24 Sep 2011

Corporations can't pay tax - they're not people!!

There's a guy called Tim Worstall who recently posted a piece on the Forbes website (that has a link from the BBC's news site!)  who makes the remarkable claim that "Corporations do not pay taxes: They can't, they're not people". Specifically, he states
all those who say that “companies should pay more tax” are simply being ignorant. Companies do not pay tax, cannot pay tax, and thus to call for them to pay more is just displaying that ignorance.

Truly amazing. Here's what he says about Financial Transaction Taxes.

It’s also extremely important to note this point when we consider new taxes. For example, the Financial Transactions Tax (or the Tobin Tax, Robin Hood Tax, all the same thing really) which is being bandied about at the moment. As I explained in City AM today, the rhetoric is that the banks must pay for the damage they caused. But banks are corporations, corporations do not pay tax thus the FTT will do absolutely nothing at all to make banks pay for anything.
Thus the major problem with the FTT: it’s based upon ignorance. It won’t be banks that pay it. It will be us, the average consumer, stung on every minor and major transaction in the economy. Further, the amount we’re stung will be higher than the amount raised in tax. Whether those who are proposing it are ignorant of all this is unknown: it could be that they are sufficiently cynical to know but think that we are ignorant enough to not.
As to calling it the Robin Hood Tax, perhaps we should remind them of the original Robin of Loxley. He made his bones resisting those collecting unjustly levied taxes, not imposing them.
It’s simply nonsense based upon ignorance. Either the ignorance of those proposing it or perhaps worse, their playing upon our presumed ignorance of the fact (yes, fact) that companies do not pay taxes, ever. Not one single cent or penny has ever been paid in tax by a company and no system of taxation will ever be able to make them do so. So to call for higher corporate taxation is simply nonsensical.
Fortunately, the Forbes site allows comments. So I did. Here's what I said.

Dear Mr Worstall,

You are totally wrong on this. Banks and other Corporations operating in the Financial Sector can and should be paying taxes on financial transactions. And they would have great difficulty in justifying handing on the costs to the public.

According to the Bank of England's report to the BIS concerning the scale of foreign exchange transactions for the Triannual report for April 2010 :

"Net average daily turnover during April 2010 in the UK foreign exchange market was $1,854 billion per day," Assuming 250 trading days per year, let's call that $464 trillion a year or around 300 trillion pounds. That's £300 000 000 000 000 . The UK is directly responsible for 37% of the world total. This activity has absolutely no useful function and could be taxed with no serious impact on the real economy.

Specifically, introducing a 0.05% Financial Transaction Tax, as proposed by many groups including the Robin Hood Tax people, Europeans for Financial Reform, plus a very large number of economists, would have one of two effects (or a combination).

Either (1) it would raise 0.05% of 300 trillion - namely £15 billion of revenue for the govenment which could be used to stimulate the real economy, or (2) it would slow down or maybe even completely prevent speculative trading on the foreign exchange markets. Both are highly desirable. And neither of these could be passed on to ordinary tax payers. Sorry you are quite simply wrong. Yes, Banks and hedge funds really can pay for their trading - just like the rest of us who have to pay "taxes" to banks for doing simple things like currency echange.

See here for an example of banks charging me a 21.5% transaction tax to convert euros into another currency. Why do I get charged an FTT of 21.5% when banks pay 0.0000000000%

People like you who try to imply that a tax on currency speculation would be passed on to us because "Corporations can't pay taxes, because they are not people" is, in my humble opinion, either a demonstration of remarkable ignorance on your part, or part of the coordinated lobbying by the city of London to block any attempts to introduce what is an extremely sensible move for absolutely everyone except the tiny minority of traders who are siphoning money out of the system using massive and pointless speculation on foreign exchange markets. I suspect that it's the latter.

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