Monday, May 05, 2008

Hissing At The Limits


Hissing off to Ireland

The geese are hissing horribly.

In the corporate sector, Shire and UBM have already redomiciled to low-tax Ireland, and last week Martin Sorrell said he was thinking of doing the same. These three companies pay chunky amounts of UK tax, but they don't need to be domiciled here: their businesses are global (eg UBM only generates 15% of its profits in the UK).

They're going because a cash-strapped Treasury is engaged in a programme to tax more of their international income here in the UK (under changes to the so-called Controlled Foreign Corporation regime). And they could be joined by others.

According to the left, Brown should simply ignore the hissing. As Poll explains, Shire and UBM aren't currently paying that much UK tax anyway, and even Sorrell's £200m pa is in dispute with HMRC (come to that, UBM is also in dispute). Gordo should - no, don't laugh - tough it out.

Hmm.

These footloose corporations are not the only ones hissing. Suddenly, with prices soaring and the economy wobbling, everyone is noticing just how much tax they're being forced to pay. Tyler's unhealthy addiction to R5 phone-ins highlights the rapidly changing mood:

"It's just cost me £40 to fill my little car - and 70% of that is tax" - two years ago most people Tyler asked had no idea how much fuel tax they were paying.

"My little business is really struggling - and all the government can do is increase the tax on small companies" - nobody mentions the need to fund public services any more.

"My council just whacked up its charges for trade waste - we can't pass it on... we're finished... I'm really angry"

Etc etc.

From rich to poor, the geese are hissing loud and clear.

Unsurprisingly, whatever Poll may do to put some lead into his pencil, Brown is buckling. He's going to scrap his new bin tax before it even gets started, and may scrap his 2p fuel tax rise scheduled for the autumn.

But can he afford to do this? Where's the money coming from?

Yup, more borrowing. Even more borrowing.

And spending cuts - not just the 2% public sector incomes policy but real live spending cuts of the kind imposed by both Wislon and Callaghan.

As we've said many times, Labour governments always end like this. They spend and spend and spend. Eventually, taxpayers can stand no more. At which point, we get a public sector incomes policy triggering massive discontent and strikes. And then we get emergency spending cuts, combining maximum service disruption with minimum efficiency.

One toxic legacy coming right up.

PS It was the brilliant Jean-Baptiste Colbert who advised Louis XIV on the limits of taxation and how he shouldn't pluck taxpayers so hard that they hiss. But he was only dealing with tax at around 15% of GDP: what would he make of tax at 40%?

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