The politicians last week at the G8 decided to make themselves look good and try to curry favour with their voters by distracting from the really important issue of trying to drag us back to economic growth after the worst recession for a generation. There was a lot of tough talking about Trade, Tax and Transparency but what did it achieve?
While Margaret Hodge is wasting time, money and oxygen in parliamentary select committees interrogating and vilifying some of the worlds greatest companies and employers such as Google, Amazon, Apple, Starbucks etc, she is entirely missing the point. These “big bad” corporations, unlike MP's and politicians, create employment and hence wealth and provide products and services that we, the customer love to buy and use.
These companies have to pay all the taxes they are legally obliged to as none of them would operate on the wrong side of the law. They have a duty to their shareholders to minimize all their costs, including tax so they can maximize profits to generate investment for more growth and employment. So what exactly then are they being accused of?
It is the government and politicians that make the rules and decide on the appropriate levels of taxation; the corporations in turn play the game, and pay what they have to, and surprise surprise, no more.
Government clearly needs to change the UK tax laws to reflect the new digital world we all live and work in especially as most of these companies trade internationally but this takes time and is complex to achieve. However there could be an easier way to kill two or three birds with one stone. Maybe if governments become competitive as corporations have to be, they would become financially more successful?
Surely then here is the answer.....rather than sniping at the corporations, the government should do something positive to attract them to the UK, so why not start by reducing the UK’s corporation tax so that it competes with the 12.5% rate of Ireland and what would then happen?
Our unemployment would be reduced, tax receipts would increase, the deficit would be reduced and growth would return.
Now that really that can't be to difficult to do, can it?