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Re-posting my comment from the Guardian thread that came up earlier ( https://news.ycombinator.com/item?id=10371728 https://news.ycombinator.com/item?id=1037172
by stegosaurus 11y ago
Re-posting my comment from the Guardian thread that came up earlier ( https://news.ycombinator.com/item?id=10371728 https://news.ycombinator.com/item?id=10371728 )
Corporation tax in the UK is payable on 'profits subject to corporation tax'. In laymen's terms this is roughly equivalent to to accounting profit.
Employee salaries, bonuses, etc are generally deductible; if you pay me 50K, that's 50K out of your bottom line.
The employees in question likely pay a variety of taxes including but not limited to the standard income tax. In an extreme scenario (recent graduate + highest tax band) that could be 61% rate.
(For comparison, the 2015 rate for Corporation Tax is 20%; so as far as the Exchequer is concerned, a salary payment is preferable, at least in immediate terms).
In summary, I think there's a discussion to be had here about abuse of taxation frameworks but the headline here is bait; the bonuses are irrelevant, any oddities regarding transfer payments etc. are what should be focused on.
edit: My position on taxation in general is that we should be focusing on Capital Gains Tax (taxes the gain on appreciation of assets such as shares) and Income Tax (taxes income from sources such as employment, share dividends).
Taxing corporations seems like it can only ever be arbitrary at some level, because they don't.... 'exist', for lack of a better term. They can be ephemeral, relocate, etc.
- arethuza 11y agoShareholders are generally pretty keen on the "existence" of a corporation when it comes to limited liability.
- RealGeek 11y agoand when it comes to lobbying, politics and religious rights... Corporations suddenly become people.
- TomGullen 11y agoWhat about scrapping corp tax, and replacing with a higher VAT rate?
- petercooper 11y agoThe public would go mental. VAT is seen as being most onerous on low earners. Something like a very low "turnover tax" for businesses could potentially work though. We take about £40bn in corporation tax each year. Total business revenue in the UK is around £3.2tn, so a 1.25% turnover tax would cover it.
- tonyedgecombe 11y agoOr just tax dividends as normal income.
- petercooper 11y agoWe are not far away from that with the new regime, but ultimately that's mostly disproportionately onerous on small, risk taking entrepreneurs and small businesses.
- tonyedgecombe 11y agoFor those people they would clearly stop drawing dividends as there would be no tax advantage to doing so. I'm not sure how you could say it is onerous (other than the fact they may have to pay more tax than they would have).
- petercooper 11y agoFor right or wrong, the British tax code has long recognized that those putting their own capital at risk do not necessarily have the same safety nets of typical employees and taxes their rewards at a lower rate. This is why both dividend taxes and capital gains taxes are lower than income taxes, and also why Entrepreneur Relief exists.
- tonyedgecombe 11y agoI've read several times that the government doesn't think it can raise VAT much higher because it would start loosing money from an increase in excise fraud.
- BenoitEssiambre 11y agoExactly, it makes little economic sense to tax corporations. It makes much more sense to tax the people who own corporations when they take the money out of them. Though there might be some practical reasons to tax corporations a bit. It might be easier to prevent tax evasion when you take the money at the source and it might lessen the amount of personal purchases being passed as business expenses to avoid taxes.
- 3pt14159 11y agoThe problem with this is that the shareholders may be outside your country. It is pointer management. You can't trace it down 100% of the time. If you want an easier tax policy focusing on things that can't be hidden like land, highway use, pollution, etc is much easier.