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Can we achieve growth with your tax moralisation?

    Digital Communications Manager Lewis Brown on the calls for 'tax justice' over celebrities and companies who dare to shop around for a lower rate. 

    In the last few days, Usain Bolt has become the latest in a long line of celebrities to criticise the UK’s punitive high taxation. Bolt has confirmed that he has not run in Britain for the last three years because of the barbaric levies that he would be forced to pay on his international earnings, meaning in some situations it could actually cost him money to compete here. Bolt only competed at London 2012 due to a tax amnesty insisted on by the International Olympic Committee, and last year chose to compete in Paris over the London Grand Prix event. The double gold-medallist will more likely enjoy an extended holiday if he faces the same choice this year thanks to M. Hollande’s own taxation policy that has the Gallic wealthy ready to flee.

    It is quite an unbelievable situation that the Prime Minister of this country is rightly ready to roll out the red carpet to those investors and entrepreneurs who would seek a safe haven from the Socialist tax heist across the Channel, but willing to engage in moral finger pointing when well-paid comedians use legal means to avoid our own high rates. Cameron will wisely refrain from commenting on any cases in the future, but inaction persists over the supply-side reforms required to kick-start growth.

    It is also a humorous if galling sight to see many tweeters and bloggers who believe in playing ‘Robin Hood’ turn Sheriff of Nottingham and side with Mr. Taxman over those who have achieved a level of success, but perhaps not too surprising considering the ridiculously-named ‘Robin Hood Tax’ involves taxing transactions that would have a knock-on effect for pensioners, employees and consumers (lest we forget that in most versions of the story, Robin was a nobleman who was spurred into action after losing his wealth to a corrupt and overbearing state).

    Meanwhile, Labour MPs have been doing a little moralising of their own with John Mann of the Treasury Select Committee calling the amount of tax Google pay in the UK “entirely improper and immoral”. He believes the search engine giant, whose European operations are headquartered in Dublin where they declare profits subject to the low corporation tax of 12.5%, should be hauled up in front of the TSC and has demanded a ‘transmission tax’ for the “freeriding” internet companies.

    Aside from providing us a practical confirmation of the behavioural aspects of the Laffer Curve, the situation we have got ourselves in on tax is quite depressing. Not only do we believe it is proper to operate a policy of high-taxation to support large state spending around 50% of GDP, but rather than accept the obvious that those who pay the most tax – corporations and high-earners – have the choice of where they operate and reside, we play the ‘moral’ card, believing they have a duty to remain within our shores and pay unfair and unsustainable tax rates. 

    Rather than accept the wealth of evidence that lower tax rates will lead to higher growth (and higher revenues for Corporation/Capital Gains Tax) in the long run, and encourage businesses and wealth creators to our shores rather than to leave them, we seem to have become blinded in some bastardisation of the Field of Dreams mantra; ‘tax them and they will pay’.

    In the short-term a programme of tax cuts would need to be funded by further spending cuts, but these are necessary anyway when you consider the ever-enlarging state debt. Tax cuts and decreased government spending would provide a vital boost to growth over the longer-term for many reasons, including allowing Britain to retain and attract the brightest and best talent – be they athletes, actors, businessmen or investors.

    The narrative constructed around the lowering of the damaging 50p tax rate by a modest amount bears witness to the manner in which the current discussion takes place – that we should use tax to punish the successful no matter what the effect to business and the economy. Usain Bolt joins numerous other otherwise-loved celebs such as Adele, Lewis Hamilton and Michael Caine in making moves to quit or avoid the country due to tax – these are just the highest profile examples. We can remonstrate and say we are better off without them all we want, but we can also watch as the USA, Ireland, the Caribbean and others reap the benefits; not only in terms of tax but of the draining of creative and successful talent from the UK. 

    Lewis joined the Centre for Policy Studies in April 2011 with responsibility for social media and digital engagement.

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    Comments

    Adam Pembrey - About 2957 days ago

    Agree entirely Lewis, I get so fed up by people wanting 'the rich' to be taxed more. Its nothing but inverse snobbery and jealousy.

    Its that typical British mentality of wanting to punish success, bring everyone down.

    As you say we should be encouraging the wealthiest earners to be here, 25% of 5 million quid is a lot more than 50% of nothing.

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