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.