If Corporations Aren’t Paying Their Taxes…Why Are We?

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The purpose of tax is in two parts: one is to raise funds for public services and investment, the second is to avoid the hoarding of wealth by redistributing it through taxation.  However, changes in tax law in favour of an ever wealthier capitalist class have turned the tax system on its head so it delivers quite the opposite.  Is it time for us to knock this unfair, dysfunctional system on the head and stage a tax revolt?

 The Great Tax Break

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 Myths about corporations include:

a) they are wealth creators,

b) they pay a great share in the total tax revenues of the country and

c) reducing their tax bill means they will pay more. Now to reality…

It was revealed today that only one in four of the UK’s top companies pay their taxes, meanwhile they were receiving tax credits to the tune of hundreds of millions of pounds by people who did pay their taxes.

Company taxes now constitute only 12.5% (Corporation Tax is just 7%) of the tax revenues of the UK.  In comparison, the people’s taxes, (income tax and VAT) make up more than 60% of the tax income.

Corporation Tax is lower today than at any time in its history.  UK Corporation Tax in 1984 was 52%.  By 1986 it was 36%.  In 1999 it dropped to 30% and in the most recent budget it was cut to 21%.

Corporations have never had it so good.

The result of these tax changes is that tax receipts are lower today than in 1963.  Worse, the composition of those taxes have changed as tax cuts to the wealthiest have seen tax rises to non means tested taxes that hit everyone.

Between 1979 (the launch of Thatcherite Neoliberalism)and 2012 the top rate of income tax was cut from 98% for unearned income and 83% on earnings, to a flat 45%.  At the same time, VAT which applies to almost everything your regular person might buy rose from 8% to 20%.  National Insurance has shot up from 6.5% to 12%.

This has meant that whilst income taxes have dropped as a proportion of income for most since 1979, income tax as a proportion of income has dropped significantly more for those earning higher incomes, and the total tax bill for a waged earner overall has increased to attempt to cover the shortfall of a great tax break for the wealthiest.

In short, we are the wealth creators (of any wealth that is shared, not hoarded), we pay the lion’s share of the taxes in the country and our taxes have gone up to compensate for their taxes going down.

Corporate Welfare

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It’s egregious enough to find that far from us all being in it together, the wage earning tax payer is paying a far higher proportion of the public services bill than the corporation or those who earn their income outside of wages.  However, not only are they not paying their fair share into the public pot, they are actively taking cash out of it it for themselves.

Obviously the most high profile case of this was the Bank Bailout.  To date, the UK taxpayer, without being consulted, has been made to pay almost 2 trillion pounds, that is two thousand billion pounds, to the richest people on earth.  To put this in context: the total UK government spend per annum, is £694.9bnSo four years of total government spending has been spent in on ‘saving’ the banks.  This is twenty years of NHS spending (£106.7bn a year), forty years of education spending (£48.2bn), or five hundred years of job seekers allowance (£4.9bn a year). This is the sheer, horrifying scale of the so called Bankers Bailout.

However, a raft of other corporations are, quite legally thanks to a tax system ever more designed to enrich the richest with the fund of the poorest, are on the take.

In a stunning (albeit rare) piece of investigative journalism, the Mail on Sunday broke one the story of corporate welfare in a way not achieved by any one in recent years.

Experian, a credit scoring firm made a £454m profit in the UK least year.  They not only paid no tax, but received £159m is tax credits.  The paid minus £159m in tax.

Royal Sun Alliance, the insurer, made £613m in profits, paid no tax but received £8m in tax credits from the public purse.

G4S, the private security firm which made a £279m profit last year by running prisons, the probation service and some police stations: paid no tax, but received £8m in tax credits.

Vodafone, the telecommunications firm made a whopping £9.5bn profit, paid no tax but received £4m from the tax payer in credits.

The list goes on.  This is flagrant corporate welfare.  In fact, the so called ‘Research & Development Tax Credit’ has risen from £70m in the year 2000, to more than £1.1bn now. That is twice what we spend on Standards and Qualifications in the national education system.

Now before some bright spark starts hailing the R&D budget and reminding me why it is so important, you might want to read a tax avoidance piece in Telegraph by KPMG.  This article in a mainstream British newspaper specifically cited the R&D tax credits as a tax avoidance scheme.

No one is arguing it doesn’t make sense to invest in our future.  But it should be all of our future we’re investing in, we should have a democratic say in what our money is invested in and investment should not be compelled from the poor while being optional for the rich.

Thanks to the Pay As You Earn system, and VAT being applied to products in stores whether we like it or not, the average person has no means of escaping this bogus tax and spend injustice.  Or do we?

The Curious Case of the Crowd

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The advent of crowd funding and crowd sourcing could be the dawn of the next great idea, in terms of how we develop and fund the things that matter to us.

Crowd funding is an online donation system, where if someone has an idea, a need, a project, or anything which requires investment, they share it on a website and people can donate money to their idea.  If the total amount required is not raised, then all investors get their donation back.

This is a win-win for both the producer and the investor.  The producer, be they musician, scientist, campaigner or business is no longer beholden to a small pool of large donors and therefore no longer necessarily influenced.  Also, anyone can now be an investor.  The playing field for investment is democratised and levelled.

Crowd Sourcing (also known as open sourcing) sourcing is where rather than working on a new idea in isolation in order to patent the discoveries oneself to make a profit – people choose to open up development, via the internet, to get the most people to solve the problem in the shortest time.

Recent successes have been made in this area by scientists and artists who have found the old capitalist approach of patent/copyright a barrier rather than a stimulant of progress in their field.

This means that people have, of their own volition, moved from a competitive model of research and development incentivised by profit, to a collaborative approach based on best results.  This is something which should thrill the bejesus out of us, and I believe presents a reason to be cheerful.

Asking the Crowd Works

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One story which may well blow your mind comes from a lab team at Harvard University.  They decided that, rather than follow the normal development model for cancer drugs, they would open source it.  This meant, rather than the normal pattern of super high secrecy to develop a drug in house, or attach its development to a large drug company – Jay Bradner and his team simply opened up their labs and their research to any individual lab or research team that wanted to participate.  They then created their own spin out companies to roll out the drug into clinical trials and the project has been a massive success.

Now, if we can develop potential cancer cures by crowd sourcing, what else is available? Interestingly enough, the spin out company here Tensha, went through normal Series A funding (venture capital) but it could just as easily have been crowd funded.  Imagine then that not only could we cut big money out of the development process, but we could cut them out of the business end aswell.

Perhaps the most lucid argument I have heard in favour of Crowd Funding was put forward by artist and musician Amanda Palmer.  Amanda raised $1.2m for a musical project.  She chose to crowd fund her musical career because she had got so much from the period of time when her musical career was funded by people throwing coins into her bucket while she busked.

To Amanda, the musician should be unafraid to ask what they are worth, rather than telling people what they are worth and enforcing that worth through copyright laws.  She despairs that Hollywood copyright lobbies, the newspapers and other businesses are tying themselves in knots with the question: ‘How do we make people pay for our product?’

Amanda believes that producers should instead ask ‘How do we let people pay for our product?’ and a critical component of that is asking what the product is worth.

 What the Hell Has This Got to Do With Tax?

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On the surface, perhaps nothing. However, I believe a basic principle is at play here – do we ask people to contribute or do we make them?  Currently, the richest are neither being asked, nor being told.  Everyone else is compelled by law to surrender ever increasing amounts to a government that fails to reinvest that money in their communities, but supports the ever increasing wealth gap by siphoning it off to private interests in a totally undemocratic fashion.

Now, imagine we could develop crowd sourcing and crowd funding alongside the current system to such a degree that the majority of us who do not support the current tax system could circumvent it?  What if we achieved better results in science, education, music, campaigning and other things with this method than the state capitalist model?  If we had this alternative, could we not simply turn off the tap and stop paying our taxes?

In recent months crowd funding has seen some huge successes. This year, $6bn will be raised through crowd funding, double last year’s total.  Still small, but growing.  Not only has a huge amount been raised but across a vast breadth of types of endeavour, and across the globe.

Notable projects include, the Do Good Bus where $100k was raised to a cause to increase volunteering by running monthly bus trips which take wannabe volunteers to different projects.  They’ve made volunteering and community building sexy again, by wrapping the whole thing in a sense of adventure.  You get on the bus, you don’t know where you will end up, who you will help, or how.  The result is awareness raising, an ever growing network of engaged, enthused volunteers and a community getting to know itself.

The Rushmore Group run some of the most well known and well loved independent bars in London, including Milk and Honey,and Danger of Death.  They recently broke the record for UK crowd funding when they raised £1m from 143 investors to open a new bar.

Individuals also attain funding or input for more personal reasons.  When open source engineer and artist Salvatore Iaconesi was told he had an untreatable form of brain cancer, his response was to hack into his medical records and release them online inviting all comers to crowd source potential cures.

When Donnie Collins was told he could not receive funding by state or insurance company for the medical treatment necessary to complete his female to male gender transition in the US, his college fraternity set up a crowd funding page on IndieGoGo to raise the $8,000 required.  Not only did they raise the $8k, but the total has exceeded $18k and the extra funds are being donated to the Jim Collins Foundation which provides financial support to people seeking gender reassignment surgeries.

What these latest innovations have shown is that where our current democracy of state and market fail, digital democracy can win by introducing infinitely more people with ideas to infinitely more people with the ability to fund them.

The Road to Tax Revolt

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In crowd sourcing and funding combined, we democratise the act of giving, we level the investor playing field, and we create a worldwide platform for new ideas to be shared, funded and developed into reality.  If we were to continue to grow this approach, delivering ever greater personal, community and global successes, we could succeed in doing the unthinkable: creating an alternative model that works.

With a new model tempting us all into it, not through rhetoric but through success in meeting our needs, we could simply say enough is enough and cease to pay these abysmal taxes to these undeserving corporate and political giants.

More than that, we will have proved what many of us (but not enough) already know: that we are actually smart enough, kind enough and team spirited enough to run this show without them.

Discuss!

Feel free to comment here about how this might work, how it might not, how we would increase access to internet to ensure digitial democracy was possible and so on..

Check it Out!

Go look at some crowd funding websites and see it in action. Here are a couple:

ImpactCrowd

Sponsume

Crowdfunder

Do it!

Got an idea, or a need that is being left unsolved by this system? Go set it up as a crowd sourcing/funding idea and test it out.

17 thoughts on “If Corporations Aren’t Paying Their Taxes…Why Are We?

  1. Pingback: If Corporations Aren’t Paying Their Taxes...

  2. I too have been thinking along the lines of alternative currencies, as Franklin has. Specifically, forms of stamp scrip based on the work of Silvio Gesell. If you google “Worgl” it’ll lead you to a few articles about the Worgl Experiment. Makes for fascinating reading. They basically solved unemployment and completed a long list of tasks the mayor wanted to do. They even built new houses, a ski jump and a bridge with their “friegeld”. And what do you suppose put a stop to all this? The national bank.

    I think it would be very difficult to implement this here in the UK but I had another idea. I’m Scottish and pro independence. If Scotland did vote yes to independence, we would have much more chance of implementing something along the lines of a stamp scrip to stimulate the economy. With no influence from the b**tards in Westminster or City of London, it might just be possible to get it off the ground and working to make everyone’s lives better. When everyone in the rest of the UK saw it was not only possible, but desirable, there would be a better chance to get things changed for the good.

    What I envisage would be a modern form of stamp scrip based on similar tech to bitcoin but backed by the Scottish government. With official governmental backing and linking to the main currency (with a tax for converting back which could fund the whole thing) which would likely still be Sterling, it should be possible to get the currency to take off and transform people’s lives.

    I’d love to hear any thoughts on this idea. :)

  3. Excellent article, again.
    I have heard of crowd sourcing/funding but never thought of it as a complete alternative to our current failing capitalist system. It definitely sounds like a logical and sensible system which now has some credible and real examples to make it’s point.
    A concern I have is, which I shall now do my homework on, what will protect it from corruption? If history has taught us nothing it should have taught us that when a new system is developed and delivered in the name of the masses rather than the privileged few it is difficult to prevent those less honest and more greedy who will do whatever they can to pervert the system to their own advantage. So how can we be sure that they will not succeed in doing the same with this system? What can be done to protect a fair system from those that want it to meet only their needs at the expense of all others?
    I am also concerned about how long it would take to move away from capitalism and into a fairer system such as this? Captialism rules the world we live in and it surely won’t be easy or quick to replace it. Those with the money and power will no doubt do all they can to prevent it or at least hinder its progress as much as they can. Take for example the Robin Hood Tax campaign, they are trying to get all goverments to sign up to it, and are doing rather well. But George Osborne has launched a legal challenge to prevent those countries already signed up from introducing the tax. He obviously likes the capitalist system, he is part of it and benefits greatly from it. The last thing he wants is the introduction of tiny financial transaction tax which his cronies in the financial sector would have to pay, even though it is so small. If he can do this just to stop something that will make those responsible for the global ecomonic downturn pay for the damage they have caused, what is to stop him from doing all he can to block the rise of crowd sourcing?
    I’m all for a change, capitalism doesn’t work, and democracy is under threat. As I say I will be doing my homework into crowd sourcing/funding but in the meantime I look forward to any reply you might have on my concerns.

  4. Pingback: Corporate Giants Aren’t Wealth Creators…They’re Parasites

  5. Pingback: Corporate Giants Aren’t Wealth Creators…They’re Parasites | Scriptonite Daily

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  7. Pingback: If Corporations Aren’t Paying Their Taxes…Why Are We? | digital_deviance3

  8. Redistribution of wealth is NOT and never has been a purpose of Taxation, you need to do a serious amount of reading up of history and economic theory if you think it is. The problem with all left leaning commentators is that they start from a position of taking money from those that have earnt it rather than encouraging more people to make it. That’s the only way to increase the amount of tax paid and use it to help those in need in society.

    • I’m not sure you read the article.

      1. Taxation has two purposes. Since the 1930’s (dawn of New Deal in US and welfare state in UK/Europe) wealth redistribution has been one of them. What else would you call a welfare state or social security paid for by compulsory taxes?

      2. According to your theory if people make more money they pay more taxes. How do you evidence this? I’ve demonstrated that the highest profit making companies in the world are not only NOT paying ANY tax, but they are receiving credits from the people and businesses (who have less).

      3. What I’m putting forward is a voluntary move for those being stiffed by an unfair, unethical tax system where those least able pay most – to an alternative model. You describe crowd funding/sourcing as left leaning? Bizarre. It’s entirely voluntary and outside of the state model.

  9. Of course I will spread the word far and wide. But the people I will desperate want to share this with are the folks on the BBC but I don’t know how to reach them! They never challenge government ministers when they assert that the rich are paying more tax today than say under Labour by pointing out that the issue should be whether they’re paying a higher proportion! If, as everybody seems to agree, they’re taking more money out of the system today than they did under Labour they may well be paying more today but at a smaller proportion which doesn’t change the fact of the very regressive tax system. I still can’t believe how the govt got away with the cut in the 50% tax rate!!!

  10. This is a profound piece of writing. Who would have thought that the Mail would be championing tax justice! It’s all down to the tireless work of activists like you. Keep it up!!!

    • Yes, a very unlikely piece of fantastic journalism. But credit where it is due! I agree, activism can certainly help influence research like this. Thank you very much for your kind words and I hope you continue to read, enjoy and share the blog.

  11. There is a third purpose for taxation: to create a demand for money. As we all take on a bigger and bigger share of the tax burden, we have a growing need for money. By contrast as the rich and the corporations pay less tax, it becomes our need for money that creates the demand to drive the value of theirs. So maybe what we need is an anti-currency. Something like the Bristol pound, but which is used for crowd funding, local business trades and paying some taxes, but not redeemable for ordinary currencies unless you can prove you are not a corporation or very rich. The biggest crowd funding exercise of the lot is pension savings. If we had an alternative currency that we increasingly got paid in, we could use it to pay our pensions and that money would then have to be invested in the economy that excludes those cheating the existing system. It might be a pipe dream, but I love the idea of getting rid of the current gross inequality by just leaving the folk sitting on their cash piles as the cash turns to piles of unwanted paper unless they are willing to negotiate complete and utter surrender.

    • Excellent points Franklin. I’m a big fan of local currencies to as, like you say, they are entirely practical in meeting a need (demand for currency) which is not being met by the existing monetary system. It might well be a pipe dream now but I believe ultimately that we will vote with our feet. I love your dream and I hope it comes true. I’m certainly going to be seeking out and utilising these alternative currencies. They are to me much closer to an idea of money (a standard means of trade) than this shambles we’ve got now (fantasy money).

      • That was the most inspiring bit of writing I’ve read in a long while. Amazing work+ lots to look forward to…
        Franklin, that was genius: you’ve connected the final dots. If you really want to make that happen there are two major allies who will be resolve that inside-out, Max Keiser+ Richard Murphy, both experts in their field.
        Max just happens to seem to want to expose +destroy the whole system, which kinda helps.
        Oh, +that counter-currency you mentioned, it’s called Bitcoin+ a new version can be developed with it only being internally usable but not saleable, Max is your man on that side as well

        Twitter.com/@maxkeiser
        Twitter.com/@RichardJMurphy

        Best of luck, keep on keepin’ on…………… ;-)

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