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Can anyone explain the logic of this second sentence to me?

And the reality is that tax yield is based on the combination of tax base and tax rate. You can control one of those two at any time, but not both at once.

I\’m pretty sure that the UK can determine both what are corporate profits and the rate at which they can be taxed at the same time.

Why am I wrong and Ritchie right?

6 thoughts on “Really?”

  1. Isn’t he suggestion some kind of Laffer-y effect -ie increasing tax on corporate profits means more of them bugger off to Ireland or Bermuda?

  2. Echoing John …. in the context of poor countries, raising the rate is thought to cut the tax base, moving activity into the informal sector. But if that’s the sort of story Richard has in mind, then you do control both the tax base and the tax rate at the same time, because the tax base responds to the tax rate, so you hit both with one instrument

    Tim adds: Amusing. So, the defence of Richard’s point is in fact the Laffer Curve. That raising tax rates can lead to lower revenues. A point which Richard steadfastly refuses to recognise.

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