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Andrew Glyn

Are the Bosses Over-Taxed?

(November 1974)

From Militant, No. 229, 1 November 1974, p. 3.
Transcribed by Iain Dalton.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Since the election, the representatives of Big Business have raised a hue and cry about “their money” being taxed away. What is the reality behind this campaign?

Socialists would of course point out that the money which the Government takes in taxes from the capitalists is not theirs in the sense of coming from the efforts of the shareholders and directors. Rather it comes out of the unpaid labour of the ordinary workers they employ.

But in any case the idea that the government is raking in huge sums in company taxation is nonsense. In 1973 industrial companies actually paid tax on less than one third of their gross profits, so great were the tax concessions for investment and interest payments. So out of gross profits of more than £9000 million, less than £2000 million was paid in tax including both the corporation tax paid by the companies directly and the income tax paid by those who receive interest and dividends.

To be set against this, companies received £800 million from the government in direct investment grants, employment subsidies etc. Also, much of the £700 million subsidies to the nationalised industries will have swelled company profits by keeping down charges for fuel, transport etc.

Further, capitalists reaped most of the benefit of the £1,000 million expenditure on roads, £300 million on research, £200 million on the employment service and many other forms of Government expenditure.

It is perfectly clear from these figures that Big Business got very much more from the Government in various forms of handouts than it paid in taxation. If we just take the direct subsidies, grant and extra depreciation allowances then Government handouts to industry run about £5 million per day (rather than Tony Benn’s figure of £2 million).

Workers Taxed More

In fact, the weight of taxation has been transferred to the working class. The proportion of manufacturing profits taken in taxation fell from 41% in 1956 to 25% in 1972, while at the same time the proportion of the income the average manual worker taken in income tax and national insurance contributions (net of the family allowance for one child) rose from 2% to 17% over the same period: a 15% fall for the capitalists; a 15% rise for the workers!

But even this shift in taxation has not been anywhere near sufficient to offset the huge fall in the pre-tax profitability of British industry. In the second quarter of 1974 the profits of companies, before taxation but after taking off depreciation and that elements of profits which represent simply a higher price of stocks they hold and which is not available for any expansion of capacity, were only 4.1% of the value of what the companies produced. This is one fifth of the level of 1964.

With the stock market paralysed companies have been forced to make up for much of this fall in profits by financing investment through borrowing from the banks. But the banks have doubled the amount they are owed by industrial companies in the space of only two years and are now reluctant to further expand their lending while profitability stays so low.

So on the one hand Harold Lever has been going round his friends in the City trying to arrange some form of Government guaranteed loan to industry while the CBI demands relaxation of price controls and massive tax cuts.

This mean emphasis is on tax cuts (£3,000 million) rather than relaxing price controls (which the CBI hopes would boost profits by £1,000 million). For though cuts in company taxation must eventually be paid for by even more taxation of workers and cuts in social services they might cause less immediate opposition than the fast inflation which would follow the easing of price controls.

But however it is done, restoring profitability to, say, the 1964 level, which is needed if the economy is to prosper on a capitalist basis, would require a reduction in the living standards of ordinary workers of around 15%. Nothing could show more clearly that a planned socialist economy, far from being an idealist’s Utopia, is an absolute necessity if the conditions of the working class are not to be brutally slashed.

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