Polly’s on the warpath about corporate taxation. In fact, The Guardian is going to have a major report on it on Monday. And from what I can see they’ve swallowed the Richard Murphy view hook, line and sinker.
Which means that the whole research is going to be most interesting. There will be, for example, no examination of the Guardian Media Group’s own accounts….accounts which show a 4.99% tax rate in one recent period I seem to remember. Nor of the GMG’s use of offshore companies to dodge (entirely legally) Stamp Duty.
But much more importantly they’re making a basic logical error. Companies do not pay tax. Only individuals do. Companies are simply a convenient legal fiction, not real people. The real point about corporation tax is what is the incidence? What mixture of real people carry the economic burden of the tax? There’s only three groups that can, the workers in the form of lower wages, the customers in higher prices and the shareholders in lower returns. Research shows that it is in fact 70% carried by workers in the form of lower wages and 30% by shareholders (that’s for the US). Another study shows that every pound of corporation tax paid lowers wages by more than one pound.
So, sharpen your pencils for Monday, as I say, it’s going to be interesting. They’re going to be wrong in detail, that we know, but they’re also going to be wrong in their basic construction. For they simply do not understand the concept of tax incidence.
And as Polly says:
Paying taxes makes us citizens. Living and voting together, citizenship means belonging to the community that decides how much tax to levy and how to spend it.
As businesses cannot vote, they shouldn’t be paying tax then, should they? For they are not citizens.