Tuesday, 8 February 2011

Monbiot: wrong as usual

*sigh* Here we go again:

The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone – and are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d'etat is taking place.

Like the dismantling of the NHS and the sale of public forests, no one voted for this measure, as it wasn't in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century.

Oh, the drama! Oh, the horror! Oh, the disgust! What could the eeeeevil Tory toff be doing now?

At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks.

But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major western economy". By the time this government is done, we'll be lucky if the banks and corporations pay anything at all.

Hurrah! There are a number of reasons to applaud this:

1. Companies don't actually ever "pay" tax. They simply claw it back out of money they could pay to their staff (you know, the working stiffs) or they pay their shareholders less (you know, the pensions of the working stiffs) or they gouge it out of their customers (which means that the working stiffs pay more). Companies are legal entities, not living, breathing things. Don't fucking pay attention to the legal fiction, pay attention to the employees, the shareholders and the customers. You know, actual human beings. Think about the consequences to them.

2. Lower taxes will almost certainly increase the tax take as larger corporates will look to move back onshore, or move here anew precisely because the tax regime is so competitive. And this is all apart from the Laffer Curve, which shows that when tax rates are too high (and they definitely are in the UK!) then decreasing the tax rate actually increases the tax take.

So, Cameron and Osborne should actually be applauded for taking small steps in the right direction, rather than being pilloried by economic illiterates.

And just to show how fucking stupid this twat is:

These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business that doesn't outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments.

OK: so we're drastically lowering our tax rate AND offering tax-reducing measures not available anywhere else in the western world, and this is going to chase businesses away? Yes, Mr Banker, you don't want to base your business in Britain, where you will pay less tax. You don't want the prestige and convenience and facilities of the Square Mile AND lower taxes, do you?

What a fucking idiot.

I'm ambivalent about the issue of driving jobs abroad -- it may drive a handful of jobs abroad, but I suspect that most headquarter jobs will need to be in the headquarters, so more companies headquartered here will mean more, better paid jobs here.

So, overall, Monbiot is, as usual, completely fucking wrong in his economic analysis, although this won't stop lefty tossers short-stroking themselves into the Guardian's comment pages today.

The only thing that I see as wrong is that some of the perks only apply to "medium to large business", although off-shoring probably doesn't make economic sense for smaller businesses anyway. So, more corporatism from Blue Labour (there's a surprise!) but at least it's better corporatism than New Labour's.


Sue Marsh said...

The Tories must love having people like you to defend their smash-and-grabs. Bet they c't believe their luck!! If only aristos and plutocrats voted for them they'd be finished!!

Now, if UK business is already sitting on a surplus of 600 BILLION, what on earth makes you think that giving them a few hundred billion more means they'll put it into jobs and development and infrastructure?

Will we never learn? Or could it be, just possibly, that they'll put it into the same tax havens and offshore accounts they always have?

I expect Osborne or Green to defend this, but if you earn less than several million a year, then surely you're just an enormous mug? It doesn't even extend to small businesses FFS, only Medium and Large!!

Have tax cuts ever lowered the gap between rich and poor? Have businesses ever turned away from extra profit?

Even Gates and Buffet realise this kind of thing has to stop.

Obnoxio The Clown said...

600 Billion is utterly dwarfed by the massive transfer of wealth perpetrated by your beloved Labour to "prop the banks up".

How dare businesses have a surplus anyway, they should piss it all away and then borrow like fuck when things turn to shit?

Just like the Labour government.

Obnoxio The Clown said...

PS It's fucking easy to be profound about "things stopping" when you're as fucking rich as Croesus already, thanks to the very system you're moaning about.

Gates has always been a cunt, as is Buffet and Soros. Happy to ride the system to make their money and then pontificate on its "evils" afterwards. Don't see any of those fucking hypocrites actually giving it *all* away and just working for a living like you and me, eh?

Sue Marsh said...

Oh, I don't know, they could spend it on, er, employment? training? research? development? infrastructure?

Isn't that what Davey and Gideon keep begging them to do? You agree the state can't do it, so business has to, isn't that what all of this so called "rebalancing" is all about?

Oh and 800 billion hardly constitutes and "utter dwarfing" of 600 really. Would you have let the banks fail the, just like Gideon? God help us.

I'll never understand how Tories can moan about the bailout, then refuse to take the money back from them? If you're against the bailout, surely your beloved duo should be claiming the entire 800 Billion back?

Bet you a pound to a nickel they don't do any of that though. Bet the surplus is just higher by the end of the parliament, they've paid less tax AND unemployment has risen etc.

Mark Wadsworth said...

Hang about here, Monbiot (accidentally) makes a good point.

The exemption for dividends from foreign subsidiaries was something which Labour brought in, and a very good idea it was too (unlike what Moonbat says). It only seems logical to extend this to income of foreign branches (taxing substance over form). Fair enough.

But Dave & Co are keen to smuggle in measures which will benefit banks in particular, e.g.

1. Increase VAT to 20% and reduce corp tax to 24% (from 17.5% and 28%). So VAT registered businesses will end up a lot worse off (extra 2.5% of total turnover is a heck of a lot more than 4% of net profits) and banks (largely unaffected by VAT) end up a lot better off.

2. If we are being logical, then yes, overseas profits and dividends wouldn't be taxed in the UK (morals aside, the net effect on UK tax take is probably slightly positive) but to be fair, related interest shouldn't be allowed as an expense.

But who's getting that interest? The UK banks, of course, so again, Dave & Co are doing something which benefits banks more than normal productive businesses.

Obnoxio The Clown said...

Hello, MW!

Isn't it interesting how this govt and the last govt are so deep in the pockets of the banks. I just wonder what has remained constant between the two completely different tribes of political leadership that are "running" the show...

Obnoxio The Clown said...

Sue, I would ABSOLUTELY have let the banks "fail". I bet you not one of them would have, either.

Instead, they used a crisis to suck just shy of a trillion pounds out of the taxpayer's pocket for no good reason.

Thanks to LABOUR.

kitler said...

Will any of this matter in a year when petrol reaches £2 a litre and half the population can no longer afford to get to work or travel to the cities to go shopping?

Cameron is no fool and he knows his policies are taking the UK into a depression that will last a decade. When it is over the banks and the government and the big corporations will be indistinguishable from each other and the highest paid employment for the working stiffs will be prostituting their children to visiting Asian businessmen.

Timac said...

Sue Marsh,

If companies want to have a surplus, that's their business and nothing to do with you. It's like you think any spare bit of cash lying around should go straight to the treasury coffers for them to dissappear it.

The taxes in this country are already suffocatingly bad for business.

Also, who cares about the gap between rich and poor. The spirit level has already been thoroughly debunked. What do you care if there is a stratified socioeconomic spread so long as the worst off are looked after and have equal opportunity? Why do you care? It's just the politics of envy seeping out again as far as I can see.

sixtypoundsaweekcleaner said...

I know what lefties are like, I used to go out with one.

Anonymous said...

You went out with a left hander?

Anonymous said...

Generally agree with your comments to Sue Marsh The banks should have been allowed to fail it's full on capitalism. Instead we had a government stance that pissed OUR money up the wall and rescued the improvident and imprudent. Capitalism would have seen the good bits of the failed banks hoovered up out of administration whilst the depositors were protected (to a level) by the FSCS. There was absolutely no need to have bent the rules and ruined Lloyd TSB. A disaster for generations to come with the dept hanging over them for generations to come compounded with the trashing of the currency by money printing (Mugabenomics). A total clusterfuck which resulted in the guilty escaping lightly and the imprudent indebted rewarded. Listen to the cries of the client state lamenting that they have to face up to their complicity in the creating the recession in the first place. We owe it to our children need to protect the future generations and do penance for the present.

sixtypoundsaweekcleaner said...

Anon 18:49

No, I meant him who looks like a cross between Tone the Fone and a hamster.

Mitch said...

Nothing seems to change does it ? one bunch of useless thieving bastards ousted so the other lot can have a go.

We really need to try something different....anything....no really anything has got to be better than this.

We are being farmed and it needs to stop.

JuliaM said...

"When it is over the banks and the government and the big corporations will be indistinguishable from each other and the highest paid employment for the working stiffs will be prostituting their children to visiting Asian businessmen."

And cats and dogs will be living together! Aieeee!!!!

Mark Wadsworth said...

PS, for the hundredth time, banks do not 'fail'.

If left to their own devices, then we end up with something called a 'debt-for-equity swap' whereby bonds are converted into share capital.

Back in 2008, a couple of politicians from all parties muttered about this and I hoped that the penny had dropped*, but it must have escaped their minds once they got into the thrill of handing over hundreds of billions of pounds of taxpayers' finest instead.

* Interestingly, what they did with Northern Rock amounted, after fannying about for a couple of years, to more a less the same thing as a debt-for-equity swap.

CIngram said...

I don't have much to add, really, but the wv was 'kuntious' (I kid you know) so I had to comment, didn't I?