WHAT’S Osborne’s Answer To This Fall In Revenues?

Given their track record in the Federal government since 2010, it might be possible to write a level of books on what the Tory party doesn’t know about economics. I don’t possess time for your, so this blog post will have to do. Judging by recent opinion polls, it is clear to almost all people in the UK that austerity isn’t working and that George Osborne is hopelessly out of his depth.

However, people can’t really articulate why, other than by causing simple observations about the lack of economic growth, or Osborne’s abject failure to meet some of his economic targets. This is not because economics is a particularly complex subject, but because the “national curriculum” education system doesn’t provide the majority of individuals with basic financial literacy. Take the mainstream mass media silence over Gordon Brown’s PFI economic alchemy strategies. The press offered Neo-Labour a free ride on PFI, with the newspaper Private Eye practically the only source of reason about them for the best part of ten years.

Even then, the mainstream press didn’t run with the scandal, or to question why the Tories insist on keeping Gordon Brown’s accounting technique of hiding PFI personal debt legacies off the national debt calculations. There is enough of a proof that visible people of Neo-Labour were economically clueless, and that the mass media provided them a free of charge ride just.

I (and many others) have proposed. Neither is it unexpected that Redwood used this tax-dodging scandal to promote the familiar Tory plan to slash corporation tax and taxes rates for the wealthy elite. These claims are outright admission that Redwood favors the “race to underneath” strategy of appealing multinational taxes dodgers with super-low company taxes rates. However, they’ve got a lot more slashing to do if they are going to compete with the extremely low rates in Ireland, Switzerland, Hungary, and Canada, or even to undercut the corporation tax rate of 0% in the Bahamas.

Redwood’s intention is that the united kingdom slash corporation tax rates to such low levels that the global tax-dodging corporatocracy opt to extract their revenue in the UK. The UK is wanted by him to behave as the economic pirates of the global economy, soaking up the tax revenues on profits that were generated elsewhere in the world.

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That senior Tories openly enthuse about winning the “race to the bottom” in order to cover up dodged tax revenues from somewhere else in the world is bad enough, but there are some gaping economic defects in this ideology too. The first objection pertains to the Laffer Curve; the theory that there is an optimum amount of tax to be levied to maximize tax returns.

The idea that tax cuts always increase taxes earnings is theoretically flawed. This is simple to see. If corporation tax was set at 0%, tax avoidance could be eliminated, but at the price of eliminating too all corporation tax revenues. The same applies to setting tax rates at 100%, nobody would even bother to go to work if the Federal government enforced a 100% tax rate.

The ideal point obviously lies somewhere between. What is certain is that the more the taxes rate is slashed, the more likely it is that the revenues are going to “fall off” on the still left aspect of the Laffer Curve. Another objection is the sheer scale of tax cuts that would be needed to lure companies into engineering their earnings to appear in the UK.