A taxing issue

The mention of corporate tax often raises conflicts in opinion. Currently the standard rate of corporation tax stands at 26% and is confirmed to continue to decrease up until 2013 to 24%. Whilst this shows that the current government recognise the issues of having higher then average corporation tax levels this does not address or prevent large corporations so blatently avoiding their tax obligations altogether.

From having direct experience of working with in a small/medium fairly young business I have felt the frustration of the effects of the tax man. Along with the basic tax rate ,companies are obliged to pay further charges such as VAT and national insurance. This all takes it toll on overall profit margin. Moreover once a salary or dividend has been taken from the company by the main shareholders, that will also be taxed through income tax providing a double hit to business owners. The strain of these charges often prevents business start ups and slows or prevents business growth quite drastically. Although tax reliefs are available to small businesses the upper limits mean that the difference between medium and large corporations are few and far between making the present system arguably unfair to smaller businesses. But there always has to be limitations and whilst busniesses are ultimatley there to make profits they too are taxable members of society. But should this be the case?

More increasingly we are seeing businesses be more tactical in a bid to avoid paying tax altogether. Whilst the morality of this is questionable the reality is that done in the correct way this is completely legal.

Sir Philip Green owner of the arcadia empire and the richest man in the UK has succesfully avoided paying his taxes for many years now. However controversial this decision might be Sir Philip has still remained extremely succesful, well respected and in 2009 was even knighted. Dividends are paid out to his wife who resides in monaco and is listed as the companies direct owner. Sir Philip has still made many positive contributions to the british economy. Not only has he provided it with thousands of credible jobs throughout the UK he has also opened his own fashion retail academy. Furthermore he is passionate about providing opportunities to young people who are from less fortunate backgrounds as well as the redevelopment of british trade in the fabric industry.

In the defence of Sir Philip and other companies who avoid the UK tax system why wouldnt they? Comparable to the rest of the world the UK corporate tax rates are higher then average however not the worst. The biggest issue for the corporate tax payer is the support are rather lack of it that is currently provided by the state. The income tax payer when faced with crisis i.e job losses is provided with housing and benefits whilst the corporate tax payer recieve neither. Unless the governement are prepared to help reduce rising rent and rates or provide support in this climate then businesses will continue to move onto other countries or decease to trade on the high street. I believe that corporation tax is actually more damaging to the economy then it is beneficial. The small video below explains this concept. 

http://www.ft.com/cms/s/0/1562f4a4-50de-11e1-939d-00144feabdc0.html#axzz1nWsUhqNy

http://www.ft.com/cms/s/0/0500282c-abc4-11df-9f02-00144feabdc0.html#axzz1nWsUhqNy

However much businesses can be lucrative this

http://www.ft.com/cms/s/0/0eb5cab0-5bb4-11e1-a447-00144feabdc0.html#axzz1nWsUhqNy

http://www.telegraph.co.uk/education/educationnews/8181487/Sir-Philip-Greens-flagship-Topshop-forced-to-close-in-tax-avoidance-protest.html

http://www.guardian.co.uk/world/2010/nov/29/philip-green-protest-alleged-tax-avoidance