Lawson suggests we should think about taxing revenue.

http://www.bbc.co.uk/news/uk-35447152

Lord Lawson has suggested that we should tax sales revenue combined with a much lower levy on profits because "ad hoc" tax deals are "unsatisfactory".

Whilst I agree with the latter, I can't think of how his suggestion would work. What about companies (often new SMEs) who actually don't make profit for the first few years of trading. Isn't this just another barrier to trading?

It sounds somewhat inconsistent to what a former Conservative Chancellor should stand for...

Reply 1

TheArtofProtest

Taxing sales revenue is a horrendous idea and it could lead to all sort of complications.

The policy assumes that businesses all sell at a profit. It also assumes that there is enough margin in the sale price to cover costs and still make a profit.

Furthermore, taxing sales revenue will mean that the government will be able to show a huge income from taxation but that will just be on paper. Whether most of it will be collected is another story and quite frankly, it would lead to a lot of firms going bankrupt.

A better corporation taxation policy would be to force companies to set up a UK subsidiary if they operate within the UK and they have a choice of either paying 99% Corporation tax on any profits made in the UK (close the loophole on royalty/franchise payments) or turning their UK subsidiary into an employee owned partnership and being allowed to reinvest any profits made or to share out any dividends at 0% tax.

For non UK companies wanting to have their HQ in London, a flat 10% corporation tax.

Reply 2

nulli tertius

Original post by George Agdgdgwngo

http://www.bbc.co.uk/news/uk-35447152

Whilst I agree with the latter, I can't think of how his suggestion would work. What about companies (often new SMEs) who actually don't make profit for the first few years of trading. Isn't this just another barrier to trading?

Original post by TheArtofProtest

Taxing sales revenue is a horrendous idea and it could lead to all sort of complications.

I think you are making the assumption that this new regime would apply to SMEs. Corporation Tax isn't failing for SMEs, but you could have a much simpler Corporation Tax lite only on retained profits allowing dividends to be taxed on recipients at full income tax rates. Most Corporation Tax on SMEs is unnecessary since those profits are distributed and income tax rates on dividends are adjusted to take account of Corporation Tax paid.

The problem for multi-nationals in particular is that by exploiting differences in the tax regimes of different countries, income is not being booked for tax in any jurisdiction. There is an old adage that "an old tax is no tax". It was invented about fixed duties like the Window Tax, but it applies equally to multi-nationals and taxes on corporate profits. For multi-nationals, profits have become too slippery to tax.