Britain's competitors soon willby Simon Walker, Stephen Herring / February 4, 2016 / Leave a comment
A good test when it comes to taxes is “if it didn’t exist, would we introduce it?” Plenty of revenue raisers pass the test. For corporation tax, however, the answer is an emphatic “no.” As a national tax levied on the domestic profits of global companies, it is a long time since corporation tax has been an effective way to fill public coffers.
Taxes should be simple to understand, straightforward to collect, and non-negotiable. On all three counts, corporation tax falls down. Consider the way that Google and other multinationals are currently negotiating with European governments. Or look at the ridiculous episode in 2013, when Starbucks offered up £20 million in voluntary corporation tax. Everybody in the country would surely agree that taxes should be binary in nature: Google and Starbucks either owed that money or they did not. Backroom deals and the perception that the taxation of multinationals is pretty much random, understandably leave a sour taste in the mouth.
Even without the latest round of outrage, there is more than enough justification to consign corporation tax to the dustbin. The arguments companies use to defend such tax arrangements are not without reason. It is tricky to pin down exactly where “profit” is created, and thus, where tax is due. The cup of coffee or online advert may be sold in central London, but marketing, research and development, retail, sales, distribution and manufacturing teams strewn across the world may all have a hand in it.