Quick, quick alert the media!
That should be celebrated as good news. It shows that tax
campaigning can work. Unfortunately, however, as one gap
recedes another one is emerging into view. And it is not one
that is just a consequence of sharp practice by clever corporates:
it is an intended consequence of government policy.
It means that I now think that the total UK large company
corporate tax gap has increased even higher than it ever was,
to £13bn a year. This is the consequence of the new ‘corporation
tax policy gap’, which might be as high as £8bn a year.
This new tax gap represents the gain that large companies
have made since 2008 as a result of the extensive changes
in UK tax policy that they have secured. As example, the
corporation tax rate for large (but not small) companies has
reduced from 30 per cent to 20 per cent over that period. In
addition, whilst UK multinational groups were once taxed,
at least in theory, on their worldwide income, they are now
only taxed in the UK on the income they have arising in this
country. This is in direct contrast, for example, to the vast
majority of individual UK citizens, who are still taxed on
everything they earn (unless, that is, they’re non-doms). This
policy change has increased the appeal of tax havens to UK
based multinational companies enormously. And numerous
other changes, such as more generous reliefs for R&D and
the tax treatment of offshore treasury functions have also
greatly helped big business.
The result is that in 2015 the UK corporation tax yield
(excluding North Sea revenues) will be £8bn less than forecast
in 2010. Part of this may be down to growth not meeting
expectations, but at least £4bn may be due to tax rate reduction,
as forthcoming report for the TUC will demonstrate.
Meanwhile, it is easy to allocate the rest of the shortfall to
specific reliefs and allowances given based on Office for
Budget Responsibility and Treasury forecasts at the time
that they were introduced.
Note that the tax gap started with, the law says these people should be paying and they ain’t.
Then it moved on to, well, if the politicians were capable of writing the law properly then these people should be paying this amount and they ain’t. That’s the spirit rather than the letter of the law stuff.
Now we move on to a third tax gap. Note that Ritchie really is saying that this gap is as a result of the express aims and desires of government in setting tax laws and rates. But that’s still a tax gap: because Ritchie thinks these people should be paying this amount, the politicians don’t so they’re not.
But it’s a tax gap because Ritchie.
We really do have an LHTD.