John McDonnell would look to reform or scrap a £1bn tax relief that was initially designed by the previous Labour government as a means of promoting innovation in companies, including in the pharmaceutical industry.

The shadow chancellor said the so-called patent box, which boosts profits from patented innovations by halving the rate of corporation tax due to 10%, was a “potential tax loophole with limited impact on research”.

McDonnell said the benefit was enjoyed mainly by large corporations and was not proven to drive up research. He proposed using the savings to set up a fund for Alzheimer’s research.

You can see why it attracts of course.

A tax break allows us to use the market and its associated incentives to sort through what might produce the best result.

A fund allows John McDonnell to spend the money as he sees fit.

17 thoughts on “Bad idea”

  1. Tax credits like this give a bonus to those that spend in the UK in a set way. Right or wrong they do what they say on the tin; McDonnell is just wrong.

    A fund for Alzheimer’s or whatever is a fund a politician gets to spend on whatever suits his capricious nature today. And who wants to give money to a cunt like McDonnell to spend?

  2. Where do patentable innovations come from if not from research?

    Now, if the objective had been to increase research spending in the UK or even research spending by UK-based companies (as opposed, say, to them buying up the successful fruits of that research) then you can understand that the “patent box” could have been better targeted. But, then, this was a McRuin invention, so I’m surprised it hasn’t laid waste to all UK commercial R&D.

  3. It’s all academic anyway. If Corbyn / McDonnell get in the country will be so utterly buggered that none of what they propose will matter.

  4. Than God for the SNP. Sturgeon might be a deluded arsehole (as proven by her announcements this morning) but at least the SNP make it numerically impossible for Labour to form a majority government.

  5. Point is that Patent Box allows the HOLDERS of the patent to benefit from a low tax rate. It encourages companies to hold patents in the UK rather than in, say, the Cayman Islands. Take away that benefit and the companies might well move ownership of the patents and instead of getting 10% of lots we will get 20% of very little.

  6. McDonut might be right. Patent Box doesn’t encourage R&D.

    That’s what the separate R&D tax credits scheme is for.

  7. Fortunately, I was ar school with Johnny. He rang me up to say would I create a Bahanian based company as my fee would be an enormous amount of money, 1% of the fund, about £100,000pa.

    He said at the end of the year there might be a bit left over and I have to transfer that to another Bahamian company JMcD.

    What a nice chap.

  8. In the present phase of yobbo capitalism so magnificently exemplified by “Sir” Philip Green, Dominic ‘Death Threats’ Chappell and Mike Ashley, there is no attempt to put money into a business, spend money on good wages, induce an increase in demand and thence make a profit: the idea is to spend as little as possible, underpay the workers and make money by squealing for tax reliefs.

  9. @DBC Read.

    Just for a handy comparison, how many jobs have you created? How many people do you employ in the wonderfully egalitarian business you do obviously must be running.

  10. @dioclese
    That speech sounded like a shakedown, Scotland currently receives a chunk of EU money and sturgeon is just saying she will make life difficult if she doesn’t get reassurances that the gravy train will continue (or even increase), after all it wasn’t their fault etc.

  11. McRuin’s scheme was R&D tax credits; you get to set R&D tax spending against profit. The patent box was Dave’s wasn’t it?

    It was funny seeing examples of retailers being turned down for R&D tax credits – like they were inventing something. The swivel servenats nearly screwed up the definition of research to pure science but then backed off to a more useful definition so that most manufacturers could use it.

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