Company taxes at Budget heart
Part of the background to today's Budget is a growing concern that businesses in Britain are paying too much tax and that the tax system here is a bit too complicated.
For example - and as I wrote here last night - it has emerged that the head office of the giant bank being created by the merger under negotiation between Barclays and ABN would be in the Netherlands.
That means that the new superbank would probably be registered for tax purposes in the Netherlands, which over time would lead to quite a significant loss in tax to the Exchequer.
Now Barclays is being careful to say that the decision hasn't been taken. And it is very keen not to lay into the chancellor at this delicate juncture.
But accountants tell me that it would be mad not to base itself in the Netherlands, because the tax advantages would be huge.
So part of what the chancellor will attempt to do today is restore the competitiveness of the UK in a tax sense.
According to the CBI, in 1997 the UK had the third lowest rate of corporation tax among the 15 countries which were then members of the European Union.
At the time, Gordon Brown took very public pride in cutting the corporation-tax rate.
However the headline corporation tax rate has been unchanged at 30% since 2000, while other countries have been cutting their tax rates.
Today, the UK's corporation tax rate is the seventh highest among the current 27 members of the EU.
It's important not to overstate the gravity of our fall down this league table.
The tax rates of some of our very biggest competitors remain higher than ours, as does the actual burden of taxation (which includes the impact of all taxes on companies, not just corporation tax).
The Treasury for example is keen to point out that the UK still has the lowest rate among the G7 leading global economies. And for example the tax burden on companies in Germany and France remains significantly higher than it is in the UK.
But the trend, of the UK becoming less competitive when it comes to company taxes, is clear and unambiguous.
Among the chancellor's great obsessions of the moment is that the British economy mustn't become less competitive at a time of intense worldwide competition for the best jobs between countries.
I therefore expect him to announce measures in the Budget to lift Britain's position in the league table of tax competitiveness.
That could mean that the rate of corporation tax would be cut over time - and almost certainly that steps will be taken to reduce the complexity of the tax system.
If he does do that - and as I say, the odds of something happening in that direction are high - the shadow chancellor, George Osborne, would be able to do the "I-told-you-so" dance.
On Monday, he urged the chancellor to cut three pence off the headline rate of corporation tax, funded mainly by a streamlining between the allowances the tax man gives companies for wear and tear or depreciation of physical assets and the rate at which companies in practice write off those assets.
Osborne's suggestion highlights perhaps the most important constraint on Brown's tax reforming ambitions. The chancellor simply doesn't have the money available to cut taxes unless he can boost revenues to the Exchequer in other ways or cut outgoings.
So whatever he does would probably be a long term process. And it would be funded by constraining the growth of public spending or finding compensating revenues.
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If Brown was serious about ensuring the UK remained competitive he'd be doing something about the low company birth rate and the lack of availability of risk equity capital.
Competing on the headline corporation tax rate is madness. What you need to do is compete on the total tax bill. Accountants can add up, and they base their decisions on the total amount of EUR available for distribution to the shareholders - not headline percentages.
You'd actually make the UK a lot more competitive if you targetted secondary class 1 NICs - the hidden cost of employment.
Simply levelling corporation tax and finding a way of eliminating secondary class 1 NICs would simplify the system greatly. It would also boost employment - particularly in services.
NeilW
I hope Mr.Brown does
a. Something about over £20bn. per year losses we suffer through fraud crimes to prove that the government is tough on crimes.
b. To boost LPG to make Britain greener the way India has done where over 80% cars use LPG which has drastically reduced fuel pollution.
As a Brit living abroad I find this story almost laughable. Here in Germany they know how to create a complex tax system! Also there are so many corporation tax loopholes that its the ordinary folk who end up paying the huge taxes, for example most end up paying 40-50 of their earnings in tax on very modest incomes. Indeed the income from corporation tax to the German govt was according to one statistic a few years ago about 7% of the amount gained in income taxes. The result is the rich have the good accountants and pay almost nothing, where as the ordinary folk pay more. Watch out UK, you are next!
work hard and get stuffed with more tax. And this rise is what he dares to talk about. What does the Red Book hold in store when he sits down ?
small companies rate goes from 19p to 20p this year, 21p next year, 22p the following year.
And this year, the £10k free band disappeared.
Stalinist ruthlessness ? Yup. The small guy can't fight back and is already overloaded with red tape.
The two main parties talk more about re-balancing than raising or lowering taxes. This is progress. No more stealth taxes or pretend spends thank you. It is just more sensible to talk about percentages within the same overall total.
Could you publish a graph of gross pay against one axis and how much you'll be paying less/more along the other axis.
That'll make it beautifully clear.
Just step back and look at the number of people employed in the tax industry from accountants to inspectors etc. Consider that all these billions spent on assessing taxes and then trying to minimise the burden is the great cost where intelligent people spend their time getting round loopholes. If the system was far simpler these guys could spend their time developing their businesses.
Just as the small businesses on the high streets are showing a rejuvenation and bring life back into the community, Mr Brown hits them with a triple whammy. First reduce corporation tax by 2% for large corporations, secondly increase corporations tax by 3% for small and medium sized business, and thirdly, have we all forgotten about the ending of the small business marginal tax rate that were abolished last year - where all small business suddenly had to pay the top tax bracket of 19%. Ironically, Labour is historically affiliated to helping growth of the lower and lower middle classes..... I guess we may have to start looking elsewhere!
it seems to me the budget is small change, whats happened to politics
we have politicians with no conviction ,all they are interested in is the money ,just pure greed ,they will promise anything ,say anything or say nothing
how many times have you seen ministers on question time in the last 2 years ,not many ,they are scared of searching questions,can you remember the last time gordon brown appeared on a programme to answer questions from joe public, well no ,we have too much spin, it used to be called bull**** ,its coming out of our ears. more later