In general, an individual cannot receive tax relief on interest payments whether the debt is for buying a house, car, fridge, cooker or anything else. In contrast, the tax concessions to corporations have been maintained regardless of whether the debt is for buying productive assets, or speculating in markets, paying exorbitant dividends, setting up operations in tax havens, or even champagne parties for friends.
You would sort of hope that a Professor of Accounting would know that interest for business expenses is allowable….whether it’s a corporation, partnership, sole trader or entirely an individual. Buy to Let landlords offset mortgage interest against rents for example.
He also rather misses the major point:
Elimination of the tax relief on corporate interest payment would not prevent companies from using debt finance. Instead, it would add an element of neutrality into their choice of capital structure since payments of dividends to providers of equity do not qualify for tax relief. The ending of the taxpayer subsidy would also force companies to maintain more moderate levels of leverage. The measure would increase tax revenues that can be used to fund pensions, healthcare, education, public transport, reduce public borrowings and even tax cuts for normal people, and provide a much needed stimulus to the economy.
You get to tax these flows once.
Dividends are taxed at the level of the recipient (different in the US, I know). So is interest. So, if you’re going to tax interest at the level of the company you have to make it tax free at the level of the recipient.
So there ain’t any more tax revenue to be had….and you’ve created a rentier class who, at least in appearance, are living tax free off their interest.
I can really see the lefties buying into that, can’t you?