But today's concern is how we get the tax, which we so clearly need. The chart at the left shows the breakdown, with income tax being something under a half on the blue, VAT something under a quarter on the orange, local taxes around 10% on the gray, corporation tax around 8% on the yellow and fuel taxes around 6% on the dark blue. Right old rat bag of bits and pieces making up the balance on the green.
So one interesting question is, have we got the balance about right? A slightly theoretical question because for any change you can think of, however virtuous it might seem from a distance, there will be losers who don't think it virtuous at all from close up. Hard to make changes except when the tide is rising fast enough to carry everyone up with it - which does not seem very likely any time soon.
One change I favour is to make local government less dependent on central funds and more independent from central government. Make local taxes a bigger proportion of local spending, set their levels locally and make local councils more truly accountable than they are now.
But the change in which I am interested today is the proportion of the total which one collects as corporation tax, levied at very different rates across the world, although mostly at between 20% and 30% of profit, giving rise to a proportion of the chatter and angst about tax havens. One of the points of interest being that the large international companies which account for a good chunk of the profits going can usually arrange for their profit to fall more or less anywhere they choose, typically (if we believe all that we read in the Guardian) somewhere with low tax and low regulation regimes.
I am told that the OECD is pondering about ways to deal with this problem and to get the tax paid to the deserving governments, rather than to the governments of tax havens. One wheeze is to allocate the tax according to where the products of the large international company - say Microsoft or Amazon - are bought. Another wheeze is to allocate according to where their people are. Another is to say that it is all too difficult and to get rid of it altogether - with some countries already nudging in this direction by allowing corporation tax paid to be offset against the income tax liabilities of the people getting dividends. This would satisfy the wonks who think we should only tax people & their doings and not other entities like companies & their doings, the profits of which, in any case, eventually wind up as the income of people who can be taxed. Concentrate the fire of the government tax collectors on people who can't afford such fancy lawyers as the large companies. With the obvious catch being that one has to make up the 10% or whatever percent it is some other way - which will get another bunch of people screaming from the rooftops about how awful it is. And one can rely on the DT to give lots of space to anyone screaming how awful.
I then think of the accounting problem of deciding what profit it. Suppose, for example, a company borrows a lot of money from some other, vaguely linked company, a loan on which it pays some exorbitant interest rate, thus more or less killing off its profit. So the first company, the visible one, has more or less no tax liability, while the second one is invisible and is probably located in some dodgy island somewhere in the West Indies. How do we deal with that?
All terribly complicated and no wonder that the whole subject generates so many words and makes so many good livings. Maybe the best we are going to do is naming and shaming companies which don't play the game. Versions of this strategy have worked in other situations.
PS: figures taken via http://www.ukpublicspending.co.uk/ from the economic and fiscal outlook published by the Office for Budget Responsibility in March 2013.
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