Just what businesses need: higher taxes

Parliament has been debating the Finance Bill, and yesterday John Redwood gave a speech warning about the risks to the UK economy of raising corporation tax rates to levels that could push companies to move more of their operations overseas. Redwood said:

"Obviously, if a multinational has footloose business of a high-technology, high-value-added, high-growth kind which will produce a high margin and plenty of profit, it will look very carefully at the effective and, especially, the headline tax rates around the world. All other things being equal, it may then decide to put more of its high-value, high-profit business into the parts of the world that offer the most competitive headline rates.

"I am sure that, in their saner moments, Treasury Ministers agree that that is the case. They know that it happens and that it is a real possibility now, which is one of the additional reasons why I think my hon. Friend the Member for Fareham is right to press them again on whether they are certain that 28 per cent. is a sufficiently competitive rate at a time when the whole world is hungry for jobs and for higher-technology and high-value-added business, and when there is not enough business to go round and there are not enough jobs to go round."

He pointed out that it has frequently been found that higher tax rates generate lower tax revenues and discussed the impact of the 10 per cent rate applied in Ireland for many years.

read the speech in full here

A good argument, but to no avail: the government does not understand the impact of taxes on business - or if they do, it has what it sees as compelling political reasons to press ahead with high taxes regardless.