Treasury considers shifting tax burden for mid-sized companies

Move could lower avoidance rates if done well.

The Telegraph's Roland Gribben reports:

Two key proposals designed to simplify taxation of their businesses and shareholders by replacing the current set-up with a single layer and align tax treatment with commercial reality have been submitted to the Treasury.

One involves giving medium-sized companies the opportunity to elect to be taxed as if they were partnerships or sole proprietors to produce a single tax level for business profits.

The second would extend the real estate investment trust regime to include all privately owned businesses, freeing them of corporation tax but paying taxable dividends to shareholders.

It's a scary experience, pre-empting the treasury. As I wrote last month, such a move could be remarkably effective at tackling tax avoidance. It is a lot harder for individuals to avoid tax than it is for businesses to, if for no other reason than that individuals have an actual corporeal existence and find it significantly harder to be "headquartered" in a country they've never actually been to.

The Telegraph quotes the senior tax partner of the consultancy which drew up the reforms as suggesting that the changes as described would not reduce the tax take. That seems doubtful – especially the former suggestion, since allowing companies to elect to change their taxation rate all-but-guarantees that the only companies which take up the offer are those which would lower their taxable income by doing so. Realistically, such a move would have to be combined with an increase in the dividend tax rate to keep the tax take level. That increase would then probably require an increase in the marginal tax rate – at least at the top –  to retain the incentives to investment in the current tax system… which means that it's a policy move which no politician would touch with a ten-foot pole.

Still, we can but dream. If the Treasury does take up the policy, expect it to focus more on the "making companies pay less tax" aspect of it, which is far more in line with previous moves.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images/Christopher Furlong
Show Hide image

A dozen defeated parliamentary candidates back Caroline Flint for deputy

Supporters of all the leadership candidates have rallied around Caroline Flint's bid to be deputy leader.

Twelve former parliamentary candidates have backed Caroline Flint's bid to become deputy leader in an open letter to the New Statesman. Dubbing the Don Valley MP a "fantastic campaigner", they explain that why despite backing different candidates for the leadership, they "are united in supporting Caroline Flint to be Labour's next deputy leader", who they describe as a "brilliant communicator and creative policy maker". 

Flint welcomed the endorsement, saying: "our candidates know better than most what it takes to win the sort of seats Labour must gain in order to win a general election, so I'm delighted to have their support.". She urged Labour to rebuild "not by lookin to the past, but by learning from the past", saying that "we must rediscover Labour's voice, especially in communities wher we do not have a Labour MP:".

The Flint campaign will hope that the endorsement provides a boost as the campaign enters its final days.

The full letter is below:

There is no route to Downing Street that does not run through the seats we fought for Labour at the General Election.

"We need a new leadership team that can win back Labour's lost voters.

Although we are backing different candidates to be Leader, we are united in supporting Caroline Flint to be Labour's next deputy leader.

Not only is Caroline a fantastic campaigner, who toured the country supporting Labour's candidates, she's also a brilliant communicator and creative policy maker, which is exactly what we need in our next deputy leader.

If Labour is to win the next election, it is vital that we pick a leadership team that doesn't just appeal to Labour Party members, but is capable of winning the General Election. Caroline Flint is our best hope of beating the Tories.

We urge Labour Party members and supporters to unite behind Caroline Flint and begin the process of rebuilding to win in 2020.

Jessica Asato (Norwich North), Will Straw (Rossendale and Darween), Nick Bent (Warrington South), Mike Le Surf (South Basildon and East Thurrock), Tris Osborne (Chatham and Aylesford), Victoria Groulef (Reading West), Jamie Hanley (Pudsey), Kevin McKeever (Northampton South), Joy Squires (Worcester), Paul Clark (Gillingham and Rainham), Patrick Hall (Bedford) and Mary Wimbury (Aberconwy)

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.