Category Archives: Opinion

Ethics and Corporation Tax

One thing that really bugs me is tax avoidance. I used to think it was a great idea until one day, whilst having an inner groan at the constant lack of cash in public services I realised that avoiding tax is, in fact, incredibly unethical and irresponsible. Taxes, whether you like them or not, are there to pay for all those things society needs. They pay for our health service, the roads, street lights and so on.

Just like as individuals we pay income tax, companies pay corporation tax – a tax on profits. Many corporations, including big household names, employ tax avoidance schemes utilising subsidiary companies in tax havens like Luxembourg. These schemes allow them to pay as little tax as possible on the massive profits they earn.

Billions of pounds are essentially being kept out of Government hands and in the pockets of wealthy shareholders, denying society of much needed cash to improve public services. So I was glad to read today that such practices have been outlawed.

Ever the sceptically minded, though, I can’t see it making a huge impact. Corporations spend hundreds of thousands on accountants to build these complex structures designed purely to avoid paying tax simply because the returns are so huge. Put simply, they’ll find another way because the financial benefit of doing so is so great.

But what’s the solution? Then I thought back to the income tax. With individuals, we are charged income tax at 20% (unless you’re lucky enough to be in the higher-rate tax band) with the benefits system helping those who don’t earn as much to get by. Corporations and individuals both earn money and have to use that money to pay their operational (or living) costs. Anything left over is then a bonus. However, we are taxed differently – corporations pay tax on anything left over while individuals pay on everything we earn (let’s ignore the untaxable allowance for simplicity). So why not tax corporations on everything they earn and then kick-back a little bit for every pound they don’t make a profit on?

It’s a nice idea, I think, but whether it will work in practice is something for the accountants and economists to battle out. My first thought is that avoiding that method would just be a case of making your accounts look like less profit was made. Probably not a hard thing to do. Yet, for big companies with lots of shareholders that would probably be a bad thing as the one thing shareholders want most out of their investment is a good profitable company.

I’d love to here thoughts on this idea, especially people who will be more well-versed in accounting than me.

One Vote Every Four Years is All We Get

A while ago I signed a petition on the Prime Ministers website asking for the government to introduce legislation that would empower ordinary citizens to call a referendum on important matters. According to the petition details a system, called Citizens’ Initiatives, exists in Switzerland, New Zealand, Hungary and 24 states in America.

The petition asks that a referendum be called on an issue when a petition is signed by 2.5% of the population. For national issues this would be the entire UK population, with 2.5% being around one million, and for regional issues about 3-4,000.

The governments response posted today states that powers already exist for local councils to hold referendums and have access to the full electoral register in order to do so. On the issue of national referendums, the response states that The Political Parties Elections and Referendums Act 2000 allows government to call national referendums but “does not however set out any criteria for using referendums.”

The government is obviously guilty in this instance of not listening to the public. The petition clearly asks for “legislation allowing citizens to trigger referendums” not allowing government to trigger referendums. It’s about real democracy – giving the public the power to show they are unhappy and make sure something is done. All that the public can do at the moment is shout and even that has been limited by legislation like the Serious Orgnaised Crime and Police Act 2005.

Not only is it disturbing that the power to trigger referendums lies solely with government but that it is a government led by an unelected Prime Minister. I know many would say that we elect parties, not the prime minister, but how can we accept that we have no say in who leads our country especially when the new prime minister has already started undoing the work of his predecessor.

If you’re interested in this issue I suggest a trip to the site for the Campaign for Direct Democracy.