US & UK are poor societies with some very rich people.

Corporation tax is 19% the lowest in Europe. Germany have a rate of around 30% . We need this tax to fund infrastructure and it's low rate has resulted in no spending on the things we need most! Not everyone who runs a business pays this tax there are thresholds to qualify. A decent accountant will be able to substantially reduce liability anyway .the big guzzler of profits are the business rates !

Gabrielle56

Corporation tax is 19% the lowest in Europe. Germany have a rate of around 30% . We need this tax to fund infrastructure and it's low rate has resulted in no spending on the things we need most! Not everyone who runs a business pays this tax there are thresholds to qualify. A decent accountant will be able to substantially reduce liability anyway .the big guzzler of profits are the business rates !

I agree with you again.

I am beginning to be a tad confused regarding tax and government expenditure. I get that the U.K. can issue money as and when, but why do all journalist’s and MPs of all parties bang on that we need tax to fund government spending?

If I was a conspiracy theorist I could be suspicious that it is an overall decision to keep the populace in its place?

Neatly put Gabrielle56.
Yes I am concerned about the levels of poverty here-noticeable particularly during and since lockdown.
Re comparisons with Europe, it must depend on which parts of Europe you travelled through or where you lived. In France this summer, the newspapers were full of concerns about the health service over there, the shortage of emergency staff and the shortage of doctors and the beggars in the street far outweighed any I’ve seen here, though to be fair, I don't live in a big city.
My brother who recently visited from Germany to be part of the funeral historic events, talked about about increasing financial problems for the poorer in Germany-unusual for him as he usually sings the praises of all things German.

GrannyGravy13

Gabrielle56 I agree with your post 09.05.10

You would GrannyGravy and Gabrielle. Reading Gabrielle's post, and GrannyGravy's agreement, it sounds as if you feel comfortably off, and mix with those in the same position. I cannot imagine either of you mixing with anyone who has to ask the state for help as you would be telling them they hadn't worked hard enough and had lived beyond their means.

Maybe neither of you has younger family members, I don't know. But I am hearing the long-expected business closures coming at speed now and the talk of companies my friends ACs and mine work for announcing the process for redundancies. If this happens to one of yours, I hope they don't expect the government to provide while they are in this situation. In a small state economy, we have all learned to see them as people who hadn't worked hard enough and/or had lived beyond their means. It's people like you would spread these tarrididles.

Business closures and redundancies would only increase if the rate of corporation tax were increased.

Of course some people have not worked hard - see the current thread on lack of NI contributions- and some have lived beyond their means. But one can’t generalise as to reasons for lack of money. Everybody’s story is different.

Katie59

I’m not trying to run the UK down but we are not good.
NoblesseOblige May have been living in one of the Scandinavian countries that are certainly better, however we travelled through France, Germany, Austria and Poland last year, UK does not compare well we are falling behind

This isn't the first time it's happened Katie. I remember visiting my brother in Germany in the very late 70s early 80s and was shocked when we landed back home. That tired and uncared for look was everywhere and nowhere in Germany did I see the obviously working, dressed so poorly.

I feel you simply cannot trust the Conservatives with our economy.

Sorry DaisyAnne to disagree, I know numerous people who are on UC both young and old. I am aware of their day to day struggles.

I have always advocated for a safety net for all who find themselves in the position to need one.

What I am not convinced about is the correlation between taxes and benefits as we are repeatedly told that taxation does not fund government spending.

I would be happy to pay 1 - 5% more in personal tax on the basis that it would go towards helping the poorest in our society, but for SME’s this is not the time to increase corporation tax.

GrannyGravy13

Sorry DaisyAnne to disagree, I know numerous people who are on UC both young and old. I am aware of their day to day struggles.

I have always advocated for a safety net for all who find themselves in the position to need one.

What I am not convinced about is the correlation between taxes and benefits as we are repeatedly told that taxation does not fund government spending.

I would be happy to pay 1 - 5% more in personal tax on the basis that it would go towards helping the poorest in our society, but for SME’s this is not the time to increase corporation tax.

Indeed.

GrannyGravy13

Sorry DaisyAnne to disagree, I know numerous people who are on UC both young and old. I am aware of their day to day struggles.

I have always advocated for a safety net for all who find themselves in the position to need one.

What I am not convinced about is the correlation between taxes and benefits as we are repeatedly told that taxation does not fund government spending.

I would be happy to pay 1 - 5% more in personal tax on the basis that it would go towards helping the poorest in our society, but for SME’s this is not the time to increase corporation tax.

I understand that GrannyGravy and we have much to learn from your knowledge of current business.

What I cannot understand are the put downs and the name calling. I doubt I ever will. Some people seem to use it as a crutch to build their own self esteem. It seems to me just the same as the client journalists who repeat the "state's" brainwashing.

DaisyAnne

GrannyGravy13

Sorry DaisyAnne to disagree, I know numerous people who are on UC both young and old. I am aware of their day to day struggles.

I have always advocated for a safety net for all who find themselves in the position to need one.

What I am not convinced about is the correlation between taxes and benefits as we are repeatedly told that taxation does not fund government spending.

I would be happy to pay 1 - 5% more in personal tax on the basis that it would go towards helping the poorest in our society, but for SME’s this is not the time to increase corporation tax.

I understand that GrannyGravy and we have much to learn from your knowledge of current business.

What I cannot understand are the put downs and the name calling. I doubt I ever will. Some people seem to use it as a crutch to build their own self esteem. It seems to me just the same as the client journalists who repeat the "state's" brainwashing.

I do not go down the name calling road, (I am too much of a people pleaser in RL)

I have said in another thread that I am becoming more aware of the gotcha journalism which appears to be growing daily. I assume it is to widen the divide and start othering , we only have to look at Leicester and Birmingham over the last few days, cultural as well as political unrest does not bode well for the future.

I have no idea what the solution is, I doubt if there is a quick fix.

I do know that I am politically homeless at the moment, not sure that is going to change any time soon.

I am beginning to be a tad confused regarding tax and government expenditure. I get that the U.K. can issue money as and when, but why do all journalist’s and MPs of all parties bang on that we need tax to fund government spending?

I think it is because for centuries taxation did fund spending. But the transition from currency being actually made from gold, silver or 'base metals' to its substitution by paper, non valuable tokens (i.e.our current coins) and figures on a computer has been so gradual over time that most people have failed to understand, or even think about the seismic shift involved on the abandonment of the 'gold standard' which pegged the 'wealth' of a country to the amount of gold it held, the gold giving 'value' to its currency.

There is an account of this in the BoE quarterly bulletin that growstuff and I have both linked to

It's the first article

www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/quarterly-bulletin-2014-q1.pdf

The article discusses the role of 'trust' in a currency. In one way, all money is a vast con trick which we all believe in!

Anyway. Once off the gold standard 'fiat', or 'self created' money was unfettered by anything but the amount of trust people had in a government's currency.

The taxation myth was well and truly embedded by Margaret Thatcher, a person who has had a most profound and damaging effect on the modern world in this respect. She was actually as ignorant of the source of government spending as most other people in the UK and the world.

The fact that the belief in taxation funding spending is practically universal does not mean that it is correct. Economists and others who have taken the trouble to question this 'truism', to trace 'money' to its source and examine how it gets into an economy, have know that it isn't true.

In fact, weirdly, a great many people do know that countries with a sovereign currency can create as much of it as they want. These people are happy to wave the Wiemar Republic, Zimbabwe and Venezuela at you as examples of the evils of 'printing' too much money.

How they manage to reconcile the contradiction inherent in knowing that governments can create money yet fervently believing that government money comes solely from 'the taxpayer' is completely beyond my comprehension.

So. Here is a question for everyone, that I think I posed on this thread yesterday

If all our money is created and issued into the economy by the state/government why would they need to take it back off us to pay their bills?

GrannyGravy13

How do you propose to redistribute the wealthy folks earned income?

Confiscate a percentage of their bank balance and hold a lottery for the poorest in society to see who gets a bit?

Sounds good to me !

Thanks MaizieD

My brain is rather frazzled regarding Country economics, like many I can manage a household budget standing on my head along with our Company profit and loss sheets.

I really really wish that the Political journalists, particularly TV would question MPs on this and hold them to account. I guess its a hangover from Mrs.Thatcher and her household economics

Mollygo

Neatly put Gabrielle56.
Yes I am concerned about the levels of poverty here-noticeable particularly during and since lockdown.
Re comparisons with Europe, it must depend on which parts of Europe you travelled through or where you lived. In France this summer, the newspapers were full of concerns about the health service over there, the shortage of emergency staff and the shortage of doctors and the beggars in the street far outweighed any I’ve seen here, though to be fair, I don't live in a big city.
My brother who recently visited from Germany to be part of the funeral historic events, talked about about increasing financial problems for the poorer in Germany-unusual for him as he usually sings the praises of all things German.

funny thing - we live in France and for a variety of reasons have been using the health service a lot over the last few years. There has been a shortage of GPs in our area but mainly because young ones don't want to live in the country it seems.

We do have two now in the local health centre, which also has regular visits from gynecologists and psychologists. There is also a physiotherapy wing with about 5 staff and a swimming pool for exercise. There are also nurses who are available every morning for blood tests, giving injections, wound dressing and anything else that nurses do. The rest of the day is given over to home visits.

I have a new asthma drug which is delivered via twice monthly injections. I could get a nurse to visit me at home to do it for me but I do it myself. Our own GP takes appointments in the morning or we can go and wait in the afternoons if necessary.

I live in a rural area so this health centre services the surrounding villages.

A Scottish friend was here recently. He'd had problems with his prostate which necessitated having it scraped! Sounds horrible. He had to have a catheter and was told that he would have to go on a waiting list and it would be about 18 months. He decided to go privately, had an appointment with a specialist in London (cost £8,000) and had the operation within a few days. When he asked for his name to be taken off the waiting list and mentioned the 18 month delay he was told "and the rest".

If we are recommended by our doctor to a particular service we generally don't have to pay for the treatment. If we do have to pay it is usually reimbursed. There are some things where the reimbursement is restricted. For example if I go to an osteopath I can claim back the cost of 3 treatments in one year and that is on a sliding scale.

I am sure that there are concerns about the health service here because everyone wants it to be perfect and to my eyes the French service is in a much better place than that of England.

A couple of days ago a French friend said that she thought the French health service is the best in the world.

My brain is rather frazzled regarding Country economics, like many I can manage a household budget standing on my head along with our Company profit and loss sheets.

Indeed, GG13. But the essential difference for a household and a company is that they cannot create our GB pounds in order to balance their books or purchase everything that they might want. Only the government/state can do that.

If a household or a company borrows money from a bank it doesn't lend from existing deposits, it creates new money for the loan. (It's all explained in the BoE bulletin) When the loan is repaid the money is essentially destroyed. It's not an easy concept to take on board because it contradicts everything that most people understand about banks and borrowing. But basically, that's all that taxation does, too, it takes back and destroys the money that the state has created into the economy.

Of course, taxation is much more complex than that as it has a number of functions, but that is at the very root of it.

I really really wish that the Political journalists, particularly TV would question MPs on this and hold them to account. I guess its a hangover from Mrs.Thatcher and her household economics

I don't think that many people think particularly deeply about where our money comes from. It's just 'there' and the household budget myth is an easy concept to understand and easy to disseminate. But the analogy to a household budget falls down on the absolutely essential point that a household can't create our currency whereas a government can.

f77ms

GrannyGravy13

How do you propose to redistribute the wealthy folks earned income?

Confiscate a percentage of their bank balance and hold a lottery for the poorest in society to see who gets a bit?

Sounds good to me !

It sounds like a recipe for disaster to me!

Trying to deprive people of the wealth/money they already have would cause immeasurable problems. Simplistic solutions never work.

OTOH, there is no reason why measures couldn't be introduced to prevent them from becoming even *more *wealthy in the future and to improve the situation of the people at the 'bottom end'

Is it really that much different, the Government can borrow money and pay interest via a bond issued currently borrowing is high close to 100% of annual GDP.
Those bonds represent security against the value of UK infrastructure, our credit is good so interest rates are low. The alternative is QE where the BoE buys those bonds on the open market and creates money to pay for them, they don’t need to pay interest but the bond has a life, when that ends cash has to be found to pay it back.

Commercial Banking is separate and lends against the value of an asset, a house, or other property, the interest varies according to the risk. As has been pointed out previously it is “new” money, not limited but controlled by the BoE.

Both Government and Commercial borrowing is secured by an asset value, the UK borrowing is not especially high, the US Government borrows around 150% of GDP to stimulate the economy, Japan 250%.

The indications are that Truss is going to increase borrowing hoping to stimulate the UK in a big way, I hope it works but will not be holding my breath.

GG is worried about the effect that an increase in the rate of Corporation Tax would have on SMEs.

The 19% rate remains in force for those companies with profits of £50k or less.

The 25% rate applies to those companies with profits in excess of £250k.

There will be marginal relief on a sliding scale for those whose profits fall within the two limits.

in the UK 99.9% of all businesses are SMEs. Of those 96% have less than 10% employees.

Don't forget that for these purposes directors are classed as employees.

It seems to me therefore that most companies have little to worry about an increase in CT. Furthermore, the companies that are going hit are those larger ones, that are not classified as SMEs.

Is it really that much different, the Government can borrow money and pay interest via a bond issued currently borrowing is high close to 100% of annual GDP. Those bonds represent security against the value of UK infrastructure, our credit is good so interest rates are low.

I don't think you have noticed that interest rates are not low, they have been steadily increased over the past few months and look set to be increased again. All because the BoE thinks this will control inflation, when in actual fact, inflation is being exacerbated by higher interest rates because it isn't inflation caused by too much money in the economy, it's inflation caused by external price rises (just like the '70s when OPEC price increases caused inflation).

When 14million people in the UK are in poverty there clearly isn't too much money in the economy to be taken out by increasing interest rates. The only result will be to drive more people into poverty as the cost of borrowing (that £1,3 trillion in mortgages) increases inflation.

The alternative is QE where the BoE buys those bonds on the open market and creates money to pay for them, they don’t need to pay interest but the bond has a life, when that ends cash has to be found to pay it back.

Bonds do pay interest, that's a key reason why people and institutions buy them. But they also buy them because they know that they are the safest investment available because the UK will not renege on the 'debt'. It won't renege because it can create the money for interest payments and repayments at term. It all boils down to trust in the currency.

But I'll point out, once again, that at least a third of the UK's 'borrowing' is money owed to itself. QE was achieved not only by the BoE buying bonds from the market, but also by the Treasury creating new bonds which were then 'bought' by the BoE. The BoE is owned by the state. So the 'debt' to GDP figure is misleading as the money the Government 'owes' to the BoE won't ever be repaid. You can't 'lend' to yourself...

Commercial Banking is separate and lends against the value of an asset, a house, or other property, the interest varies according to the risk. As has been pointed out previously it is “new” money, not limited but controlled by the BoE.

Commercial banks create new money under licence from the BoE. The BoE puts that money into the reserve account through which all bank transactions are carried out. For some unfathomable reason, the BoE pays interest on the reserve account, which makes their books look bad and just increases commercial bank profits. I really can't see the rationale behind this. And it certainly doesn't look like 'control' when the amounts transferred to the reserve account appear to be unlimited.

The affect of taxation on companies is overstated, because many are obviously declaring low profits, in which case a tax increase would yield a very small amount in revenue.

“But I'll point out, once again, that at least a third of the UK's 'borrowing' is money owed to itself. QE was achieved not only by the BoE buying bonds from the market, but also by the Treasury creating new bonds which were then 'bought' by the BoE. The BoE is owned by the state. So the 'debt' to GDP figure is misleading as the money the Government 'owes' to the BoE won't ever be repaid. You can't 'lend' to yourself...”

Because the bonds have a life and have to be repaid in typically 10 yrs theoretically they should be, what is more likely to happen is that another loan or bond is taken out.
In the meantime the GDP has hopefully grown and the % debt is similar.

Of course the economy might do well and we are able to reduce the national debt, although it’s only happened for 2 short periods in the last 50yrs

Because the bonds have a life and have to be repaid in typically 10 yrs theoretically they should be, what is more likely to happen is that another loan or bond is taken out.

What bit don't you understand about the new bonds being 'bought' by the BoE, which is owned by the state and is the issuer of our currency, in order to inject some money into the economy by paying for government expenditure?

It's a fiction, there is no need for 'payback'. The government cannot owe itself (in the form of the BoE) money. Who is it going to 'pay it back' to?

Maisie then you need to explain this statement from the BoE website. It appears to say a bond matured, is lost and is not being replaced.

“We announced our last round of purchases in November 2020 and that ended in December 2021. Now we have stopped reinvesting the proceeds when a bond matures. A government bond matured in March 2022, so the amount of bonds we hold has already started to fall.”

Katie59

Maisie then you need to explain this statement from the BoE website. It appears to say a bond matured, is lost and is not being replaced.

“We announced our last round of purchases in November 2020 and that ended in December 2021. Now we have stopped reinvesting the proceeds when a bond matures. A government bond matured in March 2022, so the amount of bonds we hold has already started to fall.”

The BoE bought and holds the bonds. It cannot 'repay' itself when the bonds expire.

I think that what they are saying is that they are 'reversing' QE. By not replacing the expired bonds ('reinvesting the proceeds', though I'm not clear that these 'proceeds actually exist - see above) they are no longer buying any more, so not crediting any more money to the to the Treasury account.

Where Truss's £100 billion for the fuel price cap is coming from I'm not sure. Perhaps it's just straight money creation without going through the bond purchase fiction.

Germanshepherdsmum

Business closures and redundancies would only increase if the rate of corporation tax were increased.

Of course some people have not worked hard - see the current thread on lack of NI contributions- and some have lived beyond their means. But one can’t generalise as to reasons for lack of money. Everybody’s story is different.

And some people have worked bloody hard and still have a dire lack of money!!!

Do people go on training courses to be smug?