Posted by: secretperson | May 20, 2008

Has Debate Shifted on Tax?

Nick Clegg follows David Cameron in hinting at lower taxes. It was a long standing Lib Dem policy to increase the basic rate of income tax by 1 pence in the pound to increase revenue, but presumably after 11 years of Labour stealth tax increases this is no longer necessary.

Clegg aims to increase taxes on the wealthy, by closing loopholes on tax avoidance and high rate tax band pension relief. Cameron will ‘share the proceeds of growth’. Only Labour remain wedded to ever increasing taxes.

I am all in favour of tax cuts, but they could be much more dramatic if they would cut spending and improve efficiency. And Quangos, the EU and the huge number of middle managers in the public sector should be the first places to look for savings.

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Responses

  1. what no one is talking about is corporation tax – that’s a tax on profits – which is not being paid at the proper rate (or at all in some cases) by the biggest UK companies… I doubt Cameron – if askes where the money will come from for an income tax cut & increased military spending – will point to increased taxation on big business, he’s in favour of cutting corporation tax further. If these companies contribute so much, it’s a wonder that the taxpayer isn’t paying them to stay here!

  2. I have to admit to little knowledge of the tax system, what happens to these company profits? Are they taxed when they are passed on to shareholders under capital gains?

    And in some cases government does pay companies to establish new businesses I believe, at least giving some kind of financial assistance.

    Much of Ireland’s growth was due to low corporation tax, as much as EU subsidies. I think their tax take actually went up long term as low taxes attracts companies and reduces the incentive to avoid (evade?) tax.

    Still, if we tried it no doubt the EU would try and stop it. They class a low VAT rate as an unfair subsidy!

  3. It’s easier to tax corporate profits than capital gains, I’d imagine. Certainly there are clever ways around paying tax on dividends – for those who can afford to set up such schemes.

    On Ireland, the problem is this: if the global economy goes into recession or if another country with a cheaper labour force becomes available – or if a rival lowers business taxes further – then you’re screwed. Capital takes flight in these circumstances. And already there are companies leaving Ireland for lower-tax lower-wage economies. They’ll be hit hard by the global recession and so will we…

    VAT is an abomination, so it’s understandable the EU would be opposed to lowering it! Sales taxes are always paid for by consumers

    Getting back to the original topic – Nick Clegg’s rumoured to have made up his mind that rather than propping up Labour, the Liberals would back a Tory minority government basis if at the next election Cameron’s party scrapes to victory and requires assistance. He’s also come out for lower taxes, but he’s been more explicit about tax cuts for low and middle income earners. But like Cameron he’s silent on high-earners. He who pays the piper, etc…

  4. Yeah that is the problem in the ‘globalised economy’ countries have to compete. How can we compete with countries who have a lower standard of living, without compromising our own?

    You are right in saying sales taxes are always paid for by consumers (though businesses will suffer from having to sell their product at a higher price, for no extra profit). I suspect that any corporate taxes will passed on to consumers or workers. That is the nature of capitalism!


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