You may have heard of UK Uncut? They’re certainly good at attracting attention: forcing their way into Barclay’s bank the other week and
managing to close a branch of TopShop temporarily.
But what they have in noise they lack in substance. New research by the Institute of Economic
Affairs exposes how the ‘grassroots movement’ want Vodafone to pay tax in the UK on the profits it makes in Germany. It’s a reasonable principle – taxing companies
based on where they are domiciled is fine. But they also want Boots, a Swiss company, to pay tax in the UK on the profits it makes selling items to Britons, from British shops. You can have one
principle or the other, but not both – not unless we want businesses to locate elsewhere. In fact, corporation tax systems are carefully designed with reciprocal agreements between countries
for the very purpose of ensuring that profits are taxed once and not twice.
The truth is that tax in this country it too high; and it is also too complicated. Corporation tax is the worst of them because it has the largest deadweight cost. In a world where capital is
highly mobile, high rates of corporation tax drive away potential capital investment, and therefore reduce productivity and lower wages. And of course, corporation tax isn’t really paid by
corporations, but by the owners of corporations – shareholders, beneficiaries of savings plans and prospective pensioners.
Besides, the companies UK Uncut rail against actually contribute a lot to the government’s tax take. They collect VAT for the government, through PAYE they collect Income Tax, and let’s
not forget all the jobs they create.
So the next time a friend of yours says they are joining a UK Uncut rally, remind them that those firms and those shoppers are driving economic recovery in this country. It may not be your
favourite shop; but let’s not let UK Uncut get away with throwing all logic out of the window.
Nick Hayns is Communication Officer at the Institute for Economic Affairs.
Comments