Smoke and mirrors

23 Jul

Yet another example of the ‘Enrich the rich and stuff the poor’ policies of the UK government:

(From Private Eye this week)

TAX HAVEN UK

THE 2 percent cut in corporation tax to 18 percent gives away (mostly to the largest companies) £2.5bn annually, which is a bit more than George Osborne removed from the child and family elements of tax credits.

The justification for what looks like giving to the rich by taking from the poor is that the corporation tax change is meant to attract business to the UK and thus lift the economy but the Treasury’s own figures contradict this.

Based on what companies currently pay, the Treasury estimates that by 2019/20 the corporate tax cut will cost £2.75bn. But it adjusts this figure for the incentive the tax cut gives multinationals to “shift profits in to the UK”. Does it make money overall? Er, no. Based on what it calls “multiple academic studies”, this shift generates less than £0.3bn, leaving the change still a huge cost to the exchequer.

The idea that corporate tax cuts attract much meaningful business has always been a myth that the Treasury’s calculations seem to confirm. It is telling too that all the studies refer to profits, not business, being shifted to the UK (and out of countries with more normal tax rates). This is classic tax haven behaviour, and something Osborne has claimed to be leading the world in stamping out.

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