Can anyone explain the logic of this second sentence to me?
And the reality is that tax yield is based on the combination of tax base and tax rate. You can control one of those two at any time, but not both at once.
I’m pretty sure that the UK can determine both what are corporate profits and the rate at which they can be taxed at the same time.
Why am I wrong and Ritchie right?
6 responses so far ↓
1 john b // Jun 12, 2009 at 11:05 am
Isn’t he suggestion some kind of Laffer-y effect -ie increasing tax on corporate profits means more of them bugger off to Ireland or Bermuda?
2 Luis Enrique // Jun 12, 2009 at 11:31 am
Echoing John …. in the context of poor countries, raising the rate is thought to cut the tax base, moving activity into the informal sector. But if that’s the sort of story Richard has in mind, then you do control both the tax base and the tax rate at the same time, because the tax base responds to the tax rate, so you hit both with one instrument
Tim adds: Amusing. So, the defence of Richard’s point is in fact the Laffer Curve. That raising tax rates can lead to lower revenues. A point which Richard steadfastly refuses to recognise.
3 Dennis The Peasant // Jun 12, 2009 at 12:40 pm
I think you are all crediting Dickie with far more coherency of thought than his post actually displays.
4 dearieme // Jun 12, 2009 at 4:30 pm
He thinks he’s the Heisenberg of Economics. He ain’t.
5 David Gillies // Jun 12, 2009 at 8:02 pm
More like the fucking Hindenburg.
6 idle pen pusher // Jun 14, 2009 at 3:28 am
This is a bit wacky too, but maybe he meant you can increase the tax rate and base, but lower the yield— or increase the tax yield but not the rate…
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