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Monday, 12 November 2012

Stop The Moral Panic Over Corporation Tax

MPs and the media have a responsibility to put the corporation tax issue into proper perspective.

The outrage is not how 'little' corporations pay. It's how much tax the rest of us pay, and how much the public sector wastes while failing to improve services. The media, MPs and campaigners should be focusing on how to make domestic spending programmes narrower and better targeted, rather than second-guessing international tax treaties over which the UK has little control.

Similarly, we can't lose sight of the need to incentivise foreign private sector corporations to operate in the UK. They employ people, generate income for local UK suppliers and compete with UK-based businesses to keep them from charging us whatever they like for goods and services.

But this is not 'the big story' either. 

The real story on the growth and employment front is that the government must do more to foster an environment in which entrepreneurs can thrive and expand their businesses. According to the Institute of Economic Affairs, just 6% of new firms create over half of all new jobs in the UK. Compliance costs, product market regulation and employment protection have remained a constant drag on the ability to grow businesses, despite efforts to eliminate red tape.

Attacking a few foreign corporations over their tax affairs won't help the government spend tax revenues more effectively or enable UK entrepreneurs to thrive. Especially when, ironically, those same foreign companies happen to provide British start-ups with plenty of meeting space, low cost server capacity, online marketplaces, software and customers...


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