Taxing corporations in a global economy: is a new approach needed? Yes, says the President of Researches for Taxes UK

Yesterday, the House of Lords sent me a questionnaire which they personally asked me to complete in order to inform them how the world’s tax system should work. I have told them that I am busy reading the Encyclopaedia Britannica this weekend so I would send them a fairly quick response.

Here it is.

1. Is there a good rationale for the existing system of taxing corporate profits? What proportion of total tax receipts should come from corporation tax? Who bears the burden of corporation tax?

No. It was thought up by idiots who hoped that one day somebody like me would come along and sort it out properly.

The proportion of total tax receipts from corporation tax should be zero. The concept of companies should be abolished as these are abused by people to defer paying tax on their income. Instead all companies should be transparent for tax purposes.

Once we have county-by-county reporting we should then focus on shareholder-by-shareholder reporting so that we can determine exactly the fair amount of tax that each shareholder should pay.

Some people, like that idiot Belinda Dodwell who I cannot say what I think of due to the fact that I sit alongside on the GAAR panel (another thing I’m ethically not allowed to say is rubbish even though it is), will tell you that the burden of corporation tax is a mixture of consumers, the employees and the shareholders. But that is sophistry and I have argued with her on many occasions over this.

Instead, corporation tax is borne by a mixture of the consumers, the employees and the shareholders in a equal amounts which is why unitary taxation always weights profits by a third for sales, assets and employees.

But, importantly, Belinda and anybody else who says that is wrong. It is only when I say it that it is correct.

2. How vulnerable are UK corporation tax revenues to a recession, or tax avoidance activity? To what extent has corporation tax become a voluntary tax?

Under this Coalition or any similar neoliberal government, UK corporation tax revenues are extremely vulnerable. Businesses and their advisers are invited into the Treasury and decide policy, design it, draft it and then enact it to ensure that there are massive loopholes through which they can operate enormous tax avoidance schemes like the patent box avoidance scheme, the research and development tax avoidance scheme, the gift aid tax avoidance scheme and so on.

Also, recession is inevitable without borrowing much, much more. So companies aren’t going to be making profits to be taxed. Except multinational ones who don’t make profits for tax avoidance purposes, like Starbucks.

Which brings me to voluntary payments. Starbucks could easily decide to not pay tax next year. As could any company anywhere. Corporation tax is completely voluntary until we introduce unitary taxation which will prevent manipulation of profit because it is impossible to just move capital around.

And where a sale actually occurs is obvious. Amazon are clearly selling in the UK because my computer is in the UK. Unless I’m on the move and me and my computer happen to be in Belgium. In which case Amazon will need to adjust for that.

Also, multinationals would never ever actually consider employing people in low tax jurisdictions. These countries are an utter sham where nobody actually lives or works. It’s obvious that their governments couldn’t operate on such measly incomes.

Switzerland pretends to have a population of about 8 million. It’s actually closer to 5,000. The Netherlands only has 150,000 people there. And Liechtenstein has a population of 8.

Of course, there is a lot of capital in Liechtenstein but that would be ignored by virtue of my GRAPIST which would throw the discredited unitary taxation method out of the window and focus on the underlying economic activity.

If we are going to have unitary taxation we will need a GRAPIST to counter people actually moving capital, jobs and sales into low tax jurisdictions.

3. How does corporation tax affect decisions by firms to incorporate, where to locate, how much to invest, how to finance activities and where to record profits?

Corporations behave like psychopaths, so they don’t focus on the tax in itself, they just try to work out how many people they can kill by shifting profits around. So where they know that smaller amounts of money have a greater impact they avoid more.

That’s why the UK has been hit so hard by corporation tax avoidance. Corporations see the cuts as a sign that they can get more bang for their buck in the UK and ruin more lives.

It’s as simple as that. But that would be solved by country-by-country reporting which would need to be enforced through unitary taxation which, provided we get a GRAPIST would work perfectly. Of course, we’ll need to have a lot of case law so that people know how the GRAPIST works, but I estimate that within 50 years the system will work perfectly.

That is, of course, assuming we can remove the concept of corporations from law altogether.

4. Is there a need to reform the UK base for corporation tax? If so, how? For example, should the preferential tax treatment of debt over equity be removed? Should reforms encourage more capital investment, particularly in UK infrastructure?

Yes, we need to reform the UK base for corporation tax. By introducing country-by-country and shareholder-by-shareholder reporting, unitary taxation, a GRAPIST and eliminating some fundamental legal concepts that have been allowed to subvert our legal system for the past 1,000 years.

Getting rid of the concept of non-natural persons such as companies would remove the debt/equity question altogether.

All this concern with capital investment is misplaced. We should just borrow more money.

5. Is the taxation of companies too narrowly focused on a complex definition of profits? Could a tax based on a broader measure of economic activity less susceptible to manipulation help to ensure that the burden is spread more fairly across the corporate sector? What would be the consequences of shifting the corporate tax base from profit to sales/turnover?

Yes, accounting standards can be complex but I understand it absolutely perfectly. And of course, the tax legislation which you then need to amend it is complex. Fortunately I am an absolute expert in both, as well as law in general. But nobody else can understand it, judging by the number of people who disagree with me over everything.

I recommend we use unitary taxation which weights in equal measures according to sales, capital and employees. This is not open to manipulation at all, as I have stated above.

However, we will need a GRAPIST, country-by-country and shareholder-by-shareholder reporting, abolition of corporate entities and probably some sort of anti-abuse rules. A general anti abuse rule might be a good idea to make sure that nothing slips by the GRAPIST.

6. Should the taxation of SMEs be reformed? Are schemes such as the Enterprise Investment Scheme successful in leveraging additional investment in the UK and do they represent good value for money?

Yes SME taxation should be reformed, in line with what I have said above. There are very few partnerships which are run on a completely genuine basis, like mine and my wife’s partnership Researches for Taxes UK. We shouldn’t be affected because clearly I’m doing nothing wrong.

HMRC should demand from most other businesses a greater level of reporting and transparency.

The Enterprise Investment Scheme is a tax avoidance loophole inserted by a secondee from a big 4 accountancy firm. It should be closed.

7. Is there a need to reform the basis of the international allocation of multinational profits between countries? If so, should this be based on the existing conventions, as recently suggested by the OECD, or is there a need for more fundamental reform? What other feasible alternatives are there, consistent with international law?

We should scrap the international tax system and implement the one I have described.

Unitary taxation is the answer. Which, to function effectively,  we’ll need a GRAPIST, a GAAR, county-by-county reporting, shareholder-by-shareholder reporting, abolition of the concept of non-natural persons and removal of the independence of the judiciary so that a sensible judiciary can implement the law properly.

8. What scope is there for the UK Government to act alone in addressing concerns about the taxation of international business?

There is no reason for us to wait for international co-operation. We can implement all the things I said above unilaterally.

To all the doom-mongers who suggest we will drive away big business I say that independent businesses will fill the void.

When Starbucks leaves, independent coffee shops will spring up in their place. When Rolls-Royce leaves, local mechanics will fill the void. When Astrazeneca and GlaxoSmithKline leave local pharmacists will step in and discover new and effective drugs. When technology firms leave I know this really good guy who helped me fix my PC last year.

9. Is there a meaningful distinction between “harmful” and “fair” tax competition? Where will future competition lead the UK corporation tax?

The concept of competetion for tax is a horrific form of neoliberalism that should be rejected in its entirety. Unitary taxation would prevent it, along with some form of fixed global tax rates.

If the notion of competition for tax were a good one, then we would be forced to adopt the idea that The State should budget responsibly rather than spending whatever it sees as necessary and leaving the taxpayers to pick up the tab.
10. Is there a problem in the UK that foreign companies are able to gain a competitive advantage through greater tax avoidance opportunities?

Absolutely. Foreigners pretend that when they come to trade in this country that they rely on the supply chains and business structures they have already built elsewhere.

This isn’t so. All the profit from sales in the UK, from the profit provided by the retail business through the manufacture of the product to the production of raw materials, should be recognised in the UK. My GRAPIST would ensure that this happened.

Starbucks, Google and Amazon pretended that their business occurs elsewhere and all they do is sell their end product here. That’s a load of rubbish.
11. How successful is the HMRC in dealing with large international business?

It’s frankly rubbish. But this isn’t an accident. This is a deliberate policy intention of the Conservative-led Coalition who have been shrinking HMRC ever since they merged it 8 years ago.

Even before then, the Coalition was ideologically opposed to HMRC and appointed people who once worked somewhere other than the public sector to run it. These people have been deliberately inserting loopholes and helping their public-school chums to avoid taxes.

12. Has the use of aggressive tax avoidance schemes increased or decreased over the last decade? Why? How successful has the DOTAS scheme been? Should promoters of tax avoidance scheme be named and shamed?

The use of aggressive tax avoidance schemes has increased exponentially over the past decade, hence the increasing tax gap which has increased from £120bn in 2010 to £1.5tn under the Coalition. DOTAS doesn’t work because it doesn’t name and shame any of the big 4 accountancy firms or multinational entities.

DOTAS was always intended to name and shame people. It is only a by-product that scheme promoters need to disclose the scheme to HMRC who can then actively enquire and legislate against the scheme if it is deemed necessary. HMRC steadfastly refuse to leak details of these DOTAS disclosures to the press or to trustworthy sources such as myself.

Instead we name and shame petty tax evaders who are probably just people who have lost their jobs in the civil service through ideological cuts.
13. Is there a need for greater transparency by multinational companies in declaring taxes paid in different countries?

Yes. Enact country-by-country reporting now. And then we’ll need unitary taxation to actually collect the taxes that are morally due, enforced by a GRAPIST, a GAAR and a new non-independent judiciary. We’ll also need global tax rates and some sort of over-arching Justice for Taxes Commission which will have punitive powers over the UN, EU, IMF, OECD and any other financial body. I would be happy to chair such a body.

I think that covers all the questions you’ve asked me. The Committee may ask me questions in the comments section below but I warn you that I will still be applying my moderation policy.

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