David Prosser: Let's call the bluff of the tax whingers
Friday 12 February 2010
Outlook One by one, they are coming out of the woodwork. On Tuesday, it was the boss of independent financial adviser Hargreaves Lansdown whingeing about the forthcoming 50p top rate of income tax (he paid himself an abnormally large dividend to get in first). Yesterday, it was the turn of Diageo, the drinks giant, to warn that it might have to move its headquarters to another domicile if UK tax becomes "egregious" for corporates or individuals.
Apparently, Diageo is finding it hard to attract top staff to London, so concerned are they about the tax bills they might face. It could, of course, relocate some of the 900 employees it is letting go at its Johnnie Walker bottling plant in Kilmarnock – a vociferous local campaign to save the historic facility has failed – but that doesn't seem to have occurred to it.
Invariably, the people who complain about higher taxes, either at an individual or a corporate level, are from the same camp as those who make hysterical noises about Britain's rising public debt. They're very often quite happy to call for large public spending cuts, which invariably don't touch them, but not so pleased to be asked to make a contribution to repairing the shortfall themselves.
What's really irritating about this mindset is the fact that they are only being asked to make a very small contribution. Forget the junk you hear about high-tax Britain. While there undoubtedly are nations that can undercut us on tax – and there always will be, so trying to outdo everyone is a pretty pointless game to play – this is far from being a high-tax country.
For the record, the OECD puts Britain's tax burden as a proportion of GDP at around 40 per cent. That is below Germany, France and Italy, for example. The figures are a little out of date, but as our tax burden has increased over the past year, so too has what other countries pay.
As for the idea that a 50 per cent top-rate tax – remember, this rate will only apply on salaries of £150,000 or more – is some draconian form of socialism, it's always worth noting that Mrs Thatcher maintained a top rate of 60 per cent for her first nine years in office. What a terrible old leftie she was.
Alistair Darling's critics claim that the tax rises he announced in the Pre-Budget Report will simply be avoided. That may be the case to a limited extent, though HM Revenue & Customs is a great deal more efficient about collecting what it is owed than many give it credit for. Some of the Chancellor's predictions, however, look overly pessimistic. Mr Darling expects to make just £500m from the one-off super-tax on bank bonuses – judging from the bonus announcements that we already know about, the actual figure will be far higher.
We should treat the warnings of companies such as Diageo with the same scepticism that wiser heads reserved for the dire predictions we have heard about thousands of fund managers leaving the City in the face of tighter regulation and increased taxation. There is no evidence to suggest that that has happened, nor will there be a mass exodus of large corporates. Only a tiny number of businesses have relocated – WPP, Shire, UBM and so on – and some of those are now coming under scrutiny from the taxman, who wants to be sure they've genuinely gone.
There will no doubt be more of this nonsense in the months ahead. Several of our European neighbours are becoming increasingly aggressive in their attempts to market the joys of their tax regimes to UK companies (though in the case of one of those neighbours, Ireland, you wonder what will happen to its taxes with the country facing a much greater public finances challenge than here).
The likes of Diageo know too that these sort of hints and nudges will be seized upon in the run-up to a general election, with both the main political parties ready to capitalise on perceived weaknesses of the other. Fertile ground on which to sow the seeds if you have an axe to grind.
The bottom line is that taxes are going to rise in the years ahead whichever political party is in government. Corporate citizens of the UK will have to share some of that pain with individuals. Their bellyaching is, at best, boring. In the case of Diageo, which expects local people to put up with the painful closure of that Kilmarnock site, it looks positively selfish.
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