Conservatives closing the gap on reform

[Pinkponyclub3]

Any conservative supporters here ?
Recent reports say the gap on reform is closing
Having watched some clips of kemi in action,I was quite impressed
But I don't know much about the party having never voted conservative,
Have they more of an insight in to current feeling than labour?

I generally loathe the Conservatives as they are now, although I always used to vote for them.
However, I think there may still be a few decent people amongst them but definitely NOT in REFORM.
Will I vote Conservative to keep REFORM out? If i knew it would maybe but if not then not only would Refrom get in but I would have to live with the fact that I voted Consevative

@1dayatatime
Thanks for your explanation. It is helpful to understand how spending can't grow an economy if you also have higher taxes.
So the problem for Rachel Reeves is that her hands are tied as she ideally needs to decrease spending but Labour voters won't support this.
She has also chosen to tax in the wrong way by increasing employer NI.
Do you think she could have raised capital gains tax instead (but not on the investment part)? Reform are suggesting reducing business rates on small businesses-perhaps this could work but this has to be funded so could there be gradual increase in VAT on businesses so there isn't a cliff edge at £90,000 and to recoup the revenue lost from decreasing in business rates.
She could have reached a compromise with her back-benchers on child benefits by having child benefits decrease after the first two children-taking into account economies of scale. She could have got rid of the triple-lock pension.

@Pinkponyclub3
@fairyring25

A far more eloquent and intellectual summary (than my rather wordy and clumsy post!) was given by Alexander Tyler in the late 1700's:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy"

Firstly stopping the pension triple lock would be electoral suicide for any party looking to get elected because of how much weight the pensioner vote has. Sure you could have it as a policy but you will forever be just a candidate rather than an elected politician.

Increasing some taxes on businesses to pay for tax cuts on other businesses is simply shuffling the deck chairs and would have minimal economic growth impact.

Unfortunately as Tytler points out the policy changes required to create sustainable economic growth will involve policies that simply aren't possible under a liberal democracy.

I read somewhere that Amazon and Starbucks don't pay tax ..is this correct?
And how on earth is it allowed .are other big business getting away with this as well ?

Yeah apart from none of that was actually written by him, first appeared in the 1950s.

Which makes sense, what democracies existed in the 1700s? let alone in ancient Greece or Rome.

Starbucks paid no corporation tax in the UK in 2024. They posted a loss, despite £500m sales, which people complained was artificial. In particular, the last £5million was swallowed up in a £40million licence payment to a subsidiary overseas (leading to a £35million loss). Remember that sales aren't profit - most of the revenue is eaten up in costs like employing staff, running the stores, buying the food. So any tax shortfall would be a fraction of the £500million sales, even without any international manipulation. Starbucks do employ approximately 16,000 people and will collect payroll tax on that, as well as paying business rates for their shops.

Amazon is on a totally different scale. They did previously do some things which reduced their rax bill, but have largely changed that behaviour since 2015. Their UK revenue was £29 billion in 2024 (again, remember this is sales not profit). They are a top-10 UK tax payer, who paid £5.8 billion to the UK last year: £1billion direct corporation tax and the rest collected on the employment they provide for 7500 people and VAT.

More broadly, there are a few different ways in which global companies reduce their UK tax bill.

1.Using subsidiaries abroad to funnel part of their profit to countries that charge companies less tax.

Eg Starbucks have a subsidiary in Lausanne Switzerland which buys green coffee beans from Kenya, roasts them, then sells them to subsidiaries in the UK and other countries. It's sure that the corporation tax rate of 14% there - compared to 25% in the UK - will influence their choice on where to have that factory, and that's normal and OK. We compete with other countries for business investment. The bit that's questionable is that they're accused of overcharging the other subsidiaries (eg the UK) for the beans. That reduces the profit - from UK sales - of the UK subsidiary (where corporation tax is charged at 25%) and increases the profit of the Swiss subsidiary (where corporation tax is charged at 14%). And unfortunately means that corporation tax benefits Switzerland rather than the UK. It's perfectly legal - you can't impose restrictions on a company's bean-buying choices. But it's unfortunate for the UK. It's one of the reasons the Conservatives argue for reducing corporation tax: to bring business and investment to the UK. It has been shown again and again that increasing tax rates above a certain point (all kinds of taxes) decreases the actual tax revenue.

Amazon used to funnel sales through it's Luxembourg subsidiary Amazon EU Sarl... and then also did some other manipulation within Luxembourg around licensing which meant that even Luxembourg took barely any corporation tax. They changed their use of international structures in 2015. Amazon paid £1 billion in UK corporation tax last year.

2.Tax relief on capital investment. In order to encourage investment in the UK, the government allows companies to deduct 100% of the cost of most new plant and machinery from their taxable profits in the first year, providing immediate tax relief on the full investment amount. This does decrease the corporation tax revenue, but it's positive for the UK: providing more jobs and revenue in the future.

For a short time (April 1, 2021, to March 31, 2023) there was even a Super-deduction which took the relief up to 130% - ie we were actually paying businesses to invest, rather than just permitting them to fully re-invest their profits. That was designed to stimulate business investment and aid economic recovery following the COVID-19 pandemic, and has now ended.

Amazon are planning to invest £40billion in the UK over the next 3 years. That will reduce their corporation tax payments - but is very much to the UK's benefit.

It's not just the online shopping and warehouses. Amazon are one of the hyperscalars providing cloud computing services: used by thousands of UK companies, including many of the fastest growing ones and almost all unicorns (most successful privately owned startups), as well as 35 public authorities. Their offering includes AI services which are starting to be used more widely in business, and I think everyone is hoping will turn around the low UK productivity. We really want them investing here!

Interesting thanks, I had wondered about those lines on tax for Starbucks and Amazon but not looked it up

A lot of these franchises don't actually post profits, they make huge losses. It's the irony of modern capitalism that many of these companies don't make any money.... share holders value is based on thin air ...the fact the company is growing and had a huge income.

Amazon is slightly different, they reinvest but like all reinvestment it's not taxable.

I personally think business rates should be linked to turnover.

I would argue that they are possible under a liberal democracy, but only after the country has run out of money and is unable to borrow any more. Then the IMF (or if Eurozone, ECB) step in with a bail out and impose radical structural reforms. Look at what happened in Greece - public sector pensions, pay etc slashed to get the finances back on to a sound footing.
I can envisage similar happening here if the lunatic fringes are elected. And I do not see how Reform will get in without offering to continue existing benefits packages.

business rates should be linked to turnover

So you think there won't be any negative consequences to imposing high taxes on a company which provides lots of employment, and makes only a small amount of profit?

OK.

Actually, let me be a bit clearer: rather than assuming you'll draw sensible conclusions.

You can't tax turnover. That's batshit.

And we do already tax consumption: that's VAT. Which will obviously be charged on every cake Starbucks sell to eat in.

No that won’t work I agree.

Possibly, but I like to think tax is fair, a small retailer on a busy high street will be paying a lot of business rates. Compare that to a company that has an operation on a brownfield site, employs automation and possibly pays less rates than the retailer in a city centre.

Companies line up in the Hague, despite huge rates and regulations......I wonder why we can't do the same. Would it be our position in Europe.

Yes you're right, it is possible to make such structural reforms if they are imposed on the country by an external body like the IMF or the ECB (which is not that democratic as many Greeks complained about at the time).

But only after the country has run out of money and is effectively bankrupt.

The party that would tip the UK into bankruptcy fastest would be the Greens followed by Reform.

Immigration isn’t the issue that the likes of Farage would have you believe. Listen to The Trawl podcast and you’ll start understanding what the issues actually are. Then you can vote with confidence.

It’s how landlords are taxed. And yes, it’s batshit.

@1dayatatime
If you were the chancellor what would you do?
Ireland is a liberal democracy with high economic growth. Why can't we reduce corporation tax like them? We could spend less on triple-lock pensions/child benefit.
You argue that triple lock pensions are political suicide but many media outlets have said that pensions have risen much faster than average wage growth and that they are unaffordable. I think the public can understand that this doesn't make sense. Even if they can't-the current government should do what is right when there is only so much pie to give out. The public can also understand that there are economies of scale when having children as baby equipment/clothes/toys etc can be shared so child benefit should be decreased after the first/second child.
Council tax bands are based on 1991 values. If we combined council tax and stamp duty into an annual property tax this could free up the property market and possibly bring in more tax based on actual house values.

I agree that immigration is not the most pressing issue that Reform or the press make it out to be, although I recognise that it is an important issue.

IMO the most pressing issue is the continued managed slow economic decline caused by:
Spending being £100 billion more than tax revenue causing the Government debt to increase meaning the amount spent on servicing that debt (£126billion) is growing and is larger than the entire education budget(£119 billion).

Higher taxes to try and plug this deficit simply means that the economy slows meaning more tax rises are needed for Government spending meaning the economy slows again and so on in a doom loop.

Why would you need a random podcast to tell you how to think and vote? Try and think for yourself perhaps. Everyone walks in their own shoes and can make their own minds up according to their own experiences.

On your point about CT being lower and successfully so with Ireland that’s down to the electorate. You can see on mn themes of tax them more, whether it’s corporations or vat on education. The rhetoric means politicians are more unlikely to win.

Maybe next time we’ll have a better view on how to tax for growth.

Taxing (ie increasing taxes) for growth is a contradiction in terms.

Cutting taxes especially Corporation tax does create growth as Ireland has demonstrated.

You are absolutely right that cutting corporation tax would grow the economy (just as Ireland has done).

I also fully agree with you on getting rid of the pension triple lock (as well as having a two child benefit cap).

But I recognise that your and my opinions are very much in the minority of the electorate as a whole. No party will ever get elected saying that they will get rid of the triple lock given the strength of the pensioner vote.

I have always thought that there should be a redistribution of wealth not just from rich to poor but from old to young. If you give tax breaks to people in their 20s then you are encouraging young people to work as hard as they can, but a house, get married and generally be productive members of society. A habit that will stay with them for life and into their 30s when the tax breaks drop off.

I mean how to get it right. I’m agreeing on Ireland getting it right, but the electorate here won’t go for it.