Sunday, 9 December 2012

More Informed Choices Around Tax Avoidance

How about....

The tax authorities (i.e. HMRC) compiles and publishes data for every company which shows the revenue received by a company and the proportion of tax paid on that revenue. This could be supplemented by legislation whereby at every transaction point a company is required by law to show the published 'tax ratio'. This could even be presented as a handy infographic that shows a target point for what should be typical corporation tax. There could be a very limited number of additional information points, such as whether the company is a charity. The tax indicator on the infographic could potentially have top ups for things like charitable given.

It would also be handy if the infographic showed the ratio of salaries (well, total reward..) within the company (including holding/owning companies/all companies within a group) between the top earners versus the bottom earners.

Though perhaps overly heavy handed the infographic could display some helpful stats to help understand the implications of the numbers, e.g. what the impact is on school funding etc. Where applicable government procurement might stipulate a minimum percentage of taxation paid by a company. Individuals might choose to opt into a system whereby their payment cards will not accept an authorisation with a company that pays tax below a certain threshold.

This system would help everyone in society to make a more informed choice in how they direct their money. If people are content or supportive of a companies taxation level, or perhaps think that the product or service on offer is so superior that the lower rate of taxation paid is a worthwhile trade-off  Alternatively, people may choose to take their custom to another business on the basis that the transaction will be more supportive of public programmes such as infrastructure building, education, etc.

The market is often considered by many to be 'right', and should that it should be left unguided in order to produce better outcomes. Two problems with market forces however, and I don't mean to imply there are only two, is that an aggregate of individual choices does not represent the collective will, and that a lack of information distorts market activity. Providing consumers with greater information will allow them to make more informed choices with regards to how they wish to direct the flow of capital.