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.

HMRC intends to really get tough on 'aggressive' tax avoidance; and in particular with the 'cowboy advisers promoting these high-risk schemes'

and has launched a public consultation on the subject, asking "can we have the unreserved power to 'name and shame' them ?"

One proposal for tackling the behaviour of high-risk promoters is to ‘name and shame’ them. HMRC does not currently have the power to name promoters of avoidance schemes whose behaviour is high-risk; Raising the stakes on tax avoidance consultation looks to give HMRC the power to do so unreservedly.

Naming high-risk promoters will publicly identify them, distinguish them from mainstream tax advisers and make sure that their customers know who they are dealing with.

Killer Arguments Against LVT, Not (250)

Two snippets emailed in by Bob E:

From The Guardian

David Gauke, the Treasury minister responsible for tax issues, told [Caroline] Lucas in a letter that it was already clear a land value tax (LVT) would be expensive (1) and an unfair burden on property developers,(2) which own undeveloped sites that currently escape tax.(3)

From The Telegraph:

David Gauke, the Exchequer Secretary, made £67,000 in profit from the sale of his London flat, but under parliamentary rules is not required to return all the profit he made to the expenses watchdog...(4)

Earlier this year, Mr Gauke said that it was “morally wrong” for people to negotiate discounts with plumbers and traders by paying them cash. He suggested that such a deal helped traders to break the law by allowing them to evade VAT or income tax.(5)
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Getting down to the nitty gritty:

1) What does he mean by "expensive"? Does he mean "would raise a lot of revenue"? If he does, that means that we can abolish income tax, VAT and National Insurance.

2) Even under a full-on LVT-only system, the tax on those sites would only be an average of £10,000 - £15,000 per plot per year, which is a lot less than the total current tax burden on each new home built, i.e. the income tax and NIC for construction workers and sub-contractors, all the taxes embedded in the prices of raw materials, the corporation tax on the profit from selling the house (a large part of which is the planning gain uplift) or the capital gains tax on the planning gains uplift (if the builder bought the land with planning).

3) Yes, the capitalised selling value of the undeveloped plots would fall, but so what? Under an LVT-only system, home builders will be paying less in tax (assuming they can finish off the houses fairly quickly once they get planning), it is only a one-off loss of the unrealised-unearned profits currently embedded in the value of their land banks.

Even ignoring the fact that they'd pay less under an LVT-only system, actual home builders (i.e. not the land speculators who make money by getting planning permission) will win in another respect: instead of borrowing money to buy a plot with planning for (say) £150,000 and paying £10,000 a year interest to the bank/bondholders (this is a privately collected tax on top of the publicly collected taxes they currently pay), they'll get the land for pennies and will be paying the £10,000 - £15,000 a year LVT to the local council, so if the worst comes to the worst, they can abandon the project and walk away, with no windfall loss and owing the bank/bondholders nothing.

4) This is how easy it is for the Home-Owner-Ist élite to corrupt the politicians, they just give them all a London flat, allow them their first delicious hit of tax-free windfall rent collection and then they're hooked for life.

5) Yes, David, but those taxes are very "expensive", so you're against them in principle, aren't you?

Is it immoral to pay a stand-up comedian cash-in-hand?