Richard Baker: World of tax is a moral minefield
TAXATION is a complicated issue. Not just literally (our tax code is one of the biggest books in the world), but metaphorically, too.
Let's get straight to the point: some people think businesses don't pay their fair share of tax or even enough tax. They think like that because they see an injustice staring us in the face. Fatcats on big salaries and big bonuses versus you and me struggling to make ends meet.
Which is morally wrong, isn't it? Well, up to a point.
Here's a reality check for you. In the financial year which closes at the end of March, it's forecast that the total revenue generated by UK taxes will be just over £591 billion.
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So, the key question is this: of that £591 billion, how much will come from corporation tax, the key levy on businesses which earn enough to register with the taxman as a company?
Any guesses? Well, we're a big economy (sixth-biggest in the world, despite our woes), so maybe corporation tax rakes in a couple of hundred billion?
Way out, I'm afraid. In 2012-13, it's reckoned the total amount raised by corporation tax will be just under £44 billion. That's a measly 7.5 per cent of the total tax take.
Which makes you think, doesn't it? The truth is that the amount raised by this business levy is individually dwarfed by income tax (£155bn), national insurance (£106bn) and VAT (£102bn). It follows that mounting a direct raid on the coffers of business might not make a massive difference to our economy. There's an argument that says that in a climate where we're desperate for economic growth, taking money away from business is the last thing you should do.
This issue has come to a head locally because there was a debate at Nottingham City Council about whether or not some businesses avoid paying their fair share. It's been prompted, no doubt, by the Starbucks issue – the discovery that the coffee shop chain was paying, ahem, beans in tax.
Jon Collins, the city council leader, was careful to characterise tax as a moral issue: whatever the rules say, shouldn't businesses be doing the right thing?
Some will argue that they are. Besides the corporation tax and business rates they already pay (and business rates account for another £26 billion), where do you think the income tax started? It's a tax on the money paid to people by the businesses they work for. And the level of tax a company pays can be reduced for good and proper reasons: Government wants firms to spend more on researching and developing products which will create jobs, so it gives them tax breaks if they put money into it.
So even on a moral basis, tax is a minefield. Jon Collins' argument is that even a modest increase in taxes paid by business could make a significant difference.
It's a right and proper point to make. And how anyone can defend the knot-tyingly complicated tax avoidance which some large businesses have engaged in is beyond me.
Businesses should pay their fair share, and no one should be handing out lavish bonuses which do not reflect the work people do. But corporation tax is complicated in every sense, and in the end it might not make that big a difference.
While whacking business might make people feel good when they're under the cosh themselves, it's a dangerously double-edged sword.