So to boost the economy, you’re much better off increasing wages and cutting dividends.

What about the trickle down effect?

Hang on

the “burden” of tax is not borne by an corporation but by one, or a combination of:

1. Its workers, through lower wages

Isn’t corporation tax paid on profits? So you can still spend as much as you need to on wages/investment and corporation tax doesn’t matter? So if you employ minimum wage workers it would actually reduce your overall TAX liability than if you just drew profit – surely?

If capital wont get out of bed for less than X, then less capital will be made available until the fixed amount of profit delivers a return of X.

An oft quoted argument, but not one I’ve seen substantiated anywhere. Just like all the bankers who’d leave the UK when we upped taxes on bonuses. We lost a tiny number and the rest stayed and put up with it.

What about the trickle down effect?

It doesn’t exist?

ahhh, he didnt bite 🙁

😉

We lost a tiny number

got some figures somewhere?

It doesn’t exist?

Poss flippant.

It is negligible compared with paying lower paid workers a smaller sum where 100% gets spent. Pay a billionaire an extra billion and he might spent as few million extra, he won’t blow the whole billion….

made my day ff, ta. xxxx

Dividends in the case of “washing” because Heath’s article assumes the ability to tax them, which I am not convinced is as simple as made out.

got some figures somewhere?

I did read an article somewhere on the subject, poss Guardian, the conclusion was bugger all left and of the ones they interviewed (who went to Switzerland), they hated it and came back (ok selective choice of interviewee).

However, more importantly, had there been a mass exodus, you’d see the City of London shouting it from the roof tops as an argument for 0% rate tax for wbankers and so as they’re very quiet on the issue, it suggests the evidence is lacking…..

aha. I hadnt read heath, I was still stuck on corporate capital.
In which case, then yes, I see what you’re getting at.

made my day ff, ta. xxxx

You’ve lost me…..

I was teasing with the whole “trickle down” canard…

I was teasing with the whole “trickle down” canard…

I just thought you were being dumb daft….. 😉

Here’s a question…

Could an individual contractor set up as a Ltd Company create a Luxembourg entity which bills his UK company for ‘license of logo’ of something, so the company pays all its tax in Luxembourg? And then somehow re-repatriate the taxed income?

An article on the non mass exodus of City workers:

http://www.guardian.co.uk/business/2010/oct/17/banking-executive-pay-bonuses

That article is over two years old.

According to the Centre for Economic and Business Research, the number employed in City financial services is 255,000 this year, down from a peak of 354,000 in 2007.

We’re only loosing out because we’re in the EU and some countries like Luxenburg take the piss with low rates.

The problem with arguing based on your own facts is that they are often wrong.

Luxembourg has a higher rate of corporate tax than the UK, has done for at least the last 8 years.

Could an individual contractor set up as a Ltd Company create a Luxembourg entity which bills his UK company for ‘license of logo’ of something, so the company pays all its tax in Luxembourg? And then somehow re-repatriate the taxed income?

This is effectively the scheme used by Jimmy Carr and Wiggo. Gurnsey or some other tax haven such as the Caymen Islands is the location of choice for these type of scheme.

In reality the real answer, as with mosth things, is somewhere in the middle we need to ensure coproations pay tax on the money they make here and cannot be moved, selling things mainly, Starbucks springs to mind, but balance that with just causing inflation. At the same time we want to be an attractive place to add value, be in paper value or actually making things, like a car factory, here we need to offer tax breaks to attact companies as the value of creating jobs and growth far outweighs the small amount of tax that could be collected (but wouldn’t as these companies would just go elsewhere)

Obviously being in the EU hurts us a we don’t have freedom to set these policies but it has lots of other advantages. Again the answer is somewhere in the middle.

Perhaps they had a crisis of conscience and they left to actually do some good for others rather than rip us all of for personal gain

THM how will starbucks drive down wages seeing as they basically pay the Minimum wage for the majority of their staff ?

Perhaps george should explain he is cutitng tax for the rich to help the poor – god forbid we should treat tax evasion like benefit scroungers or speak of them in similar terms eh – lets call them wealth creators, risk takers , something sexy and alluring like that

[ joins Stoner in fishing trip 😉 ]

Pick a brighter lure, why dont you?

Obviously being in the EU hurts us a we don’t have freedom to set these policies but it has lots of other advantages. Again the answer is somewhere in the middle.

Are you saying that all things involve (a can’t bare to say the word) compromise?

Are you trying to tell me things are not black and white, (or perhaps looking at it another way not just blue or red)?

This is the biggest loads of horse manure I have ever read! You sir / madam are a witch.

According to the Centre for Economic and Business Research, the number employed in City financial services is 255,000 this year, down from a peak of 354,000 in 2007.

You’re confusing two things there.

When the government was discussing a one off tax on city bonuses, 3 years go, the City of London said it would cause a mass exodus of city workers in the UK, to warmer (tax) climates.

It didn’t.

However, the financial meltdown subsequent to the boom years has meant that the number employed in financial services has fallen from the peak (all over the world).

JY – they wouldn’t, they would merely employ less. But this is a slight red-herring. Corporation tax is probably the most messed up part of modern tax systems across most of the OECD. It raises less and less revenue and is open to plenty of abuse from all sides. The issue of who gets hurt is also complicated and has many factors eg, elasticity of demand for labour, labour versus capital intensity, taxes on corporate versus non-corporate sectors etc.

However, there is sufficient evidence to suggest that a simple call for higher rates of corporation tax (from left-wing politicians), while appearing attractive at face value, may have unintended consequences especially in open economies like the UK. That was my point (edit: the interesting bit for sado’s like me is that according to research over time, the burden has shifted between the three parties with workers losing out more over time….hence labour versus capital intensity, capital mobility, open versus closed economy debates etc)

Re the driving down wages that is simple labour economic theory that you know well enough. Draw basic S&D curves with Wages on Y and Quantity of Labour on X. Raise the wage and follow the diagram – higher wages at lower quantity demanded. The key is to shift the demand for labour at the same time ie, higher productivity (training, capital, better management etc), hope that the demand for the product rises and/or the price of substitute products increases. All three would have the same effect (directionally at least) and could result in both higher wages and higher employment.

Put another way – assume wages are fixed – in Starbucks case at the minimum wage – that corporation tax increases are passed on to the consumer through prices. What does that do to demand for coffee and/or relative price of its substitutes? What does that then do to the demand for labour and therefore wages?

Of course, this is a gross simplification of what is happening at Starbucks. The issue here IMO is the inter-company loans and other financial skullduggery!!

What about the trickle down effect?

Cured by a good shake at the urinal!

No I just provided some data rather than some anecdotal evidence. I think you will find that there has been growth in Singapore, Hong Kong and Shanghai in city like jobs over the same period. Divining precise numbers to different causes is pretty difficult but to claim increased regulation will not impact London’s competitiveness ignores history.

the burden has shifted between the three parties with workers losing out more over time.

True but this is down to politics IIRC the top rte of tx used to be quite high and VAt quite low so it has reduced direct taxation and increased indirect taxation and shifted the burden to the poor

This is an effect of politics not just econmomics

assume wages are fixed – in Starbucks case at the minimum wage – that corporation tax increases are passed on to the consumer through pricesshareholders by reduced profits and dividends

I like this assume game 😉 though your is a much more realistic assumption.
I think your points are broadly correct greedy folk are greedy and wont give up their money – its why we need to make them. Part of this is increased regulation, part is withdrawing our custom and part is vilifying a company that avoids taxation just as much as we do “benefit scroungers” as they do GAS about image [ if it affects profits.

JY – are you mixing corporate and income tax? The burden I am referring to is the impact that corporation tax may/may not have on wages. Very different thing to higher rates of income tax and consumption taxes, isn’t it?

I agree with the option of withdrawing custom but not the rest. Read the article I cited and others – the greedy folk hypothesis, while convenient, does not give a full enough picture IMO!

JY – you are missing the point, the 1,2 and 3 analysis is restricted to the burden of corporation tax, other taxes would be in addition and are not included, therefore the politics are irrelevant.

edit: too slow.

are you mixing corporate and income tax?

I did not read your post properly 😳

I agree with the option of withdrawing custom but not the rest

What greater regulation and vilifying them would not work?
Well George has increased the staff to tackle this – I never thought i would draw on him as an ally in a corporation taxation debate
Vilification would seem to be why Starbucks are talking at the moment.

I think they do work but yes I am OT /wrong and did not read your post properly.
Sorry.