Some tax sense

 

              Yesterday the Chancellor’s remarks included news that he is revising the treatment of overseas profits for companies headquartered in the UK, and offering a 10% rate of Corporation  Tax on profits earned from new products.

               This is welcome news, If the details are worked out sensibly it will stem the loss of businesses from the UK for CT reasons, and help the growth of business here. Tax competition works.

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19 Comments

  1. lifelogic
    Posted November 30, 2010 at 10:42 am | Permalink

    Good – but it sounds like more pointless work for accountants/lawyers defining what is a new product or an old on in a new cover, what constitutes overseas profits, how the overheads are split and the rest.

    Still better than nothing I suppose. When do we get full details and when will it actually start? Will it be before they loose the next election? Will companies change their products only to find the 10% rate is abolished six months later?

    • lifelogic
      Posted December 1, 2010 at 8:51 am | Permalink

      Good to see that snow has become a “rare and exciting event” as predicted by the new high priests the climate “experts” and it is still two months to go until the coldest time of year.

  2. Norman Dee
    Posted November 30, 2010 at 10:59 am | Permalink

    It will be interesting to see if Europe react to this, especially as there are moans about Irelands rate already.

  3. The ESSEX BOYS
    Posted November 30, 2010 at 11:42 am | Permalink

    Our research friends at ESSEX VOTERS VOICE have just emailed us their summary conclusion of Mr Cameron’s first 6 months as Prime Minister.

    “Nice enough bloke but…(like Blair, no bottle”)

    Despite the wide relief to see the back of New Labour and this site’s underlying loyalty to the new government this will not surprise regular contributors.
    We shall look over the next few days at the specifics from the group discussions held across this county and comment further.

  4. lola
    Posted November 30, 2010 at 11:48 am | Permalink

    In other words a recognition that tax destroys wealth creation. And this is news…? Cripes – don’t this tell you immediately what needs to be done? Slash taxes (on wealth creation) now.

    • alan jutson
      Posted November 30, 2010 at 3:54 pm | Permalink

      Lola

      Exactly. but why complicate things by having different tax rates for new products compared to old ones.

      Ireland showed the way to go with a one rate competitve Corporation Tax rate, and whilst I do not suggest we go to their level in one go, we certainly need larger cuts than the one percentage point per year from 28-24% for the next four years.

      If you want UK PLC to grow fast, you need to encourage not just new investment, but also need to revitalise some of the older well established but struggling businesses.

      Lets keep it simple, various rates is a charter for Accountants fees, Tax advisors fees, and it leads to honest mistakes in returns to the Inland Revenue, with all of the problems that entails.

      • BrianSJ
        Posted December 1, 2010 at 9:04 am | Permalink

        Agree 100% about the new product nonsense. That sounds like a Gordon Brown scam. I do think it might be nice if Vodafone paid some tax though.

      • lola
        Posted December 1, 2010 at 8:39 pm | Permalink

        Just reinforce my argument, my business does a lot of ‘tax planning ‘ for clients – and here I am trying to talk myself out of a job…

        • alan jutson
          Posted December 2, 2010 at 3:28 pm | Permalink

          Lola

          If people had more money left then you would be able to give investment advice.

          Far more positive for clients, and still would enable you to charge fees. So your business need not suffer.

          Its the mantra that government knows how to spend our money better than ourselves which constantly frustrates most of us.

  5. waramess
    Posted November 30, 2010 at 11:50 am | Permalink

    I earneestly believe that with this lot, as with the last lot, they seek headlines. Be certain nothing will emerge that gets anything close to the headline.

    They play to the press and to the right of their party but in words only. In deeds they are “big government” and will continue the failed policies of the last lot.

    They know they have nothing to fear from the right wing so long as they throw a few scraps now and then and they have no good reason to tackle a system that in reality serves their philosophy well.

  6. Derek Buxton
    Posted November 30, 2010 at 12:36 pm | Permalink

    We will cheer when and if it happens, with this lot we cannot trust a word they say. Why do they not cut the high rate of income tax? Many economists say that this high rate could deter workers. I can remember that the “conservative” party once actually believed in lower taxes.
    Still since Cameron believes CO2 is dangerous, I suppose he will believe anything that WWF tell him. Perhaps he should talk more to other people, horticulturalists for example.

    • lifelogic
      Posted November 30, 2010 at 3:51 pm | Permalink

      Certainly the CO2 is warming us all nicely today in this the coldest November spell for many years.

  7. lifelogic
    Posted November 30, 2010 at 12:36 pm | Permalink

    “Tax competition works” – of course it does – a company has to compete. If its competitors pay less tax they have a clear advantage. Companies often have little choice if they wish to survive they need to cut all costs, tax included, when ever they can.

    That is why the EU is always trying to extinguish such tax competition. It is the only real defence for voters against big (tax and waste) government.

  8. Gary
    Posted November 30, 2010 at 1:28 pm | Permalink
  9. Acorn
    Posted November 30, 2010 at 5:42 pm | Permalink

    I will refrain from starting an argument on the need for Corporation Tax to exist at all; (Corporate Income Tax; to be globally precise); because all corporates are owned eventually by households, who pay tax on receipts from those corporates.

    But, I am glad that George has woken up to the fact that forcing corporations to shield profits in tax havens is not a good idea. Ireland is full of international corporates that appear to make huge profits from an office staffed by a very small percentage of its world wide staff. This link sums it up:- http://www.businessweek.com/magazine/content/10_44/b4201043146825.htm

    • waramess
      Posted December 1, 2010 at 10:00 am | Permalink

      George has woken up to nothng I fear. Hard to remember the time when we had such a low caliber Bank of England Governor criticising such a low caliber Chancellor.

      If George has not woken up to the fact that low taxes stimulate private sector activity and low taxes can only be brought about by smaller government then he misses the big picture. He is also completely dumb if he thinks growth over the next five years will expand his tax receipts sufficiently to reduce the deficit.

  10. JimF
    Posted November 30, 2010 at 6:45 pm | Permalink

    Fine, but let’s see the detail. I suspect this will relate to sales of newly patented products, great for mainly larger Companies and those that can take the big risk of developing new products and paying for patents. Corp Tax on those is like taxing the 100-1 punter on his winnings, with no offset when he loses the bet.
    You really need to release SME s profits to invest in men and machines, whether products are new or old. Remember funds available for investment are only those marginal ones after dividends to repay the investor and Corporation tax are paid.

    Every Pound off of CT releases a Pound for investment.

  11. emale
    Posted November 30, 2010 at 10:26 pm | Permalink

    Why should new businesses alone be so favoured.

  12. ferdinand
    Posted December 1, 2010 at 11:20 am | Permalink

    It doesn’t say much for his intelligence that he hadn’t realised before now that businesses and businessmen would leave if obliged to suffer excessive tax rates. How naive of him – and his cohorts.

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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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