@RichardJMurphy finally gets one right: Oh, wait…..

Let’s try another reformulation:

Because companies can’t pay tax they should be taxed as if they’re individuals under income tax rules at income tax rates on their worldwide income just like all other natural people

Now that, I think, works nicely. A UK company pays UK income tax rates now at standard tax rates of 50% and shortly to be 45% on their worldwide income wherever arising and whether remitted or not to the UK and let’s stop all of this nonsense about territorial taxes, remittances, and so on for companies. Let’s create a level playing field. That should give Bill Dodwell something to think about.

Well, yes, that is actually the argument. Just as an individual can deduct interest for business purposes, has allowances for investment etc. Yes, tax all profit that individuals receive from business in one manner and one manner only.

In the case of an incorporated business this would mean taxation of distributed profits at the normal marginal rate of the recipient. Simples. Abolish corporation tax, as companies really do not carry that burden anyway, and tax dividends, interest, capital gains, received from such companies at normal recipient marginal rates.

And the tax would have to be at the level of the recipient, not the company. Otherwise we would be taxing French, German, USian, holders of UK domiciled shares on their income. And that\’s not right at all: that income is righteously for the French, German, USian governments to tax, just as the income of UKites is righteously for the UK to tax. If the tax were at the level of the company then if, as an absurd example, Vodafone made profits in Germany then those profits should be taxed in Germany and not in the UK. And we know that\’s not right because Murph has told us it\’s not.

Yep, I\’m fine with that. So are most economists. So Ritchie\’s actually managed to get one right.

Ah, wait, sorry, he\’s being sarcastic, isn\’t he? Typical Murphmeister. He only manages to describe the right solution in order to reject it.

38 comments on “@RichardJMurphy finally gets one right: Oh, wait…..

  1. And no, the tax would be at the level of the company as if it were an individual, because profit is income, as if an individual were earning.

    The nationality of the employee is neither here nor there as they will be paying income tax on their earnings as per their national laws.

  2. The point of the sarcasm is that companies do pay tax. Simply stating they don’t is not the reality. You can blather on at length about how much incidence comes back on the worker, but the fact is corps pay corp tax.

    All you are proposing is ideology. Not reality.

  3. Arnald: so, you understand the implication of this plan is that there would be no dividend tax? Filthy capitalists not being taxed at all, because the company would have paid full income tax?

  4. Arnald are you really that dense? TW is talking about taxing the shareholders income, not the employees. Remember the share holders own the company and the profits, not the employees?You’re just projecting into your socialist fantasy world again.

  5. because profit is income, as if an individual were earning.

    You’re not in the finance department at that housing association are you, please?

    No, profit is not comparable to individual income. Never mind that taxable profit and declared profit aren’t the same thing. “Taxable profit”, for a company, is after allowable expenses. Like, in the individual case, professional fees, work travel expenses not otherwise re-imbursed, etc.

    Of course, if what you are burbling close to is double taxation of dividends then, fine. As long as you accept that you’ll end up in the US situation with companies not paying dividends and sitting on cash piles. Oh, and the collapse of the remaining viable corporate pension schemes.

    But, meh, just minor sacrifices necessary to build the Socialist Utopia, eh?

  6. Of course the other issue with taxing the company as an individual is that any shareholder whose marginal rate was less than the highest tax rate (ie 99% of private shareholders) would be paying extra tax on their dividend income. Thats before the issue of whether the income paid out after the company had paid its income tax would then be taxed again as personal income.

    So Granny Smith would be paying at least 45% tax on her dividends from the BT shares she’s held since 1984, and possibly more. I suppose thats all in a days work to the Left – taxing ordinary people as if they were millionaires.

  7. Yeah, I don’t think Murphy is being serious with that point though, is he?

    SE
    It’s a hypothetical situation. Time again you lot are unable to see the what if.

    Just all this nonsense about “well EU law is such and such”. The aim is to change laws to make the system better. Of course people may not like that, but people don’t like things now.

    Anyhoo, you’ve totally missed the point of the comment. Presumably you haven’t read the whole of the original, and the links therein.

  8. Time again you lot are unable to see the what if.

    No – we can. And we see that the answer to the question “what if Murphy had his way?” is “utter disaster”.

    But, as long as you’re blinded by the Sun you imagine is shining out of his fundament, you’re not going to do anything requiring more thought than grovelling worship at the altar of the Lord High Tax Denouncer, are you?

  9. @ Arnald

    “Just all this nonsense about “well EU law is such and such”. The aim is to change laws to make the system better. ”

    Except that’s not what all the campaigning and shaming is about at all. What it’s about it creating some sort of ‘moral’ standard which negates any need to change the law… none of the people whining about Starbucks are demanding that the EU rules be changed.. they’re just demanding that Starbucks pretend that the law is different so that they have to pay more tax.

    If the tax campaigners made any attempt to a) understand the law, and b) suggest how they consider it should be improved.. then they’d probably get a bit more respect around here.

    Oh, and no.. Murphy’s catch-all ‘do as we think, not as we say’ GAAR doesn’t count.

  10. Arnald: “The point of the sarcasm is that companies do pay tax. Simply stating they don’t is not the reality. You can blather on at length about how much incidence comes back on the worker, but the fact is corps pay corp tax.”

    As concise an announcement of fundamental ignorance and misunderstandig of basic economics, business and logic would be difficult to find.

  11. TTG
    “Oh, and no.. Murphy’s catch-all ‘do as we think, not as we say’ GAAR doesn’t count.”

    Why not? Because you say so?

  12. Arnald: “Corps pay corp tax.”

    No, corporations forward corporate taxes to taxing authorities. Shareholders actually pay those taxes (to an extent customers and employees do as well, but let’s keep it simple), as they are the ones who own the taxable profits.

    Knowledgable accounting, financial and management professionals call it “Shareholder’s Equity” and not “Corporate Equity” for a reason.

    It’s really not all that hard to understand, Arnald. Try cracking an accounting or taxation textbook some day. It’d do you a world of good.

  13. Remember, Arnald, that the law explicitly states that corporate management is nothing more than an appointed agent acting on behalf of the shareholders.

    Think it through.

  14. since you seem to be agreeing with Worstall that companies don’t pay tax.

    This is what is usually referred to as a “misleading technicality”. Yes, companies make electronic payments to the revenue for corporation tax. As they do for PAYE income tax.

    Now, in the latter case, it is quite clear that the company doesn’t suffer the burden of the tax. If the tax rate was halved, the employee (certainly in the short term) would get more money, the company wouldn’t see a difference.

    So, the question, with regard to corporation tax, is not “who writes the cheque” but “who gets less money”. And this is a question with a complicated answer – depending on the scenario, the economic situation and various market and regulatory positions, it may be the company’s owners (shareholders), it may be the employees (no money for wage rises) and it may be the customers (higher prices). It is pretty usually a combination of all three. But note who it is not – the company itself.

    Note that, in the UK anyway, for the company to increase its cash reserves at the end of a tax year, pretty much means it has to pay out at the headline CT rate …

  15. I’m staggered(well, not actually) that the concept of tax incidence seems not to have permeated to the darkest corners of Norfolk (What a shame for Downham Market it’s associated with this guy. )Tim, you can argue until your blue in the face with both the man himself (Or, actually, you’re a ‘Troll cheerleader’ for apparently orchestrating the chorus of hostile comment that used to feature on his blogs – in Murphy’s kingdom the One Track mind is king) and his bastard proxy on these comment pages, but he seems impervious to reality.

    Shades of Brecht:

    ‘Some party hack decreed that the people
    had lost the government’s confidence
    and could only regain it with redoubled effort.
    If that is the case, would it not be be simpler,
    If the government simply dissolved the people
    And elected another? ‘

    But of course, Arnald, Murphy’s vision has absolutely nothing in common with communism…..

  16. Dennis the Peasant (#16) – I’m not sure a fast food chain allows employees to read whilst they are working?

  17. Actually, recommending textbooks to a man who cannot read without moving his lips is probably futile in the first place.

  18. I want to get rid of that idea that so long as you can find a way round the law then it is legal. That is not legal: it is simply not finding that there is nothing that says at present that it is not illegal. That is not the same as legal, in my opinion. – Richard Murphy

  19. Ukliberty (#22) – Can you post a URL ? – if that quote is legit (and I have no reason to doubt it or you) then I’d advise posting it on every Leftist blog in existence – it effectively removes several centuries of legal precedent in favour of effectively something resembling the rule of some Despot from the Middle Ages or beyond.

  20. Get the quote in context. Finding abusive loopholes is big or clever, and should not hide behind ‘legal’ meaning ‘right’.

    That’s all.

  21. I don’t think he’s anyway correct about the tax situation for individuals as regards necessarily being taxed on worldwide income whether or not remitted, since I was just this weekend looking at some HMRC notes about it.

  22. Arnald: “Get the quote in context. Finding abusive loopholes is [not] big or clever, and should not hide behind ‘legal’ meaning ‘right’.

    “Big”? “Clever?” What a fascinating choice of words. A choice of words that seems to go to the heart of the matter.

    Who said anything about those tasked with ensuring corporate tax compliance (which is what we’re taking about here, in fact) being “big” or “clever” in the successfully accomplishing those tasks? No one in this thread.

    That wasn’t an expression of concern for equality or fairness or morality on your part, it was an expression of personal resentment.

    Personal. Resentment.

    And in that, I think it safe to say that you and Mr. Murphy see eye to eye.

  23. Oh, Arnald, I notice you haven’t made any comment about my fictitious Granny shareholder yet. Do you think it right for small shareholders to pay 45+% tax on their dividends, when their marginal rate might only be 20%?

  24. Jim
    I care about your fictitious Granny, I really do, but since when has her shares been an issue? She was a nonsense then and she is a nonsense now. The whole point Murphy was making was nonsense based on the nonsensical proposition that corporations don’t pay tax.

    Your point is?

  25. Ukliberty (#25)

    Many thanks indeed – I think this gets to the heart of the problem with Murphy’s analysis in totalis, and it’s a criticism his ego tends to reject. After all, if you’ve been flogging a dead horse for the better part of a decade, thinking it’s alive, I’d imagine it’s very hard to take.

    His entire theory (as evidenced in the Courageous State) is that people are fundamentally honest, and that tax avoidance is an unnatural activity. Surely even the most cursory analysis of UK history since 1945 would have to inform him this simply isn’t the case. Tax avoidance was endemic in the 1970s, certainly in the financial sector, and the Public Sector who act as his paymaster was a good deal less costly then, even taking into account the large swathes of the economy that were nationalised. I think his ideas might explain much of the reason why Tolley’s tax bible is now I think four times the size it was in 1997 – Suffice it to say, even assuming his principle were adopted the volume of legislation required to put it into practice would be so vast as to simply creat even more loopholes for wealthy people to exploit. The lesson is clear from history. If you make taxes lower (to a point) and simpler, almost invariably you raise the amount of revenue you receive. That he seems unable to grasp this basic analysis would be a tragedy were he not so influential.

  26. Arnald, what didn’t I quote that changes the meaning of what I did quote?

    The whole point Murphy was making was nonsense based on the nonsensical proposition that corporations don’t pay tax.

    Based on quoting Dodwell out of context. Oh the irony.

    All Murphy riffed from was:

    There is one of the challenges: companies do not pay tax.

    Apparently because quoting the immediate next sentence would have ruined Murphy’s point:

    Ultimately they pass on that tax bill to a combination of consumers, employees and shareholders

  27. ukliberty
    If they can pass it on they can pay it, no?

    What happens is that they don’t want to pay it so ultimately they pass it on.

    So the premise of abolishing corp tax because they don’t pay is stupidity.

  28. Arnald,

    1. Do you think the burden of a tax is always on the entity on which the tax is formally levied?
    a) Yes
    b) No

    2. What do you think bears the burden of corporation tax?
    a) the corporation
    b) a combination of the consumers, employees and shareholders

  29. Arnald, are you being stupid for effect? I sincerely hope so. Because the alternative is rather sad.

    The point of my fictitious BT share owning Granny is that if you force a corporation to pay more taxes (by taxing their profits as if the corporation were one individual, and therefore paying 45% tax for pretty much every large company), who ends up with less cash than they did before? And the answer is (among others) Granny Smith, who receives less dividends than she otherwise would. The company is no worse off – it made £Xm in profit, paid 45% of X in tax, retained some for future investment perhaps and paid out the rest as a dividend. The company is not worse off, HMRC is better off, Granny Smith is worse off. Ergo she is effectively paying the tax. Which bit of that can you not understand?

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