Analysis: Scrap corporate tax and benefit long term, some conservatives say

Thu Jun 6, 2013 5:14am EDT
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By Tom Bergin

LONDON (Reuters) - As western politicians consider moves to clamp down on corporate tax avoidance, some conservative economic thinkers say the damage done by avoidance is overstated and any remedies are more likely to do economic harm than good.

Revelations that companies including Apple Inc, Google Inc and Inc have shielded billions of dollars in profits from taxes by using tax havens have ignited a public debate on the issue.

But those who have long argued that taxing corporate income discourages investment and job creation say the current drive to extract more tax from companies is a step in the wrong direction and will prove only temporary.

"It's a tax on growth, it's a tax on success, it's a tax on employment," said Tim Knox, director of right-leaning think tank the Centre For Policy Studies.

"While we may have lost the public argument for the time being, the intellectual argument is actually even more in our favor. The system is unsustainable," he added.

Knox said the complex arrangements employed by Apple and others showed how multinational corporations could get around any tax rules. So rather than waste resources trying to tackle avoidance, governments should cut corporate income tax rates further or abolish the tax altogether.

Ben Southwood, researcher at the free-market Adam Smith Institute, said companies avoiding taxes did not hurt the economy, but rather, gave it a boost.

He said lower tax bills contributed to lower prices for consumers, higher wages for employees and higher returns for shareholders, which could be spent in the economy or reinvested.   Continued...

View of the reception of Amazon Europe Holding Technologies in Luxembourg in this picture taken on November 20, 2012. REUTERS/Francois Lenoir