Open for Business

March 24, 2011 8:47 AM

The U.K. Government presented its 2011 Budget, intended to be a “budget for growth” aimed at reinforcing the message that Britain is “open for business”.

Whilst it will be the unexpected 2% cut in the main rate of corporation tax which will no doubt feature in the headlines, the radical reform of the tax treatment of foreign profits is perhaps more significant to the international tax competiveness of the UK.

A good Budget for business....unless you're a bank or an oil company.

posted by three blind mice (27 comments total)

Meh. These sectors have been screwing consumers for decades, I couldn't care less about a (decidedly modest) windfall tax. They'll screw it out of us in price hikes anyway.
posted by londonmark at 8:54 AM on March 24, 2011

open for business

FOR SALE.
posted by Artw at 8:56 AM on March 24, 2011 [6 favorites]

What is the radical reform of the tax treatment of foreign profits?
posted by grobstein at 9:03 AM on March 24, 2011 [1 favorite]

If the meaning of "growth" among British Conservatives is similar to the meaning of "growth" among American Republicans, I recommend burning it with fire.
posted by at by at 9:04 AM on March 24, 2011 [4 favorites]

If their CEOs can cure impotence, their economy should be in good hands.
posted by larry_darrell at 9:05 AM on March 24, 2011

this one of those things where by cutting the corporate tax rate they are actually going to bring more revenue in... tee hee... good luck with that one. and i'm sure there will be no loopholes here:

The corporation tax exemption for foreign branch profits will be available for accounting periods commencing on or after Royal Assent to the Finance Act 2011. It will now be extended to some life insurance companies. There will be revisions to the rules preventing diversion of profits from the UK to the exempt branch, the transitional provisions for companies which have previously claimed relief for branch losses and the application of capital allowances. Details of these changes have not yet been published.

and then there's the budget:

Fairness is central to the Government’s economic policy. The Budget sets out the next steps in realising a fair, simple and efficient tax, benefit and pensions system that rewards work, saving and personal responsibility.

Orwell couldn't have said it better himself...
posted by ennui.bz at 9:08 AM on March 24, 2011 [2 favorites]

Open for Business

Too late. West Virginia is using that one already.
posted by I'm Doing the Dishes at 9:14 AM on March 24, 2011

I like that phrase "tax competitiveness". Sounds a lot better than "corporate giveaway".
posted by DU at 9:15 AM on March 24, 2011 [7 favorites]

West Virginia is using that one already.

No way! Wisconsin got it first!
but you can have it
posted by echo target at 9:18 AM on March 24, 2011

Yeah, we got that slogan here in Wisconsin, too. Meh.
posted by Mngo at 9:19 AM on March 24, 2011

Oh right, the "tax cuts actually raise revenue" bit, didn't you Brits laugh smugly or something while the stupid Americans slowly passed all the productivity gains and living standards of the middle class up the Reaganomics ladder for the past 35 years? You should know better by now.
posted by T.D. Strange at 9:19 AM on March 24, 2011 [2 favorites]

Too late. West Virginia is using that one already.

As is Wisconsin.
posted by drezdn at 9:19 AM on March 24, 2011

The problem is that Osborne got his definition of growth from an oncologist.
posted by Grangousier at 9:22 AM on March 24, 2011 [2 favorites]

Can someone smarter than me explain what this reform of foreign income is and what it's going to do? It always struck me as manifestly unfair that large corporations could reduce their marginal tax rate with international accounting trickery.
posted by papercrane at 9:22 AM on March 24, 2011

What is the relevance of corporate tax of any kind when the corporations can and often do ask their purchased politicians to not pay taxes at all, and quite often get their wish granted? Often they just don't pay and it is forgiven or forgotten.

Any action whatsoever that is not beheading the aristocracy is just feeding the circus. And it is just circus - no bread for you.
posted by CautionToTheWind at 9:28 AM on March 24, 2011 [3 favorites]

Too late. West Virginia is using that one already.

As is Wisconsin.


And Pennsylvania.
posted by tommyD at 9:29 AM on March 24, 2011

Whilst it will be the unexpected 2% cut in the main rate of corporation tax which will no doubt feature in the headlines, the radical reform of the tax treatment of foreign profits is perhaps more significant to the international tax competiveness of the UK.

Unfortunately, the more attention-grabbing measure in the UK is the one pence reduction in petrol (gas) duty.
posted by Stark at 9:33 AM on March 24, 2011

The whole "open for business" meme is so sad and juvenile.

First, and foremost, it's a loser right out of the box; it automatically capitulates to business. It concedes all power to business - here, before we start, let me give you all my cards, too.

Second, its logic is on par with a 16-year-old lovestruck girl. Brains are too much work. All I need to do to get the guys is change my makeup and get a sluttier dress. That'll get their attention. Then, when they fuck me I'll know they love me.
posted by Benny Andajetz at 9:36 AM on March 24, 2011 [12 favorites]

Fairness is central to the Government’s economic policy. The Budget sets out the next steps in realising a fair, simple and efficient tax, benefit and pensions system that rewards work, saving and personal responsibility.

Horrific poverty is a great motivator, but they might want to be careful, people might be motivated to riot and form lynch mobs
posted by Stagger Lee at 9:39 AM on March 24, 2011 [1 favorite]

As long as this keeps the government too busy to go screwing around with the immigration rules again, I can't complain hugely. :/

That's right, Daily Mail readers. IMMA TAKIN YER JERB...eventually. I hope.
posted by Mr. Bad Example at 9:39 AM on March 24, 2011 [5 favorites]

Some of the foreign company measures have been consulted on already. The Guardian have a summary of the various budget measures and expected impacts on tax revenue in the datablog. The foreign company stuff is near the top of the table. I won't even give you one guess as to the direction of the estimated revenue impact.
posted by Jakey at 9:42 AM on March 24, 2011

I'm surprised to see that they openly agreed to reduce corporation tax. I was under the impression that their plan was to do that in secret.
posted by Acey at 9:44 AM on March 24, 2011

Oh right, the "tax cuts actually raise revenue" bit, didn't you Brits laugh smugly or something while the stupid Americans slowly passed all the productivity gains and living standards of the middle class up the Reaganomics ladder for the past 35 years? You should know better by now.

Unless I'm misunderstanding things, this isn't Reagonomics at all. They aren't cutting taxes now to spur growth so that corporate revenues grow and grow tax revenues that way. They are closing loop-holes to increase the average effective tax rate while also cutting the nominal tax rate.

Companies that were using accounting tricks to keep their effective tax rate down will see this as a tax hike, companies that didn't will see it as a cut. On average, it should work out to be a tax hike.

Didn't Obama mention something like this in the state of the union?
posted by VTX at 9:50 AM on March 24, 2011

"Tax competitiveness" is one of those concepts that have me instinctively reaching for a bucket. It effectively means: "opening a bunch of jumbo-sized tax loopholes for multinationals and massively wealthy individuals which then will have to be compensated by higher taxes on those with a less mobile wealth and income (read: payroll, sales taxes)".

"Tax competition", when where you pay taxes is effectively uncoupled to the public services you can opt to, is a race to the bottom. As Helmut Kohl (hardly a leftist revolutionary, him) once put it to a bunch of CEOs loudly complaining about German taxes and regulation as compared to Thailand's: "So, why don't YOU move to Bangkok?".

Finally, the only point of the "radical reform of the tax treatment of foreign profits" is to compete with the Irish to see who can provide the most comfortable stopover for the profits of multinationals on their way to a tax haven. Moreover, considering that British banks like HSBC make a large part of their profits abroad, this is going to turn into yet another big gift to the bankers.
posted by Skeptic at 9:53 AM on March 24, 2011 [4 favorites]

Worked for Ireland, didn't it?
posted by ocschwar at 9:54 AM on March 24, 2011 [6 favorites]

Can someone smarter than me explain what this reform of foreign income is and what it's going to do? It always struck me as manifestly unfair that large corporations could reduce their marginal tax rate with international accounting trickery

It is very complicated. One part of the problem is that you may have a foreign subsidiary that is earning tons of cash, but if it shows up as income for the parent company it gets taxed again, first it was taxed by the country where the subsidiary was setup, and the. Again by your home country. The result is that many companies have cash piling up in a bank account overseas controlled by the foreign subsidiary. Rather than take this money home, they leave it there and use it for overseas acquisitions or to make investments in the subsidiary. The theory is that if the parent company could repatriate that cash to a domestic account, it would boost national savings or company investment, etc. This is somewhat bs, but business people went going to pay taxes unless they have to. Now you might say tax the subsidiary, bit various international treaties make that a bit difficult. Plus one want to avoid killing exports or international services transactions.
posted by humanfont at 3:09 PM on March 24, 2011

For understanding the whole foreign income thing then the book Treasure Islands by Nicholas Shaxson (previously blued here) is very much worth a read.

I try very hard to avoid slipping into conspiracy theory belief and mindless (incoherent, fuming, foaming, raving, stroke inducing) class bigotry; that book made it considerably harder to do so.
posted by titus-g at 11:08 PM on March 24, 2011