It is positive news that Google has paid some more tax, although many feel the amount is far less than must truly be due. In fact whatever they had paid before was what was due; the fact that it was barely anything is a reflection upon the tax rules and systems, rather than the company which paid what it believed the law demanded. Here is the problem. The taxation of corporations the world over is based upon the notion of profit and vast multinationals are able to organise a world company so that its profits emerge in the country with the most advantageous tax regime.
This story neatly dovetails with the recent announcement that Osborne’s budget forecast and those of the OBR are adrift in a negative direction, with borrowing by the government for the whole financial year now exceeded with over two months to go. The forecast now is that the net borrowing target will be missed. The slashers and burners will use this news as a signal to launch a fresh assault on benefit recipients, especially single parents, the disabled and the infirm. The suffering caused will advance the cause of deficit reduction not one jot, because the problem lies not any longer in spending which is cut to the bone, but in taxation income which is just not enough.
There are two reasons for this. The first, which will be self correcting if any political party has the guts to undertake essential rebalancing of the economic model, will improve as productivity (and therefore personal income) increases. Too many of that record number of jobs Cameron is always boasting about are low skill, low pay and low yield for the Treasury.
But the other area where not enough happens is from business, not because the rates are too low, but because the base, defined by profit, is too narrow and too portable. The solution is to abolish Corporation Tax, Capital Gains Tax and Stamp Duty and replace them with a Turnover Tax and a Capital Transaction Tax. The base would be much bigger, the rates much lower and avoidance impossible.
Modern global corporations operating 24/7 worldwide generate enormous revenues which are tax neutered by such devices as paying huge licence fees to a parent company offshore, which then emerges the profit in a tax haven. When our taxation structure was built, no such businesses existed. Tinkering with a structure which is no longer fit for purpose will get nowhere. We need a radical reform based upon simplicity of collection and unavoidable liability.