Thursday, March 28, 2013

Reasons to resist the attacks on the corporation tax

The Guardian two years ago carried a piece entitled "Ten reasons to tax corporations," responding to all the devious corporate lobbyists who seek to argue that it's better to let corporations take the benefits provided by society without paying for it.

Now, from Tax Research UK and Economia magazine, a new list that overlaps with the Guardian original but provides of fresh analysis too, with a UK focus.
  • Corporation tax is a core part of our tax system. On average it raises 10% of UK tax revenues.
  • Corporation tax is a backstop to income tax: without it anyone who could incorporate would pay tax at will. We cannot afford that.
  • Tax-free companies would allow those with wealth to accumulate more in a tax-free environment, exacerbating wealth inequality.
  • A tax-free business sector would distort competition, providing much opportunity to large business, but little or none to small enterprise.
  • Corporation tax is source-based. It taxes profits made in or attributable to the UK. If it was abolished and instead company distributions to their recipients were taxed, the ownership of shareholdings would flee the UK and the tax base would collapse.
  • In many cases we don’t know who the owners of companies are – so have no other way of taxing them.
  • Source-based corporation taxes are the contribution paid for the right to trade in and make profit from UK markets. We grant that right by offering limited liability. As a result society shares the risks of capital communally, as the banking crash of 2008 showed.
  • Corporation tax is a distribution to society for the right to have limited liability; as compensation for the costs it imposes, and for the costs of market failure. Unless business pays that, ordinary people will.
There are many other reasons to resist the anti-tax lobbyists. One particularly important argument, particularly in the current economic climate, is provided via the London School of Economics blog, here.

Points to understand and rehearse, and to wheel out wherever necessary.


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