Gordon Brown was notorious for complicating our already over-complicated tax system, and it seems that his former aide, Ed Miliband, wants to emulate the master. The danger is that Ed Miliband would do so against the backdrop of a vulnerable economy in a very mobile global market place.
His latest idea is to put up corporation tax, arguing that this will “pay” for a freeze in business rates on small firms. In fact, the net burden on business will remain unchanged, so his tinkering would be little help to the small businesses that he allegedly wants to help. There are more devils in Miliband’s detail: the freeze would only apply to those properties with an annual rental value of £50,000 or less. This might be good for small independents; but don’t expect it to save the high street because the large retail chains, which are struggling to resist internet competition, are unlikely to benefit.
Miliband’s scheme is also at odds with what every prudent nation is trying to do: keep corporations within their jurisdiction and attract new inward investment to create jobs and increase tax revenues. One must ask what Labour policy makers imagine company directors do when choosing the location of their next chunk of investment? Tax is not the only consideration; but a country that is increasing levies is not going to win business’s hearts, minds or cheque books.
I don’t dispute that business rates are unfit for purpose. All businesses regard them as an out-dated mode of tax assessment, and see no actual “return” in services for what they pay. Nor do they see them as a contribution to their local area. In short, business rates are just another tax collected in a sneaky, old fashioned way. Crucially, in today’s online world, they penalise the high street and favour the online trader because the latter do not usually have retail premises, so they pay less in rates.