Which taxes hurt your business the most?

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I’ve been listening to the news over the last few days on how little tax high earning individuals and big businesses that are located overseas to avoid paying tax.

The Daily Mail have commented on both Amazon and Apple over the last few days decrying how little tax they pay in the UK, although they fail to mention how much they and their employees pay in payroll taxes. They’re taking the position that because these companies have large UK operations it’s somehow morally incumbent on them to pay a decent whack of tax to support the economy.

There are two points here worth considering. Firstly why would any sane individual pay more tax than they have to? Amazon run some of their operations out of the Channel Islands and their offices in Luxembourg, although they also have offices in Slough, Berkshire. Apple similarly are headquartered in Ireland taking advantage of the low 12.5% Irish corporation tax compared with the 24% they would pay if they were based in the UK.

These companies have a duty to shareholders to maximise profits and it simply doesn’t make fiduciary sense for them to pay UK taxation when they don’t have to. Just as you as a small business owner probably do every thing you can to minimise the amount of tax that you pay, (and if you don’t why not?) it’s only reasonable for shareholders in large companies to expect them to do likewise.

Secondly it opens up the question as to why successive governments have allowed the situation to continue and at the same time poses the question as to what the current government are doing to encourage businesses to start up and base themselves in the UK. Corporation tax has been lowered by 1% this year and again next year reducing to 22% by April 2014, but that’s still way more than the 12.5% in Ireland. VAT is at 20% compared to the 15% that eBay pay based on their trading from Luxembourg.

There are two strategies for governments to raise more through taxation – One is to close loopholes and ensure that all businesses pay their fair share if they’re trading in the UK. With the freedom of trading that exists today businesses can pretty much base themselves anywhere in Europe (or the world) that gives them tax advantages so the UK needs to be attractive to them if they’re going to opt to pay UK taxes. The second is to encourage businesses, large and small, to grow and prosper which will result in higher tax revenue as their profits increase.

What taxation measures would you like to see the government do specifically to help your business grow. Would lower taxation help increase your turnover and thus result in you paying more overall in tax? Do you believe that simply by employing more people and reducing unemployment your contribution to the economy as a whole is more valuable and so the government wouldn’t need to raise more through corporation tax?

No one wants to pay tax, but it’s a necessary evil to run the country’s essential services. How best can the government raise the revenues it needs and at the same time be ultra attractive to large and small businesses with fair taxation and an economy conducive to growth?

10 Responses

  1. fuel duty/tax hurts ,farm/industrial users get off road lower tax diesel.
    why cant small business have similar

  2. One of the reasons why our Tax is so high is that the Government waste so much of the Tax Revenue. When the current shower took over we had on the TV the brand new Nimrod Aircraft which the MOD had paid £4 billion for being cut up. This was said(by the Government) to be a major saving.

    No it was not to start with it represented a waste of £4 billion. Then we had to buy secondhand aircraft to be converted to do the job(poorly) the Nimrod Airctraft were designed to do(very well). According to the Government this was going to save the country hundreds of millions of pounds. A more realistic estimate is that it is going to cost the country hundreds of millions of pounds extra to do the job nowhere near as well(remember the Nimrod Airctraft that were cut up would probably have had a service life of ten maybe twenty years).

    Also why is the UK Government paying to plant trees in China. China is a very rich country why can’t they pay to plant their own trees?

    If the Country through its Government spent money more wisely it would have to collect in taxes less to pay for it.

  3. The Pasty Tax!

    all the other taxes effect my business but this on effects my LUNCH!!!


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