So, cutting tax rates does raise revenues then?

Yet as corporation tax rates have come down in the UK, from 52% in the late 1970s to 28% today, total revenue from the levy has remained surprisingly buoyant. EU figures show that the UK\’s corporation tax take was worth 3.6% of GDP in 2008 – down slightly from 4% in 2006, before the credit crunch, but little changed from a decade earlier. When Margaret Thatcher came to power in 1979, the corporation tax take, at £4.6bn, formed 5.4% of total tax revenues. Last year, the £38.5bn paid by Britain\’s companies made up 7% of the government\’s tax take.

Darn that Laffer Curve, it\’s everywhere!

4 thoughts on “So, cutting tax rates does raise revenues then?”

  1. Unfortunately John, that graph doesn’t factor the “Somalia Effect” into the equation as it stops at 2000. Since then there has been an explosion in the number of active pirates (certainly a damned-sight more than 17) yet temperatures have remained relatively stable.

    I suppose, that the the sub-title of the piece, “The idiocy of correlation”, would be even better demonstrated should this be done, as it would clearly show that the initial period of correlation failed to hold and was therefore pure coincidence.


  2. It’s a shame that the popular claims that global temperatures actually fell in the late 2000s are completely made up (generally, by comparing 1997 to whatever year you’re talking about), otherwise the correlation with pirates would be perfect 🙂

  3. If it was just the Laffer Curve, then corporation tax receits would decline as a % of GDP while rising in absolute terms, but your explanation isn’t the whole story.

    Look back through budget speeches and you will see Chancellors proclaiming a drop in the headline rate of tax while funding the loss of revenue by abolishing of reducing allowances.

    Examples include Jack Straw reducing the rate of corporation tax while bringing forward the date on which it was paid by more than a year, and more recent ly by Chancellors dropping the rate of tax while reducing the value of capital allowances, favouring bankers and PR firms at the expense of industry and capital insive utilities.

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