Monday, November 12, 2007

the red queen of corporate tax avoidance

The New Statesman seems confused as to the cause of falling corporate tax revenues. I think I know the answer. Corporation's taxes depend on how much they can squeeze past the inland revenue. Doing this takes either political clout- "if you tax me I will take my business elsewhere"- or a deep knowledge of the loopholes. Both of these are heavily dependent upon money in the first place- if you can't afford top notch accountants you don't get access to the loopholes, if you don't have the fiscal mass to become a moral blackhole, perventing any measly little government from extracting money from the dpeths of your bank accounts' gravity well, then you are similarly vulnerable to legitimate taxation. Governments tie up loopholes periodically in response to voter pressure or financial squeezes themselves. However, as with PR, the big businesses have all the resources on their side whereas the government is working on a budget. We can illustrate this with the metaphor of the Red Queen, running constantly to stay in the same place. The ground rushing beneath her feet is the progress being made by the corporation's mega-dollars on opening loopholes, increasing fiscal mass and generally dodging the government's bullets.

There's another good piece of economic analysis there too.

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