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No wonder The Guardian is a little odd on economics, tax and business

Summary:
Phillip Inman is the economics editor for the Observer and an economics writer for The Guardian. Within his latest piece we can get an inkling of why the newspapers can be quite so odd when discussing economics, business and tax.He is right in part of course, there are indeed some 1,000 or more various tax breaks out there. Many of them somewhere between silly and risible. We can and probably should pare many of them back. So far so good.He then suggests that government could thereby raise lots more tax revenue, we disagree there, we think that we should do so to lower tax rates more generally by removing those special privileges. But that's a difference of opinion. It this next which explains the general oddity perhaps: Companies would drop plans to buy the equipment they need without tax

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Phillip Inman is the economics editor for the Observer and an economics writer for The Guardian. Within his latest piece we can get an inkling of why the newspapers can be quite so odd when discussing economics, business and tax.

He is right in part of course, there are indeed some 1,000 or more various tax breaks out there. Many of them somewhere between silly and risible. We can and probably should pare many of them back. So far so good.

He then suggests that government could thereby raise lots more tax revenue, we disagree there, we think that we should do so to lower tax rates more generally by removing those special privileges. But that's a difference of opinion. It this next which explains the general oddity perhaps: 

Companies would drop plans to buy the equipment they need without tax relief. Likewise, private landlords would let their flats go unmaintained if the cost were not tax-deductible.

Private landlords are taxed as if they are a business on the useful grounds that it is a business. And businesses are taxed upon their net income. The revenues from being in business minus the costs of being in business to generate that revenue. There is no other logical manner of taxing business either.

Where the confusion comes in is that there are indeed various "tax reliefs" here. But they are rules not stating that you may deduct your costs, as you must be able to do. Instead, they're rules about how quickly you may deduct your costs. That is, you may not deduct them when you've spent the money but rather as what you've spent it upon starts to wear out, depreciation rules and all that.

If the taxation of business simply worked on a cash basis then we wouldn't have those reliefs and so on at all. There wouldn't even be any difference in the amount of tax paid, only in when it is paid.

As we say, no wonder we see economic, business and tax howlers in those newspapers if this is the supposed adult in the building, the one who is meant to know these things among the assembled snowflakes and arts graduates.

Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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