Thanks to other people posting things to the book of faces I stumbled across two rather differing views of the problems with the UK tax system. One from the Gaurdian that puts the blame largely on companies trying not to pay more tax than they have to and the other from the Telegraph who see the problem as being the system itself. From here I’d say the Guardian is doing an excellent job of describing the symptoms of the problems described by the Telegraph – I’m not sure I agree with what they seem to think is the cure though.
The symptoms that has the Guardian up in arms are that large companies have arranged their affairs so as to pay as little tax as possible, which is something I’m sure their shareholders (which probably include pensions funds, councils, charities and who knows what else) approve of. After all less taxes paid more profits, better dividends (do companies still pay those?) and better news for the shareholders who ultimately will be people. One of the main ways that they avoid paying taxes here is by having headquarters in other lower tax countries like say Ireland and thus only paying tax there, which is a design feature of the EU and could be quite easily tacked by lowering the tax rate here. After all to take one example they give:
“Four US companies – Amazon, Facebook, Google and Starbucks – have paid just £30m tax on sales of £3.1bn over the last four years, according to a Guardian analysis. Apple is estimated to have avoided over £550m in tax on more than £2bn worth of underlying profits in Britain by channelling business through Ireland, according to a Sunday Times analysis, while Starbucks has paid no corporation tax in Britain for the last three years.”
So after asking for 26% we get 3%, now some of those companies are headquartered in Ireland which asks for 12.5% if it gets even half of that it’s doing better than us, so it’d seem to perhaps make sense to drop our rate to say the same as Ireland or lower so that these companies headquarter here and we get a smaller slice of more and bigger pies. Of course suggesting lower corporate tax is terribly unfashionable during these times of austerity, after all “taxes are rising and jobs, benefits and pay being cut for the majority.” Though taking a smaller amount of more pies seems to work for supermarkets the world over, though it is so much nicer being the small corner shop of the tax world with reassuringly high prices and few people paying them.
Before I move on I must mention a bit I do find quite laughable in the Guardians article:
“The total tax gap between what’s owed and collected has been estimated by Richard Murphy of Tax Research UK at £120bn a year: £25bn in legal tax avoidance, £70bn in fraudulent tax evasion and £25bn in late payments.”
Emphasis mine, as I hate to break it to them but if it was legally avoided it’s not owed – I make homebrew and apparently the tax per pint is about a pound so my last 40 pint batch means by the Guardian logic I’ve legally avoided 40 pounds of tax that I owe – taken to it’s logical conclusion every time you do anything for yourself you’ve avoided tax you owe, cooked at home you’ve legally avoided paying the VAT on a take away meal. Anyway on to what the Telegraph had to say for itself.
Having previously tried to work out how much tax the government takes from me that it shouldn’t (or in Guardian speak how much tax I could legally avoid or possibly how much tax the government takes from me that I don’t owe) I find this line rings very true:
“Britain’s shockingly opaque tax system, which sometimes feels as if it has been purposely designed to confuse and fool taxpayers”
Compliance costs and a complex tax system are an utterly avoidable drag on the system, adding costs to every financial transaction we make, and the UK tax code is very complex indeed. We pay swathes of civil servants to take money out of peoples pockets and then pay another tribe of them to put some of it back – why not just take less in the first place? How can it make sense that people on minimum wage are taxed at around 40% (PAYE + NICs)?
“The total tax levied on wages paid to under-65s is an astonishing 40.25pc for anybody earning between £8,105 and £42,475; 49pc on earnings over that; and 57.82pc on £150,000 or above. There is an especially crazy tax rate of 66.1pc on incomes between £100,000 and £116,210 as the personal allowance is removed, as well as various loopholes that render the picture even more complex than I have described it.”
Of course for most of us we than go and spend the bit of our wages the government lets us keep on fripperies such as fuel (Vat) petrol (Vat and duty) , housing (stamp duty), clothing (vat) or maybe some luxuries like beer (vat and duty) of baccy (vat and duty). Perhaps those at the sharp end that the (tax avoiding)Guardian are so concerned about might be an awful lot better off if the Government just took less money away from them in the first place. Maybe it might be easier to find jobs if small firms weren’t having to spend “up to 36 hours a month on tax-related matters”? Perhaps those evil evil tax avoiding companies (like The Guardian) might find fewer loop holes if our tax system was less complex?
“Tolley’s tax guide, the Bible in such matters, reached an insane 11,520 pages at last count, more than double the number of pages in the 1997 edition”
The “business friendly” Tories haven’t seen fit to tackle this but then just think how many tax lawyers, tax accountants and civil servants might find themselves having to look for gainful employ if we actually had a tax system that was understandable by an individual. I’m sure they’d happily explain to me just why we need such a complex tax system as it’s no doubt far too complex an issue for the likes of me to understand, I mean what possible good could a simple stable tax system do anyone?