I\’ve had this argument with John Christensen before on my blog.
The government\’s pursuit of tax competitiveness, where countries vie with each other to offer lower corporate tax rates, puts Christensen\’s hackles right up. \”It\’s just a race to the bottom, a beggar-your-neighbour return to the protectionist policies of the 1930s, but these days it\’s not around trade tariffs, but around subsidising multinational corporations through the tax systems.
\”It\’s no coincidence that when this government came into power almost the first thing it did was raise VAT rates so that ordinary people would pay more tax and then cut corporate tax rates.
\”What\’s happening here is that the tax burden is being shifted from capital on to ordinary people.\”
In an open economy it\’s not capital which pays the corporation tax. It\’s the workers in the form of lower wages.
Thus his entire contention is wrong.
When I upbraided him about this he came back with: Ah, but that only works in a closed economy. Which is of course entirely the wrong way around. In a closed economy capital will pay corporation tax. In an open one, labour.
Which is something of a problem, don\’t you think? That when we\’ve got a campaigner trying to change the taxation system for the entire business world, said campaigner is ignorant of the basic economics of the very thing he\’s trying to reform?
Getting the ill-informed to design something rarely works all that well.