What´s with this new craze in Europe to cut corporate taxes?
The British finance minister George Osborne unveiled a fourth cut of corporate taxes since 2010. He rate will have gone from 28% to 20% since 2010.
To what good? It hasn´t helped growth so far, no new jobs are in sight.
Is it because Cyprus is a shining example of what really low corporate taxes can do for a country?
A tax rate of 10% has given 40 000 letterbox-companies that offers not one single job on the island and not one of them around to help out when trouble hits.
Ah, and there´s Bulgaria. Offering a 10% tax rate for businesses and the economy in such a state that it “may become Greece” according to some analysts.
Still, the tax race goes on.
Sweden cut corporate taxes to 22% this year which meant a loss of 1.6 bn EUR to the state coffers. No stampede of foreign companies so far, wanting to relocate to Sweden.
(Sweden, really?, you say, well known for its high taxation. You´re not wrong, the Swedish citizen pay a top marginal personal income-tax rate of 57%.)
Now, the Swedish state can afford to give money away, the state made a surplus of 0.3 bn EUR last year.
Denmark, on the other hand, has a budget deficit that won´t go away, no matter how much the government tries. Denmark recently announced a lowering of its corporate taxes from 25 to 22% amid an ongoing recession and its hard work to right the persistent budget deficits.
Having deficits doesn´t seem to scare any government from giving up tax revenues from the corporate world. Debt-laden Portugal has floated the idea of lowering corporate taxes to 10% – as low as Cyprus – for some months now.
The Spanish government has also had the clever idea to give up tax revenues in this way. (Both countries has to ask permission from their lenders though, so we´ll see about that.)
Meanwhile, most European governments are shifting the tax burden to their citizens. Someone has to pay, after all.
This is a race to the bottom. We will no doubt have to hit rock bottom before European governments can agree to give up their national prerogative to decide on taxes and harmonize at European level of corporate taxation.
Just the “level playing field” on the single market that the governments of UK, Sweden and Denmark keep banging on about.
The day couldn´t come too soon.
#1 by jon livesey on March 21, 2013 - 7:36 pm
“To what good? It hasn´t helped growth so far, no new jobs are in sight.”
Huh? this comment is completely in error. Total employment in the UK has risen from 32.1m in 2010 to 31.9m today. In fact, total employment is back to to levels seen before the financial crisis began.
In the same period, unemployment has fallen from 8.4% to 7.8%, while unemployment in the euro-area has risen from 9.9% to 11.9%, and total employment has fallen from a peak of 150m to 145m today.
Was it really too much trouble to look up this very simple and basic statistic before making the completely incorrect claim above?
Euobserver seems to have collected a team of bloggers who like to write long blog entries, but who don’t keep up with the most elementary economic statistics.
#2 by tim on March 22, 2013 - 12:02 pm
Thankfully, people like you take the time to point out to that silly team of bloggers that “Total employment in the UK has risen from 32.1m in 2010 to 31.9m today.” Good work.
#3 by jon livesey on March 21, 2013 - 9:58 pm
In addition to the statistics I quoted above, here are a couple of pointers to UK press stories concerning the growth of total employment to record levels.
http://www.dailymail.co.uk/news/article-2282007/At-new-jobs-filled-British-workers-thanks-stricter-immigration-policies.html
http://www.just-auto.com/news/jlr-announces-800-new-jobs-record-sales-in-2012_id130612.aspx
http://www.independent.co.uk/news/business/news/north-sea-set-to-create-50000-new-jobs-as-investment-soars-8449992.html
http://www.thisismoney.co.uk/money/news/article-2266952/UK-workforce-swells-record-level-unemployment-falls.html
Bottom line. A Government that takes the initiative and which does not wait for EU ‘harmonization’ to take effect can indeed crate new jobs, and cutting corporate tax rates is part of that.
#4 by willa on March 25, 2013 - 6:24 pm
The road of life twists and turns and no two directions are ever the same. Yet our lessons come from the journey, not the destination
#5 by Betterworld on March 27, 2013 - 9:24 pm
The UK jobs figures being bandied about above are bogus.
When an established company in a region closes with the loss of, say, 100 full-time jobs, for example, and another company opens up with 101 part-time, non-pensionable temporary jobs at minimum wage, the jobs figures show a net gain of one job in that area.
But the bill to the exchequer goes up because all the low paid, temporary workers, who were formerly net contributors to government coffers now qualify for family income support and other benefits.
But hey, the jobs figures are up, green shoots can’t be far away. “Horray!” say the cheerleaders of boom and bust economics! “Lower corporation taxes” say the message multipliers of corporate greed. “Great!” say the unknown bloggers of ignorance … and the corporate media asks for an interview.
And so it goes.
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