The simple answer is because the Government can!
Since the beginning of time, taxing income or spending has been easy. Taxing wealth or corporations is tricky, the two are linked, both have vast resources that they bring to bear behind their lobbying and both pay huge amounts to tax accountants to reduce their tax bills and hide their wealth.
Only 7% of UK tax receipts are raised from Corporations – how is this possible where they sell almost a trillion pounds of goods and services each year? The solution is simple but strangely elusive – tax corporations on their reported tax, up corporation tax and introduce an “imputed tax”.
Taxing reported profits is so obvious that it beggars belief that no one discusses it – shareholders want profits, the bigger the reported profits the better the managers, so tax them on what the shareholders value! What we have now is an absurd situation where I can report 50m profit and only pay 5m tax despite tax rates of 25% in the UK.
This “imputed tax” idea is a great one (sorry – maybe someone else has thought of it before) – I designed it especially for Jeff Bezos – if you sell in the UK then you presumably do so because you make a profit – you will therefore be taxed as if you did make a profit. Nice one don’t you think? The percentage of sales upon which you are taxed is determined each year against comparables in your industry.
Finally, the icing on the cake, corporation tax rates are increased to 40%. Sorry you guys but either you want to to sell in our market or not – if you do then accept a lower profit.
In three quick cuts of the rapier we more than double corporation tax receipts raising over 40bn in the process. What I particularly love about these measures is that “where you base your business” is of NO importance. what matters is the residency of those you sell to, this is the true definition of where you make money.
As for wealth taxes – let’s leave that for another day!