A combination of Corporation Tax, 50% income tax on higher incomes and 28% captial gains tax was always going to put some people off coming to the UK. The question was how many would it also send away.
Yesterday one of our large companies, Wolseley, announced it was going to the Channel Islands and Switzerland to get away from UK tax rates and the Inland Revenue. It follows Shire and Ineos, and various investment businesses. It should have come as no surprise, as some of us have been warning for some time that the UK is no longer tax competitive. It’s a footloose world out there for entrepreneurs and businesses. Other jurisdictions now are friendlier and set lower tax rates than we do, so people and companies take up their offers.
The British political class is indulging in one of its phases of moralising and bashing anyone with a bit more money than the neighbours. We are told they should not seek to minimise their tax bills. They should stay here and help the country pay off its debts. They may not be easily persuaded.
All this would be easier to sell if the political classes themselves sought to maximise their own tax bills. There have been cases of prominent Labour, Lib Dem and Conservative MPs, peers and donors who have taken good advice to lower their tax bills legally. I see nothing wrong with them doing that, but the parties should not then turn round and tell people taking sensible precautions to keep their own tax down that such an approach is unpatriotic, immoral or worse. Most sensible people seek to reduce their tax bills by legal means. The government itself encourages that with its tax shelters for National Savings, pension investment, ISAs, charitable giving, family gifts seven years before death and the like.
I found myself agreeing with Mr Darling yesterday. He said that it would be increasingly difficult to collect more tax from income and profits, as successful people and businesses will simply shift tax jurisdiction if the UK puts up its rates. He might have added the way to increase the UK tax take from the rich and successful is simple – cut the rates, then more will want to come here and stay here.
September 28, 2010
Should one invests £1M at 10% return with no tax for 20 years it grows to £6.73M. with 50% tax then it only grows to £2.65M. Just about beating inflation and the rest £4.08M goes in tax. If the investor dies they then take another 40% of the 2.65M (so certainly not even beating inflation then).
And that is if the investment goes well. Anyone tempted?
September 28, 2010
Something of a statement of the obvious if I may say, (obvious to anyone outside the Westminster front benches I should perhaps add), even Ken Livingstone (sic) realised this in an interview when he more or less admitted he would tax people at 1p below the level where they would fly the coup.
If only we had a government that could grasp this and act accordingly. But when the tories stay with mad high taxes you cannot blame people for leaving as indeed, I hope to in a year or two.
September 28, 2010
Down here in the Fens, I can see absolutely no attempt to cut back on government spending. Can anyone out there?
Indeed, I am even hearing signs of INCREASED government spending too!
September 28, 2010
Mike
Only sign of cutbacks I can see here is in the Hospitals, they appear to all be having a staff recruitment freeze as a minimum, and have been for many months. The cuts were enacted under the old Labour policy, and started before the election.
Information to hand suggests that most now appear to be thinking of reducing spending budgets for the next 12 months. Will wait to see exactly what and how the cuts will relate to service provision.
September 28, 2010
Some of the silliest comment on this subject is coming from LibDem politicians such as Messrs Oakshott, Cable & (unfortunately) Clegg & Alexander. Anyone who, e.g., buys an ISA, makes contributions to a pension scheme, buys national insurance certs, makes lifetime gifts to their children (like Tony Benn), or flips the designation of their main residence (like Danny Alexander) is engaged in tax avoidance. Let's insist on honesty and consistency from politicians along with the sanctimonious conference claptrap.
September 28, 2010
Cutting income and Company taxes is the obvious answer to collecting more taxes.
Increasing them means people and their accountants waste a lot of otherwise productive time and money escaping and avoiding them. That's a lose-lose situation.
But your party is in Government. You are the people who can correct this. So far the reverse has happened.
September 28, 2010
You are right however, we should not be talking about collecting more taxes by any means, we should be talking about reducing them and the only way to do this is to reduce the size of government.
September 28, 2010
Shame more do not share your view.
I wonder how many Trade Union leaders and Socialists ignor any tax saving breaks on their own personal and Union Funds. The old saying do as I say, not do as I do, spring to mind.
The sooner we all realise that it is a competitive World out there, and a Global economy where boundaries do not really exist, the better.
September 28, 2010
Change some of the laws in this country
If you want to do business in this country – Your business pays tax in this country
You cannot register your business in another country to avoid paying UK taxes
* You company has to pay Tax on the profits your company makes in this country
* Your have to have a registered UK head office based in this country
* You have to have a UK call centre based in this country
UK citizens spending their hard earned cash, in UK stores, with the profits from their purchases being taken out of the UK , with little or no UK taxes paid.
September 28, 2010
Even Vince Cable seemed to recognise this truth in his fabled speech, saying "It will be said that in a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels. That is right." However, he fails to realise that his idea of taxing property instead only works provided that those who own the property have a taxable income in the UK.
Perhaps you might also have mentioned the threatened rush to the entrance to obtain UK benefits, thanks to the EC. Add the two together, and we'll have a bankrupt nation.
September 28, 2010
The UK currently has roughly 62 Million people living here, that is a market of 62 Million people for any company to have the opportunity sell their goods & services to.
It would be highly unlikely that any large companies would leave the UK if they were made to pay higher taxes, ( IF) they were unable to continue trading in the UK.
They would rather pay slightly higher taxes in the UK rather than be excluded from trading in the UK marketplace altogether and from making potential profits from the 62Million UK citizens living here.
If you allow companies to move their registered Head Office to another country so that they are able to pay less taxes on their profits, and pay no taxes to the UK then some companies may choose to take advantage of this situation.
Don't let them do it, change the UK laws
September 28, 2010
Sorry James I do no understand this type of logic.
Are you really saying that if a business does not have a Head Office in this Country you would ban their products.
If so, how about Toyota, Honda, Nissan, as manufacturers for a start.
Think their workers and the Towns where they exist may have a different view, as all of their workers pay taxes of many kinds.
September 28, 2010
Even the most fleeting knowledge of the 1930's and it's "beggar my neighbour" tarriff policies should show you how good an idea this would be, setting aside its illegality because of GATT, EU membership etc.
September 28, 2010
It's interesting to compare companies and jobs leaving our shores. Whilst companies are driven away by tax costs, employment is driven away by Labour costs.
In the very large bank where I work a goodly 25% of the seats are occupied by Indian IT workers who are over on skilled visas. There are actually plenty of British people who could do the job for a little more money and plenty of graduates who could be trained with a little more time – but accountants rule and the British lose out. The fact large corporates abuse these visas (intended for senior staff and hard to find skills) just to cut costs is a very sad state of affairs and ultimately will lead to the decline of the UK workforce.
September 28, 2010
i would imagine Indian workers don't bother with industrial tribunals and are more compliant than bolshy British staff who are all into their rights. Employers get sick of all that stuff. You can't blame them for finding a workforce than wants to cooperate. The costs are not the main driver to stop hiring locals, I think you'd find with a more detailed enquiry. Yet no one will talk about such things publicly.
September 28, 2010
Perhaps we should be looking at the "new" swedish economic model. Taxes have been lowered substantially for both companies and individuals. This has encouraged companies to invest and individuals to spend in order to moderate the recession. It is true their banks appear sound, having gone through a financial crisis in the 90's (although I wonder about the extent of their indebtedness in the former USSR Baltic countries).
And now the swedes have forcefully voted for no more immigration. Quite right too, for both social and economic reasons. Javelin's point is sound. We should ignore the pleas of Richard Lambert et al. This is the trade-off for lower taxes.
September 28, 2010
Why does Michael Ashcroft live in Belize?
It's not only rich and productive companies that leave the UK. 6 million individuals have left in the last 25 years. Just think if we could bring them back, and stop others going.
The climate in the UK is crap. We need better i.e. lower tax rates not higher ones to stop people leaving.
Red Ed's equality agenda is the equality of the sewer. All in the financial poo together. In fact the unions he's teamed up with are not into equality at all, but a better deal for their members, Health workers and local authority in particular, who bag 50 per cent higher salaries than those working in the private sector.
September 28, 2010
Just to add an additional point – if the Government want a simple law to protect EU workers – they need to have a simple rule that says that 2 recognised recruitment agents should sign off to say they can't find an EU worker. This would ensure best efforts and the market would be given a chance to recruit an EU worker.