The UK Politics and EU Referendum thread - merged

[Jon MW]

Love this thread, there are so many political issues which cause a massive conflict within me (As, I think, they should. If you think you have the definitive answer, especially if it's a far right or a far left answer, then IMO you are probably looking at things with blinkers on) and I find you get a nice balance of views within these virtual walls. Gonna start asking some broad questions which have been causing the ol conflict over the next few days.

Question of the day:

If we leave out the top 1%, the massive corporations, the oil barrons, the royals, the amazons and googles etc (Basically everyone where we assume there is a disproportionate amount of wealth relative to what they have done to get it), and assume we are left with a pool of regular working people from cleaning ladies to doctors, is it fair that the richest ones get taxed more?

Yes, though not at the levels that are punitive and are a disincentive to wealth creation or mean people move away

i think Corbyn and McDonnell are suggesting they woudl stick with 50% top rate (happy to be corrected, but think i saw that)

the main issues as i see it are

- tax avoidance by non-doms, corporations etc and how to lower that

- and at the other end of the scale, policy on tax credits and poverty issues

I read a book this week that had quite a lot of evidence to support that tax avoidance costs this country 70 times more than benefits fraud (£70 billion to £1 billion to be precise). Which was actually the catalyst for me thinking about this issue more.

The problem with this is that it often uses quite "creative" economics to come up with those figures.
For example if a loophole existed which meant a person could legally pay £1000 tax instead of £10,000 tax then it assumes it has cost the treasury £9000; but ignores the likelihood that if that loophole wasn't there then the economic activity that generated the tax might not have taken place at all - and if it did might have been at a lower level (multiply this many millions and that 70 billion could rapidly reduce).

There's also an issue with language.
If someone uses an accountant to pay £1000 tax instead of £10,000 - they've contributed £1000 to the treasury.
If someone else claims £1000 benefits they're not entitled to they've taken £1000 from the treasury.

Has the first one really cost £9000 and the second one only cost £1000? Which is more beneficial or harmful to the economy overall really?

[DungBeetle]

Love this thread, there are so many political issues which cause a massive conflict within me (As, I think, they should. If you think you have the definitive answer, especially if it's a far right or a far left answer, then IMO you are probably looking at things with blinkers on) and I find you get a nice balance of views within these virtual walls. Gonna start asking some broad questions which have been causing the ol conflict over the next few days.

Question of the day:

If we leave out the top 1%, the massive corporations, the oil barrons, the royals, the amazons and googles etc (Basically everyone where we assume there is a disproportionate amount of wealth relative to what they have done to get it), and assume we are left with a pool of regular working people from cleaning ladies to doctors, is it fair that the richest ones get taxed more?

Yes, though not at the levels that are punitive and are a disincentive to wealth creation or mean people move away

i think Corbyn and McDonnell are suggesting they woudl stick with 50% top rate (happy to be corrected, but think i saw that)

the main issues as i see it are

- tax avoidance by non-doms, corporations etc and how to lower that

- and at the other end of the scale, policy on tax credits and poverty issues

I read a book this week that had quite a lot of evidence to support that tax avoidance costs this country 70 times more than benefits fraud (£70 billion to £1 billion to be precise). Which was actually the catalyst for me thinking about this issue more.

Not sure on the exact figures but that sounds about right.

But there can be no doubt the media coverage of the two is nothing like balanced in the way it should be.

The reason for that is obvious.

Well one reason would be that one group is breaking the law and the other isn't?  Tax gap is about £35 billion and that includes VAT in the shadow enconomy, so not sure where the £70 billion is coming from (the isolated Richard Murphy I suspect).

[AlunB]

Phew. Thank **** it's only £35bn.

I'm always quite surprised how quick people are to defend faceless corporations who, mostly, play in a zero sum game where the people defending them are on the wrong side of the equation.

[DungBeetle]

Phew. Thank **** it's only £35bn.

I'm always quite surprised how quick people are to defend faceless corporations who, mostly, play in a zero sum game where the people defending them are on the wrong side of the equation.

Of the £35 billion:

£6 billion is from hidden economy (cash in hand VAT avoidance from bog standard people)
£10 billion is from outright criminal fraud
£6 billion is tax written off
£5 billion is from error which presumably can be collected later
£8 billion is from avoidance

Of the £8 billion, £4 billion is corporation tax avoidance.

Generally what happens in these discussions is everyone thinks the total tax being avoided is the likes of Starbucks/Facebook without looking at the breakdown.

So - I'm sure we can all agree that naughty corps with their offshore structure are an issue, but let's at least establish the magnitude before we blame them for everything.
 

[Jon MW]

also £35bn is a big number but it's about 1% of the economy isn't it?

I read somewhere the UK has one of the smallest tax gaps of any country - all in all, it doesn't seem to be that much of an issue.

EDIT:  I think the problem is people want to draw a comparison because it suits their purpose - but benefit fraud is nothing like tax avoidance and only a tiny bit like tax evasion. But if you compare benefit fraud with the combined effect of tax avoidance and tax evasion (without separating the two) then you get a useful illustration of how evil the big corporations and super rich are.

[AlunB]

So all we've established is tax avoidance is a significant integer multiple higher than benefit fraud and we're still saying benefit fraud is worse? Or did I misunderstand? Genuinely not trying to put words in anyone's mouth here.

From my perspective, I think you also need to take into account the net negatives of large corporations. It's nowhere near as simple as saying they create jobs and wealth. In some ways they can be like the mid-high stakes pros of the poker world making a small initial deposit then churning round everyone else's money and taking a chunk of it out of the system each year.

[DungBeetle]

So all we've established is tax avoidance is a significant integer multiple higher than benefit fraud and we're still saying benefit fraud is worse? Or did I misunderstand? Genuinely not trying to put words in anyone's mouth here.

From my perspective, I think you also need to take into account the net negatives of large corporations. It's nowhere near as simple as saying they create jobs and wealth. In some ways they can be like the mid-high stakes pros of the poker world making a small initial deposit then churning round everyone else's money and taking a chunk of it out of the system each year.

It's worse because avoiding tax isn't illegal.  The corps are taking advantage of weak legislation around transfer pricing.  Our politicians should strengthen that legislation.

Benefit fraud is breaking the law.  I'd agree tax evasion (at £10 billion) is a bigger issue to worry about on ground of magnitude.

Don't get me wrong - I'd like to put an end to corporate tax avoidance.  It it inherently unfair that a small coffee shop pays for whack corporation tax while starbucks can fiddle around in Holland and Luxembourg, make the saving and undercut him.  It's an issue that winds me up. 

But the reality is corporation tax is a relatively minor revenue source, and HMRC get a big whack off the PAYE/Rates/VAT generated from successful business in any case.  What concerns me is the lack of awareness of what actually makes up the tax gap and that it gets used for political ends.

[Jon MW]

What do you think is better for the country - companies that pay millions to the treasury or benefit cheats that take millions from the treasury?

[DungBeetle]

Going off on a tangent here, but I'd say there is a decent argument to be made for the UK having zero corporation tax.  It's 9% of our tax take and we'd get it back via increased economic activity through PAYE/VAT/Rates and we'd level the playing field with the big corporates for our small business.

Unfortunately we aren't allowed to do this as part of the EU as far as I know.

[AlunB]

So all we've established is tax avoidance is a significant integer multiple higher than benefit fraud and we're still saying benefit fraud is worse? Or did I misunderstand? Genuinely not trying to put words in anyone's mouth here.

From my perspective, I think you also need to take into account the net negatives of large corporations. It's nowhere near as simple as saying they create jobs and wealth. In some ways they can be like the mid-high stakes pros of the poker world making a small initial deposit then churning round everyone else's money and taking a chunk of it out of the system each year.

It's worse because avoiding tax isn't illegal.  The corps are taking advantage of weak legislation around transfer pricing.  Our politicians should strengthen that legislation.

Benefit fraud is breaking the law.  I'd agree tax evasion (at £10 billion) is a bigger issue to worry about on ground of magnitude.

Don't get me wrong - I'd like to put an end to corporate tax avoidance.  It it inherently unfair that a small coffee shop pays for whack corporation tax while starbucks can fiddle around in Holland and Luxembourg, make the saving and undercut him.  It's an issue that winds me up. 

But the reality is corporation tax is a relatively minor revenue source, and HMRC get a big whack off the PAYE/Rates/VAT generated from successful business in any case.  What concerns me is the lack of awareness of what actually makes up the tax gap and that it gets used for political ends.

Lots of really good points there. Only thing I would take issue with is this.

Yes, one might be illegal and the other legal (albeit usually against the spirit of the original law). But if one is actually having more of a net negative effect on society shouldn't we be more concerned about that?

[AlunB]

Going off on a tangent here, but I'd say there is a decent argument to be made for the UK having zero corporation tax.  It's 9% of our tax take and we'd get it back via increased economic activity through PAYE/VAT/Rates and we'd level the playing field with the big corporates for our small business.

Unfortunately we aren't allowed to do this as part of the EU as far as I know.

I'd be up for this if wages rose considerably alongside it.

[AlunB]

What do you think is better for the country - companies that pay millions to the treasury or benefit cheats that take millions from the treasury?

Ridiculous question. As if those are the two options here.

[DungBeetle]

What do you think is better for the country - companies that pay millions to the treasury or benefit cheats that take millions from the treasury?

I know the point you are making, but the argument is that if the big corporates left and were replaced by small independents (who paid full tax) then it would generate more revenue than is lost by benefit cheats.  Hence via opportunity cost, the big corporates faffing around in Luxembourg/Caymans and dominating the high street cost us more than the benefit cheats.

[Woodsey]

What do you think is better for the country - companies that pay millions to the treasury or benefit cheats that take millions from the treasury?

Benefit cheats that DON'T take millions from the treasury.

[AlunB]

What do you think is better for the country - companies that pay millions to the treasury or benefit cheats that take millions from the treasury?

I know the point you are making, but the argument is that if the big corporates left and were replaced by small independents (who paid full tax) then it would generate more revenue than is lost by benefit cheats.  Hence via opportunity cost, the big corporates faffing around in Luxembourg/Caymans and dominating the high street cost us more than the benefit cheats.

This being a much more helpful response. Sorry Jon, my reply wasn't intended to sound as harsh as it did.