That's fine, says Phillip Inman, but it should be matched with a proper tax on wealth
Soon there will be no such thing as corporation tax. Among the first items on the shopping list of reforms outlined by Spain's new prime minister, Mariano Rajoy, on Monday is a cut in the main business tax.
He said more firms would enjoy a 20% rate as a central tenet of his mission to make Spain more business-friendly.
Much of Rajoy's programme, at least from the headlines in his speech, is a steal from George Osborne's budgets and latest autumn statement. Tax relief for hiring new employees is another key element along with a break with national bargaining.
The Tory-led coalition government has already pledged a cut in corporation tax. In his first budget Osborne declared business would benefit from a reduction of Labour's 28% charge on profits to 24%. Then he went one better and reduced the target to 23%.
Yet Rajoy will trump Osborne, despite maintaining the current 30% rate. The next stop must be to reach the 12.5% benchmark set by the Irish.
In one sense, all major economies have already cut the cost of tax paid by corporations, whether they have a high standard rates or not.
The US ostensibly charges 35%, but very few firms pay anything like this rate. France, for all its bluster about taxing corporations, has a myriad of complex, but very rewarding, tax reliefs that French companies milk with alacrity.
The TUC and tax campaigner Richard Murphy's groundbreaking 2008 report The Missing Billions: The UK Tax Gap, found a £12.5bn difference between what companies should have paid in corporation tax annually and what they really paid.
Some on the left argue, as the TUC did, that governments should play hardball with companies and make them pay the full charge.
But not only is that a forlorn task against the run of play (when governments across Europe are reducing corporation tax rates), it is wrong headed.
We need to generate taxes to fund social welfare and for that we need to redraw the tax map. I subscribe to the OECD's recipe for reform. Despite the Paris thinktank's reputation for rightwing, pro-capitalist reforms, in this case it is pretty even-handed.
It would reduce all taxes on income and increase taxes on spending and wealth.
Unfortunately, the proposal leaves most leftists gasping for air. What do you say when a proposal slays the sacred cows you hold dear, but also slays those of the opposition?
The left loses a tax on businesses, and must suffer the regressive nature of high consumption taxes. On the other hand, workers pay less tax and crucially, the owners of wealth, be they rich individuals or corporations, must pay a new tax on their holdings.
The OECD, like most economists I speak to across Europe, subscribes to a tax on land as the simplest and fairest tax on wealth.
The shift has many positive benefits. The key must be to unlock a desire for work by cutting taxes on incomes. At the moment we lock families into static or falling living standards, partly through the interaction to income tax, tax credits and benefits.
Consumption taxes rise, but there is evidence that skewing VAT away from food to luxuries makes it much less regressive. Land taxes would discourage the wealthy from hoarding land without doing something with it (planning rules permitting). If they want to live in expensive areas of the country or base their businesses in the south-east, then there would be a significant tax charge for doing so, and one they cannot dodge with elaborate schemes or offshore trusts.
Rajoy is, like most rightwing politicians, only tacking one side of the equation. The left should argue the logic of the right's position on income taxes with demands for taxes on wealth.