The Single Income Tax - The 2020 Tax Commission

68
A tax on success
UK celebrities who have moved abroad to more favourable tax jurisdictions:
■ Sir Michael Caine
■ Sir Michael “Mick” Jagger
■ Phil Collins
■ Jenson Button
Chapter three | Taxes should be cut
■ Lewis Hamilton
■ Sir Sean Connery
■ David Bowie
■ Rod Stewart
Many of the individual cases that have been reported are significant in their own
right. The Financial Times reported in 2012 that UK hedge funds were leaving the
UK. William Bollinger, considered one of the pioneers of the City of London’s hedge
fund industry, decided recently to launch a new venture in Singapore, rather than
London.56 In February 2011, Pfizer announced it was closing its research factory
in Sandwich because it was no longer competitive. Other large companies also left
the UK in 2010: WPP, Shire, Informat, Aberdeen Asset Management, Hendersons
Ireland, Charter, Regus, Brit Insurance, Wolsely, McDonalds (European HQ), UBM,
Kraft Foods, Gallaher, Experian, Catlin, and Hiscox. In late 2011, an aluminium
smelting plant at Lynemouth in the North East of England announced that it was
closing because of the Government’s decision to introduce carbon-floor pricing – or
a new green tax. 515 jobs were lost as a result.57 Demand for aluminium will not alter
as a result, and economic activity will simply move elsewhere because of high taxes.
Electronics firm Raspberry PI have chosen to produce their products in Taiwan
and China rather than the UK. The organisation – a charity that makes credit cardsized
computers aimed at helping children learn to write their own programs – said
that the tax system in the UK makes it far too expensive for an electronics company
to assemble its products in Britain.58
There are countless other real-life examples of companies relocating or making
initial location decisions based on tax rates. For example, an article in The Economist
discussed the increasing levels of migration to Texas, a low tax state, from other areas
of the United States:59
Migration statistics reveal that people are moving in droves to Texas. Why?
Jobs and no state income taxes. High earning New Yorkers and Californians
can take home between nine per cent and 11 per cent more of their income by
moving to Texas.
High corporate tax rates elsewhere can mean more investment in the UK. For
example, American rates of corporation tax are currently at 35 per cent, one of the
highest rates in the world. This means that corporate tax revenues are actually falling
and the effective rate paid by large US public companies fell to its lowest in a decade
in the fourth quarter of 2011. More and more revenue is being generated outside of
the country, including in the UK. The Chief Financial Officer of Intercontinental
Exchange noted in the Financial Times:60
56. Jones, S. Hedge fund pioneer back for Asia venture, Financial Times, 16 February 2012
57. Wachman, R. Rio Tinto blames carbon tax for 515 job losses, The Guardian, 16 November 2011
58. Reported on their website here: http://lowtax.es/HOd3bg
59. The Economist, Free Exchange blog Texas, here we come, 16 June 2010
60. Demos, T. US corporation tax rates hit 10-year low, Financial Times, 4 March 2012