Saturday 3 June 2017

Why "corporations will just run away" is a stupid argument

The narrative that corporations will just up sticks and leave the UK if The Labour Party increase Corporation Tax to 26% (still the lowest in the G7) is preposterous.

Here are five reasons
First - This corporation-flight argument relies on calling 26% "high" when it's actually low.
Second - It assumes that shifting huge businesses between countries is a costless exercise (or at least significantly cheaper than just paying a slightly higher rate of tax on their profits). Just imagine how much it would cost Rolls Royce to relocate their jet engine factory in Derby to another country. Is that really going to end up saving them money? 
Third - It totally ignores the fact that major corporations have not fled countries like the United States, Japan and Germany because of their higher-than-26% Corporation Tax rates (it's almost as if Corporation Tax rate is not the only determining factor in where companies are located isn't it?).
Fourth - It seems to imply that big corporations are a benefit to society, but if they pay such low rates of tax that they don't contribute to the cost of public infrastructure, services, educating their workforce, or paying their workers a high enough wage that they don't end up reliant on social security or charity (Tax Credits, Housing Benefits, food banks ...) ... then they're not beneficial are they? They're leeches.
Fifth - One of the favourite tactics of the low-tax fanatics is repetition of the argument that "the lower the tax rate the higher the tax take". This is wrong on two fundamental levels. It's contradicted by reality because the Corporation Tax take has flat-lined since the Tories slashed Corporation tax from 28% in 2010 to 19% now, even though corporate profits have been rising. Then there's also the fact that this over-simplistic "lower tax = higher tax take" idiom completely breaks down when the rate approaches zero. I've tried to get low tax fanatics to explain how a 0% tax rate would result in the highest possible tax take, but none of them seem prepared to even try and answer.
Labour's plan is actually really good
Labour's Corporation Tax policy is actually pretty good because small and medium sized businesses will pay less corporation tax (21%) than the giant multinationals (26%).

This is a very good policy because it allows small businesses and entrepreneurs to actually compete with the giant corporations (which obviously benefit enormously from the advantage of economies of scale).

Differential corporation tax rates are actually a very good idea from an economic perspective because they support infant industries (some of which become the giants of the future) and because they promote economic competition.

The Tory plan is ridiculous

The Tory policy of reducing the UK Corporation Tax rate even further (to 17% on their current plans or even lower if they do the "no deal" Brexit strop thet're already planning for, then turn the UK into a corporate tax haven) is ideologically driven lunacy.

We've already got the lowest level of Corporation Tax in the G7 and we've also got the lowest level of infrastructure investment in the developed world (at just 1.7% of GDP), yet the Tories are on about cutting Corporation Tax even further, and even further reducing the tax take, so that big corporations have to contribute even less towards the infrastructure and services they rely upon in order to generate their profits.

Cutting the Corporation Tax rate from 28% to 19% has cost the country £9.7 billion per year, and their plan to cut it even further to 17% is set to cost the country another £6.8 billion per year.

The Tories tell us voters that we have to tighten our belts because of austerity, but then they're handing whopping great tax givaways to their corporate mates.

Either we're broke and we can't afford things, or we're awash with enough cash to give loads away. We simply can't be both simultaneously can we?

The choice

One of the biggest significant differences between Labour and the Tories at this election is on economic policy.

Labour wants major corporations and the super-rich to pay their fair share so that the country can invest in infrastructure and innovation for the future prosperity of the country (like Germany does).

The Tories want to continue giving tax giveaways to the corporations and the super-rich and cutting back on infrastructure and innovation spending in order to cover the £70 billion they want to stuff into the pockets of their super-rich mates.

The choice is between a costed Labour manifesto with a strategy of investment for the future (which will benefit us all in the long-term, even the big corporations) or an uncosted Tory manifesto outlining a plan for asset stripping and national decline.

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