Tuesday, 31 March 2015

Tories and Labour - both deliciously wrong on tax, as usual.

From City AM:

Labour and the Conservatives will today lock horns over the levels of tax imposed on companies, as business takes centre stage in the fiercely contested General Election campaign.

Real policy differences or Indian Bicycle Marketing?

Labour will announce today that, if elected, the party’s first Budget will cut business rates, in a move they say will be worth an average of £400 for 1.5m small businesses.

Pandering to the landowners. Boo.

During a visit to a small business, Balls will say: “Under the Tories, higher business rates have cost firms an average of £1,500 a year and are an ever bigger part of their tax burden. So instead of another corporation tax cut for large comp­anies which helps fewer than one in 10 firms, we will cut and then freeze business rates for small firms instead.”

What the Tories have proposed, quite sensibly, is to have a flat rate of corporation tax of 20% for all limited companies, instead of 20% for small ones and 21% for large ones.

Yet the Tories argue that such a move would equate to a one per cent rise in corporation tax, as it would mean reversing a cut from 21 per cent to 20 per cent that will come into force tomorrow.

No, keeping the rate at 21% is not a rise, it is simply not a reduction.

Treasury minister David Gauke said: “You have it now in black and white – Ed Miliband and Ed Balls will whack up corporation tax in their first budget. This would be the first time corporation tax has risen in over 40 years.”

Keeping the rate the same is not exactly "whacking up" corporation tax, is it? Sticking 2.5% on VAT or 2% on National Insurance, that's closer to "whacking" and that was the Lib Cons who did that (the fact that Labour would probably have done it had they won in 2010 is neither here nor).

But he is lying.

My trusty tax tables tell me that until 2006 or so, Labour experimented with corporation tax rates of 0% and 10% for very small companies and 19% for small/medium sized companies (a stupid idea if there ever was one).

Nonetheless and despite that bloody great lie, the Tories win this one on points. Cutting and simplifying corporation tax is clearly better than reducing business rates. But no mention of the biggest taxes on business (rather than on 'business owners') which are VAT and NIC.

What we need with business rates is a revaluation, which is due to happen in 2017 and which will solve a lot of problems...

BNP Paribas Real Estate predicts that following the 2017 re-evaluation, the Uniform Business Rate – the multiplier used to calculate rate payers’ bills – will rise to a record 50p in the pound England, earning the government £26bn. It named retailers in Leeds and Bristol as likely winners from the next revaluation, with their bills likely to fall by 40 and 20 per cent respectively.

Mayfair and other prime West End offices are also set to benefit with no change in their rental values since the peak in 2008. However, retailers on Bond Street and Oxford Street face rises of 60 and 40 per cent. Offices in King’s Cross face a 79 per cent rise in rents.


Physiocrat said...

This says all that needs to be said on the subject how businesses benefit from reductions in their property tax.

Bayard said...

Good find.