Richard Murphy posts claims from business that it is paying to much tax. These claims apply to NZ as well as the UK. Quoting him and changing the UK to NZ:
1) NZ business pays too much tax;
2) NZ is out of line on tax rates;
3) If only tax was cut NZ business would be more innovative;
4) Then we’d all be better off.
His response is:
We support competition, but think business should compete on the basis of innovation and the quality and price competitiveness of its products, rather than continually looking for state subsidy – direct and indirect – to create a “competitive” environment. Tax competition has forced many developing countries to undermine their revenue bases in their efforts to attract inward investment with no benefit to anyone other than shareholders overseas.
It is time the issue of tax competition was examined afresh since it is quite clear business will not be happy until we reach the stage where it pays no tax.
Personally I don’t know of any business leader or executive that is proposing a zero tax on capital system. This will never happen in any democratic state anyway because it is unlikely that the population will elect a government with such policies.
Secondly, tax competition is a reality, and unless the EU has a standardised tax system there will always be tax competition. I’m no expert on UK or EU law but the recently announced decision on Cadbury Schweppes shows that tax competition is a real threat to developed countries such as the UK. So the question then is – how should an EU member state such as the UK respond to such an environment. Either by competing by lowering the headline tax rate, or by providing more services in return for the higher tax rate.
Either way one thing seems obvious – tax competition make governments more accountable, not less. That is one thing NZ could have more of.