Company Tax and Economic Growth

cepheus

ajsexton wrote: »

Had a similar conversation at work recently...

I think everyone can pretty much agree that economic growth is directly linked to the success and profits of private business, when they are successful, they expand, take on new staff, resulting in more taxes being paid, more money being spent in shops etc etc

I also think that many would agree that a lot of businesses focus on London and the South East resulting in uneven growth around the country. I will say the a few other cities are getting some investment such as Manchester and Birmingham.

Could a method be devised to encourage business owners to expand outside of the SE via a method of a altering tax requirements for different areas of the country and adjusting for growth in an area each year.

One we discussed was if the corporation tax rate was 20%, then companies output from poorer areas such as the NW/NE could be taxed at a lower rate (say 16%) that tax rate would gradually move back towards 20% as growth occurred. This could be recalculated every 2 years - every year seems a bit overkill.

This might not deter existing investment in the SE as for a small %age reduction the costs to move would be prohibitive, but it might be enough to encourage incoming foreign large companies to make their UK operation bases in cities (and even towns) other than London.

Discuss...

One might wish to consult the people who study this for a living such as Nobel Laureate Joseph Stiglitz. Although his analysis refers to the US it could equally apply over here.

He has just been published a White Paper with the Roosevelt Institute entitled Reforming Taxation to Promote Growth and Equity.

Our Corporate Tax Agenda
Our corporate tax agenda has seven basic elements:
1. Raise the corporate tax rate.
2. But provide generous tax credits for corporations which invest in the U.S. and create jobs here.
3. Eliminate the loopholes that distort the economy, reduce tax revenues, and create enormous inequities.
4. Increase taxes on monopolies and other rent-seeking economic activities.
5. Ensure that multinationals pay their fair share of taxes, and have incentives to invest in America. We will outline several elements of this agenda, including: (i) Tax multinationals on a “formulaic basis” – analogous to the way that corporations are taxed by the states within the U.S., on the basis of their sales, employment and assets within each state; (ii) Adopt a special provision that intellectual property that can be substantially attributed to the U.S. (e.g. as a result of research conducted in the U.S.) be treated as an American asset; and
(iii) A minimum tax on global income.
6. Increase taxes on corporations the profits of which are associated with negative externalities.

http://rooseveltinstitute.org/sites/all/files/Stiglitz_Reforming_Taxation_White_Paper_Roosevelt_Institute.pdf

CLAPTON

cepheus wrote: »

One might wish to consult the people who study this for a living such as Nobel Laureate Joseph Stiglitz. Although his analysis refers to the US it could equally apply over here.

He has just been published a White Paper with the Roosevelt Institute entitled Reforming Taxation to Promote Growth and Equity.



http://rooseveltinstitute.org/sites/all/files/Stiglitz_Reforming_Taxation_White_Paper_Roosevelt_Institute.pdf

A good keynsian analysis with a bit of USA protectionism thrown in.