Attention dunderheads: Taxpayers are NOT giving businesses £93bn

A look in the ledgers of Trotter & Worstall Independent Traders

But we have special rules

So, that's the way it would work if we didn't have special rules for depreciation and capital allowances and how it does when we do. All 100 per cent capital allowances do is collapse that four-year period down back into that first year.

So, the special rules cost is that £1,250 (plus the other smaller cash flow interest sums) and 100 per cent capital allowances give them back to us.

You can, if you really, really, want to describe that as a £1,250-and-change subsidy. But note what our sociologist is doing: he's counting that £1,250 from cash flow and interest as actually being the £100,000 capital allowance itself. Or, the other way around, he's claiming that it's a £100,000 subsidy when the maximum possible is that £1,250, plus change.

And, of course, at no point is the taxpayer paying for that lorry. All that is happening is that we're not charging them a profit tax on the income they've used to buy the lorry. Because a lorry is a cost of doing business and costs of business are deducted from revenue before we work out what the profits that we're going to tax are.

There's actually no difference here between the way the taxpayer doesn't fund the gaffer tape nor the wages.

There is, of course, more to this idea and report as well. There's a £15bn subsidy in there because when the government buys things from private companies that's a subsidy to private companies. Erm, what? This would make all salaries to civil servants subsidies, because the government is purchasing their labour from them.

No, really, he's including the Bank of England printing bank notes as corporate subsidy. Which is pretty damn good as that's the only part of government that undeniably makes a profit: adding 5 pence of ink to 10 pence of paper to make a £50 note really is profitable.

Just the two I've highlighted, capital allowances and public procurement, amount to at least one third of this claimed corporate subsidy the state provides.

And we could go into more detail about R&D tax breaks and all that, but my point isn't really about how this report is nonsense, it's about how memes enter the public sphere. For, we've a sociologist not understanding the tax system nor accounting, two pieces in The Guardian, and then Owen Jones:

And thus is the Twattersphere convinced that there's a £93bn corporate subsidy going on. And that, me hearties is how politics and public policy work these days.

I've no doubt there's similar nonsenses being perpetrated by people I sometimes agree with as well but that does not fill me with any joy (for example, it is sometimes said that the Laffer Curve means that all tax cuts pay for themselves: nonsense. The Curve tells us that some do and some don't). ®

Broader topics

Other stories you might like

Biting the hand that feeds IT © 1998–2022