Opinion
Let’s get down to business
There’s a lot of noise coming from the media about the recent changes to the welfare system. These are portrayed as either a brutal attack on some of the most vulnerable people in society or some long overdue and wholly necessary reforms, depending on where the relevant part of the media stands on the political spectrum. There is also a lot of controversy about rich people avoiding paying their fair share of taxes. I could hold up Jimmy Carr as a shining example but he makes me laugh, which is what comedians are supposed to do, so I won’t. The current political battleground is real income levels, which are continuing to fall and show no sign of stopping. Yet in among all of this, the only time businesses are mentioned is when some American mega-corp is found to have avoided paying any corporation tax in the last five years, or some banker pays himself a colossal bonus. I think it’s about time that someone stood up for businesses and I’m putting myself forward for the job.
Virtually all the revenue which the government uses to pay for so many things (including welfare benefits) comes from taxes. Let’s look at these taxes in order of the amount of revenue they generate. First up is income tax which accounts for 30% of the revenue pie. Income tax is generated by businesses because they create the jobs which pay the wages which are then taxed. Businesses also collect income tax because they deduct it from your wages and pass it on to the treasury. Next up is National Insurance which contributes 19% of the total. NI is really income tax by another name so businesses both generate and collect it, but the big difference is that over 60% of NI contributions are actually paid by businesses – effectively a tax on employing people. Then you have VAT, 17% of the total, which is generated by businesses because they add it to everything they sell and collected by them too. Fourth on the list is corporation tax at a mere 8% of the total; generated by businesses and paid by businesses, it is a tax on making a profit. Of the remaining quarter of the pie, 5% is accounted for by business rates which are both generated and paid by businesses.
If you look at the total amount of dosh the government has to spend, excluding what it borrows, 79% of it is generated by businesses, 63% is collected by them and 24% is actually paid by them. You would think that the government would be very solicitous to the people who own and run businesses but, as one of those people, I can tell you that they are not. Times are tough in business; the lack of economic growth means it is hard to increase your turnover and harder still to grow profitability. All the big banks flatly refuse to lend money to businesses, not because they don’t want to but because the rules they operate within dictate that lending money to businesses is so risky as to be suicidal. Worse still, HMRC are becoming ever more diligent and aggressive when it comes to collecting taxes from businesses. Hefty fines for late payments or late filing of returns have been introduced across the board and HMRC now employs debt collection agencies to harass businesses.
I really can’t understand the government’s approach. Surely if businesses were given more support they would be able to do what they do best, grow their turnover and profits, generate more revenue for the government, create more jobs and, ultimately, make the economy grow. I think I know what the problem is; businesses don’t vote. Although the next election is still two years away, all three main parties are busy electioneering. Any policy that wins votes is a good policy and it is too easy to characterise business owners as tax avoiding, employee exploiting rich people. In the words of the Stranglers, “Something Better Change!”
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