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When Lord Lawson was Chancellor of the Exchequer he used to abolish a tax a year. Interviewed in the Daily Telegraph this morning he proposes the abolition of Corporation Tax which, he suggests, “has had its day”.

Lord Lawson says:

“It is profoundly unsatisfactory that corporation tax has to be collected from large multinational corporations by a series of ad hoc compromise deals, as we have once again seen with the Google affair.

“It is also grossly unfair on smaller businesses, who are unable to shift profits between tax jurisdictions and have to pay the full amount due under UK law.

“I have long argued that in the modern world corporation tax has had its day as a major source of tax revenue. It needs to be a much lesser tax, bolstered by a tax on corporate sales.

“While multinationals can artificially shift profits to whatever tax jurisdictions they choose, sales are where they are, and can’t be shifted.

“Instead of endless discussion at international conferences of one kind or another, the UK should take the lead in implementing this much-needed reform.”

Chancellors of all parties tend to be addicted to eye catching fiddly tax changes. The gimmicks are praised for their great cleverness on the day, but tend to unravel once the accountants get stuck into them.

While George Osborne has had many fine achievements as Chancellor – not least the reduction in the Corporation Tax rate which, reflecting the modern realities of globalisation, has led to an increase in Corporation Tax revenue. However I fear that tax simplification has not been one of Osborne’s accomplishments thus far. The Tax Code is 21,000 pages long.  Before the General Election in 2010, in a speech to the CBI, Osborne complained that the Tax Code was 11,000 pages long and had become “hugely complex”.

In mitigation, much of the growing complexity is imposed on The Treasury by the European Union. Yet this alibi can hardly be seized on by Osborne as he prepares to argue for us to retain our EU membership.

Of course, abolition of Corporation Tax would leave £43 billion to find. While Lawson suggests a sales tax, Stephen Herring
Head of Tax, Institute of Directors, proposes in a letter to The Times(£) this morning something broader:

“Corporation tax ought to be replaced, but a combination of modest changes to sales, payroll, property, energy and other levies is a much better solution than significantly raising the tax charged upon a single asset such as land.”

That bold tax cutter, President John F Kennedy, declared: “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard”.  That is also the case with the mission to achieve fairer, simpler, lower taxes. There is no longer even any political mileage in just producing extra regulation and promising a “crackdown” – people simply won’t believe that it will prove effective. Fairness can be achieved not by futile attempts to make Google pay more but to ensure that others pay less.

68 comments for: Fairness requires the abolition of Corporation Tax

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