Homey-In-Chief makes more good points but fails to join the dots...

From City AM:

In some cases, a pound generated by capital or labour ends up being taxed so many times that it is almost entirely confiscated by the state; in other, much rarer cases, the tax levied is far lighter. This makes no sense, and we need a tax revolution which sees the current system swept away and replaced by a simple, clear tax code where all income is taxed just once at a single, flat rate, with as little opportunity for avoidance as humanly possible.(1)

Most critics of tax avoidance actually quite like high taxes, and want to wring out as much money from the economy as possible. I disagree: I want to slash tax avoidance, but at the same time I want the overall tax burden to be reduced as much as possible...(2)

Another flagrant instance of such double standards can be seen with the patent box, which enables companies to pay a lower rate of corporation tax of just 10 per cent on profits from patented inventions and certain other innovations. To widespread cheers, George Osborne is promoting his scheme – a blatant tax avoidance device – as a key tool to attract investment and business to the UK.

Yet when Luxembourg or other low-tax jurisdictions tout for business in similar ways, it’s deemed a scandal. Why is it OK for Big Pharma to pay much less tax, but not for water companies to do so, or Google or Starbucks? Why are some companies being treated better than others? Why the inconsistency? (3)

Our kafkaesque tax system is bonkers and broken. We need to tear it up and start again.(4)

1) Yup, agreed.

That tax would be Land Value Tax - truly earned income is not taxed at all, and residual income which would otherwise go into land rents is taxed once and once only at the same flat rate (anything up to 100%). Such a tax cannot be passed on, neither to consumers nor to producers/employees and neither does it affect anybody's gross income or total output - the flow is in the other direction: you start with turnover, deduct wages and other input costs (or you start with wages and deduct living costs) and the rest goes to land rents. Land rents are not really a cost, they are a residual profit share once everything else has been paid for.

2) Yup, agreed. What kind of tax does not wring a penny from the productive economy and cannot be avoided..? See (1).

3) Yup, agreed. The Patent Box is going to be great fun for us tax advisors and might, at the margin boost UK tax receipts or the UK economy, but the really evil thing is that patent income is basically government-protected monopoly income. If governments did not protect patent holders against infringement, it would be much lower.

Now, there are good arguments for giving such protection to innovators but clearly, the holder of the patent can choose where it should be registered and where the residual income is taxed. Patents are very internationally mobile, but the end-users aren't.

For example, you can register the patent for a whizz bang mobile telephone in the Bahamas if you wish and pay not tax whatsoever. But millions of people are not going to fly over to the Bahamas when they want to buy a new mobile phone (assuming they can smuggle it back through customs in their own country). So the only way to tax such income is at source, i.e. by slapping a tax on the sale of patented products to end users, wherever they may be.

But there is another kind of government-protected monopoly income which is not mobile in the slightest, the source of that income cannot be moved by as much as an inch... see (1).

4) Yup, agreed... see (1).