UK Uncut is back, and today’s victim is Barclays Bank. Inspired by the efforts of the Labour MP Chuka Umunna, who has forced the bank to reveal its low corporation tax bill, protesters have descended on branches of Barclays in outrage. Polly Toynbee herself even visited the one on Tottenham court road, tweeting about the “great comedy protest”. Just imagine the excitement! It must have been like a royal visit!
And it’s easy to understand the protesters. That Barclays has somehow managed to pay only around 2 per cent of its profits in corporation tax is astonishing. When the rest of us are paying ever more for deteriorating public services, this reinforces the idea that big corporations and the wealthy are being let off – in short, that we’re not “all in it together” after all.
But actually, there’s a more subtle point has been missed here. As Bob Diamond argued before getting caught out by Umunna, Barclays generated some £2 billion for the exchequer last year – just mostly in the form of income tax, national insurance, VAT and so on, not corporation tax. Bankers at Barclays Capital earn an average of £236,000 each, so they tend to contribute a lot.
So the real question isn’t whether Barclays should be paying more corporation tax. Rather it is whether trying to force it to is worth it. Unfortunately, multinational companies tend to be very sensitive to corporation tax. That is why, even as it has cut everything else, Ireland has stuck with its 12.5 per cent corporation tax – its leaders know how dependent they are on keeping big firms like Google in Dublin. Similarly, the one tax George Osborne is cutting is corporation tax.
If we try to extract more from businesses, by increasing rates, or by changing the terms under which losses can be written off, we risk losing more revenue than we gain. The Government would only have to force a few firms to relocate abroad, as Kraft recently moved Cadbury, or a few more to move profitable operations abroad, and the higher revenues collected would be wiped out.
The UK Uncut protesters hold the ludicrous idea that big businesses should voluntarily pay more tax. What we actually need is the exact opposite – small and medium sized businesses should have the same freedom from tax as big multinationals. The aim of tax policy should be to encourage firms to produce as much as possible in Britain, not to treat them as villains. But then that’s not an easy case to make at a stand-up comedy gig in a protester-occupied high street bank.
Source: http://blogs.telegraph.co.uk
And it’s easy to understand the protesters. That Barclays has somehow managed to pay only around 2 per cent of its profits in corporation tax is astonishing. When the rest of us are paying ever more for deteriorating public services, this reinforces the idea that big corporations and the wealthy are being let off – in short, that we’re not “all in it together” after all.
But actually, there’s a more subtle point has been missed here. As Bob Diamond argued before getting caught out by Umunna, Barclays generated some £2 billion for the exchequer last year – just mostly in the form of income tax, national insurance, VAT and so on, not corporation tax. Bankers at Barclays Capital earn an average of £236,000 each, so they tend to contribute a lot.
So the real question isn’t whether Barclays should be paying more corporation tax. Rather it is whether trying to force it to is worth it. Unfortunately, multinational companies tend to be very sensitive to corporation tax. That is why, even as it has cut everything else, Ireland has stuck with its 12.5 per cent corporation tax – its leaders know how dependent they are on keeping big firms like Google in Dublin. Similarly, the one tax George Osborne is cutting is corporation tax.
If we try to extract more from businesses, by increasing rates, or by changing the terms under which losses can be written off, we risk losing more revenue than we gain. The Government would only have to force a few firms to relocate abroad, as Kraft recently moved Cadbury, or a few more to move profitable operations abroad, and the higher revenues collected would be wiped out.
The UK Uncut protesters hold the ludicrous idea that big businesses should voluntarily pay more tax. What we actually need is the exact opposite – small and medium sized businesses should have the same freedom from tax as big multinationals. The aim of tax policy should be to encourage firms to produce as much as possible in Britain, not to treat them as villains. But then that’s not an easy case to make at a stand-up comedy gig in a protester-occupied high street bank.
Source: http://blogs.telegraph.co.uk
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