Business Taxes

Abolishing most current business taxes

It might seem slightly at odds with the rest of the Transformation Deal, to allow many businesses to avoid paying taxes altogether, but it isn’t. The reason is partly to make collection simpler and more difficult to avoid, and partly to support the general aim of the Transformation Deal of shifting the tax burden away from the productive economy.

Preventing Tax Avoidance

A company does not really pay taxes anyway, no more than it takes a holiday, gets lonely, eats a meal, goes to prison or has a good day. It is not a person. It is an agreement primarily between shareholders and workers, and perhaps in some senses also customers and suppliers. The taxes it bears are in fact borne by all these other people. By abolishing the business taxes listed below, we are in fact transferring this money to the people listed above. And it is they who will bear the tax on their new income (primarily the flat tax of 25%, but others as well)

Taxes (and subsidies) abolished £bn
Corporation tax 43
Employers NI 60
Business Rates 28
Climate Change Levy 1.5
Landfill tax 1.1
Air Passenger Duty 3.2
Insurance Premium Tax 3
Bank Asset Tax 2.7
Corporate subsidies ended -14
Total reduction in taxes 128.5

The purpose of this is primarily practical. Taxing profit, which is easy to disguise, transfer overseas or indeed not even possess, is tricky. That tax is difficult to enforce and easy to avoid. Taxing the income of an individual is much simpler as the individual can be traced and their income assessed more easily than a multinational company.

Transferring the burden of tax away from productive business activity

The second reason is that many of these taxes inhibit productive activity within the economy (employing people, producing goods and services, establishing business premises)

By abolishing them we will create better incentives to do the things that will support the overall economy.

Taxes introduced
LVT 51.15
Bank licences 30
Oil & Gas extraction 2.2
Airline routes 3.2
Spectrum 1
Carbon Tax 10.2
Total increase in taxes 97.75

The new taxes created will move the burden of taxation towards rent-seekers and those business activities that use common resources for private profit, but even if these business are able to pass the cost of all these taxes on to the wider business community (which is unlikely), UK businesses will still receive a £30.75bn tax cut. For productive, non-polluting business, the savings will be even greater

Note: Oil & Gas LVT is set at a rate that is the same as the current crop of taxes in this sector, Airline routes are licenced at the same rate as current Airline Passenger Duty . This means none of these sectors will be disrupted financially by this proposal, although clearly political and environmental priorities might seek to shift the tax burden further in that direction, thus increasing them in future.