Jonathan Lane recommends a flat-rate tax on revenues, andPhilip Barton seeks a fairer tax rate to rein in the tech giants
I was interested to read that the EU and the chancellor, Philip Hammond, are considering taxing some global companies based on their revenues rather than their profits (Hammond calls for ‘Amazon tax’ to save the high street, 11 August). Would it not make sense to shake up corporation tax by scrapping the current system and imposing a revenue-based tax on all UK companies?
For example, if every firm paid a flat 2% on revenues, all the loopholes would disappear overnight – ensuring all companies paid taxes proportionate to the business they do in the UK. With the sweeping away of complex tax law, costly tax advisers would become redundant, and tax accounting would be simplified.
An argument could be made that marginally profitable sectors will be destroyed, but these will simply increase costs to protect their margins. Indeed, it is possible that all sectors would increase prices once to protect margins, causing a single inflation event.
However, if the tax rate were carefully selected, the many current non-contributors would pay a fair share, and the rest of our companies could pay less than they currently do. The result could be an increase in corporate tax revenues and a decrease in tax paid by the existing payers, especially the most profitable firms. Reporting profit rather than disguising it would clarify company accounts for shareholders and potential investors.
Revenue-based tax would level the playing field for those companies struggling against the likes of Amazon, creating a more diverse set of local employers. With the new tax contributions from the global giants, it might also be possible to reduce local business rates on high streets.
Loxwood, West Sussex
• According to media reports, Amazon only paid £4.5m in corporation tax in 2017 despite UK sales of nearly £2bn. This amounts to a tax rate of only 0.225% on turnover. Most will agree this is disgracefully low. Most individual UK taxpayers pay at least 20% of their income to HMRC each year.
Is it beyond the wit of the chancellor and HMRC to impose on these grossly greedy and immoral “tech giants” a fairer rate of tax? Ordinary taxpayers under the PAYE system are chased for every penny of underpayment by HMRC, which seems unwilling, or perhaps unable, to impose greater penalties on the tech giants.
One wonders how these tech giants have got away with it for so long?
This article was originally sourced from here.