Outside the marginals

a commentary on the politics that followed the UK 2010 & 2015 elections

Oxfam’s war on tax dodgers

Instinctively you reach to support Oxfam’s proposals for a bill which:

  • Makes it harder for big companies to dodge UK taxes and ensure they’re not getting unfair tax breaks
  • Ensures UK tax rules don’t encourage big companies to avoid tax in developing countries
  • Makes the UK tax regime more transparent and tougher on tax dodging

They want it introduced in the first 100 days – perhaps the urgency is such that MPs should work through the summer?

It is not easy though.

What is the difference between an “unfair tax break” and a rule framed to “protect our competitiveness”?

Oxfam’s last point is the interesting one. The current regime is so complex and opaque that the accountants and lawyers are always going to run rings around the politicians (and us!).

Businesses believe in zero-based budgeting – where you assume nil spending and then justify all spending looking carefully at marginal benefits from marginal spending.

Perhaps government should introduce zero-based tax reliefs.

First, as a hypothetical exercise, abolish all reliefs and introduce a simpler definition of profit and taxable profit. Then decide what minimal reliefs/bribes are required to get business to behave in the way we want them to behave.

Second, work out a way to transition from the current system which is a honey-pot for tax-dodgers and tax-avoiders to a simpler more transparent system.

Then do it – probably over a five to ten-year time period – too many of our “good businesses” may be impacted by a big-bang change.

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