borrowing and improve front-line services".

    YES, IT MEANS A MILLION QUANGOCRATS AND CIVIL SERVANTS (AND THEIR FAMILIES) WILL HATE THE TORIES! BUT IT ALSO MEANS TENS OF MILLIONS MORE WILL HAVE A STRONG REASON TO VOTE FOR US AT THE FORTHCOMING ELECTION. Do the maths, if we are prepared to displease a million by sacking them, in order to please 20 million we are going to appeal to the electorate as a whole! It's a simple law; to win the Election we must offer the biggest cherries to the largest number of voters! We must grasp this simple fact, and Sir David Cameron must, as many Conservatives have been calling for, be more courageous in spelling out policies. We don't have much time left.

    Labour winning the forthcoming Election will be a huge catastrophe for Britain; and I don't simply mean the economy. We have a EU President who, under the auspices of the Lisbon Treaty, wants to have all Europe as one giant Superstate. Labour's track record in Government, in capitulation to the EU, fills me with a sense of dread. What do you think Gordon Brown is likely to do if Herman van Rompuy snaps his fingers and demands Britain abolish its Police and Army to make way for the new EU-wide authorities. We know that the political Left wants to cosy up to the EU because it provides good cushy numbers for all of their failed politicians, and because the Left generally approves of the giant EU State with its socialism! This is a disaster waiting to happen.

    Labour staying in office will cost Britain her sovereignty- totally! WE CANNOT LET THAT HAPPEN! We must wake up, smell the coffee and really jump about- BEFORE ITS TOO LATE!!!

    Ian Pennell

  12. gac
    Posted March 8, 2010 at 2:37 pm | Permalink

    I doubt it now matters for, with the Libdem strategy to bad mouth the Conservatives in the hope of a hung Parliament, Brown is becoming a shoe-in.

    The crunch will come on the BBC Dimbleby chaired leader debate during which Dimbleby will take every opportunity to interrupt Mr Cameron and intercede with his barbed so called Emailed-in questions.

    Why Mr Cameron agreed to have him chair given how he gives Tories a disproportunately hard time on Question time is beyond me. Even died in the wool Labour supporter friends of mine think this!

  13. Mike Stallard
    Posted March 8, 2010 at 3:19 pm | Permalink

    Didn't the Chicago School prove this in South America way back in Mrs Thatcher's time?
    If only we had a government that would cut back all the waste and profligacy in the public sector (including the quangocats, local government greedies and so on) and then slash taxes so that companies would be falling over themselves to get here!
    As soon as companies smell money – they are at it. That is what they do.
    I suppose even thinking like this is impossibly right wing?

    • DBC Reed
      Posted March 9, 2010 at 2:59 pm | Permalink

      The ingrained habit of not paying even reasonable taxes did not do Greece much good,did it? The Conservatives showed themselves as anti-tax when they abolished Schedule A on domestic dwellings in 1963, followed by years of property spikes ,bubbles and collapses. They have created a middle-class as averse to paying tax as the Greeks and Italians.

  14. David B
    Posted March 8, 2010 at 3:47 pm | Permalink

    Unfortunately the “Left” leaning politicians have never understood the inverted U curve that taxation follows. What this means is as tax rates increase from 0% tax revenue increase, until you reach an optimum point. After you have reached this point any increase in tax rates results in falling tax revenues. This occurs because tax payers change their behaviour to minimise their tax. This includes not doing certain activities such starting business as the risks become greater than the rewards or move to other countries that have lower tax rates.

    The most destructive phrase in the Political dictionary is now “Fair Taxation”. We must now shout from the rooftops – tax is not and never will be fair. It is the duty of the government to raise the revenue they require in a way that has minimum impact on the economy.

    “Fair Taxation” is code for higher tax, but in reality it will means taxing success, taxing a desire to improve yourself and taxing any inheritance your parents may have worked hard to build up. It also means lower tax revenues, more unemployed and lower economic growth.

  15. Stronghold Barricade
    Posted March 8, 2010 at 4:07 pm | Permalink

    As an addendum to my earlier point

    Reducing corporation tax may induce businesses to stay here and set up satellite ventures of their own operations to take advantage of the tax status.

    These people, however, could ultimately decide to move these operations again if another location became more tax advantageous

    Thus, I think you need to think about feeding business from the bottom up, because the larger businesses will decide where their cash flow is best served by whilst the SME's do not have those options

  16. Michael Taylor
    Posted March 8, 2010 at 4:41 pm | Permalink

    To make a very obvious point: the only way the nation will deal with the debt burden (and other balance sheet problems such as pensions) is to raise the return on capital.

    Dupont analysis tells us there's only four possible ways this can be done: raising margins, increasing leverage, increasing asset turns, or cutting the tax burden.

    Of those four, we can rule out raised leverage for now, and probably also increasing asset turns.

    Margins could be raised if govt was willing actively to cut the costs of regulation and dismantle the economy's monopolies/oligopolies.

    And taxes could be cut.

    And that's it: there's no other way Return on Equity in UK plc can be raised. And without raising ROE, any government will find it extremely difficult to tackle the debt and deficit problems.

    I imagine none of this is news to you Mr Redwood. But I seriously wonder whether the Favoured Five really understand it.

  17. JimF
    Posted March 8, 2010 at 8:20 pm | Permalink

    Stepping back, the question is whether as a society we start with the presumption that we can demand a specified level of services from the public sector, and fund it to the maximum possible level by tax and then by money printing, or whether we aim for a society where we only get the level of services we can afford from the taxes of a steadily growing economy.

    The first is a route to black-hole oblivion, robbing savers and businesses as higher and higher tax percentages (but less tax take) try to pay for more and more services, whilst the second route is a balanced use of our resources.

    We know Labour and the Libdems favour the first, and UKIP the second way forward. I’d call the Conservatives fence-sitters on this one, until Osborne says firmly “no money-printing once we are elected”, and proposes a defined route back to a balanced budget.

  18. no one
    Posted March 8, 2010 at 8:52 pm | Permalink

    if you want someone to tax then tax folk here on intra company transfer visas the same as the rest of us

    tax companies bringing in masses of folk on these visas punative rates to encourage them to employ brits

  19. waramess
    Posted March 9, 2010 at 11:20 am | Permalink

    It may all be quite academic because a Tory administration without a strong mandate will be able to do precious little.

    Thousands of the finest brains in this countrry are employed as career civil servants and the prospect of them letting a bunch of chancers cut back their empires is laughable.

    Without the cuts there will be no reduction in the tax on earnings or on anything else.

    With a strong mandate Cameron's best bet would have been to scrap entire ministries and I would propose that a good first start would be scrapping the Department of Business Innovation and Skills.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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