The announcement of the planned closure of the Pfizer pharmaceutical facility at Sandwich in Kent – with the likely loss of at least 2,000 jobs – is a real blow, not only to the area, but also to government business strategy (what exactly is that, I can hear you ask).
Quite simply, the government does not seem to be evolving a sensible business strategy and it needs to review its business support measures and business taxation policies. One minute it is refusing to support even commercial loans (like the one for Sheffield Forgemasters) and then the next it seems to be offering strange incentives like the patent box (a reduced rate of Corporation Tax on profits from patents to take effect from 2012), to encourage investment in high-tech industries (which would include the pharma sector). Whilst the patent box is an idea on the right lines, it is a rather complicated and clearly unappealing measure as pharma companies are not responding to it and R&D activity is moving elsewhere.
We would like to see more creative and more clear-cut action. Here are a few random tax policy suggestions:
- immediate low tax regimes for selected areas – start with Sheffield, Sandwich and any other spot adversely affected by industrial closure. Encourage, for instance, the re-use of the Pfizer plant, through business rate and tax incentives – say a 5 year tax moratorium for pharma firms setting up there;
- give a ‘never knowingly undertaxed’ commitment for certain industries – eg pharma (for example, Pfizer re-sited its Viagra production to Ireland because of its lower tax regime – some would say that is the only way to make the Irish economy stand up – we should have matched the tax rate);
- tax businesses that produce things less than service industries – we have got to redress the balance and move back to being a country that makes things;
- stop companies like Google paying little or no UK tax (in Google’s case on its £1.6bn+ UK advertising revenue by routing it through Ireland);
- offer any company ‘returning’ to the UK from a lower tax regime (eg Ireland, Switzerland, Bermuda) to have its rate pegged for a period to the low rate they have enjoyed elsewhere;
- reduce the top-rate of income tax to 40 or 45% – but all UK citizens to pay UK tax less any foreign tax suffered (this is how US citizens are broadly treated);
- apply Capital Gains tax on freehold property to all (and not just residents) – this is what happens elsewhere after all and if UK residents own property in, say, France and then sell it, they pay French capital gains tax;
- introduce an Environmental Impact tax – to apply to companies damaging not only the environment in climate terms, but also damaging the local environment when closing factories;
- end funding for tax havens (for example we are currently bailing out the Turks and Caicos Islands – using our tax revenue to help out a country that levies little or no taxes on its corporate or individual residents. We should tell them to levy taxes – that’s what the rest of us do.
That’s all for now, folks. More suggestions will follow. Let me know your ideas….
Published on Feb 24, 2011 by Neil Thomas