Heisenberg wrote:It seems like a reasonable assumption, given that a very large number of companies have posted record profits since the pandemic started.
What specific "complications" are you referring to here?
Given that Sunak is supposed to be raising corporation tax from 19% to 25%, this seems like an irrelevant concern.
Okay, the basic idea behind doing business is to get profit. So there are several problems with taxing profit too much:
1) Probably the most important one is that it destroys the whole moral idea of business. You might not like excessive profit as it created inequality but it is perhaps the main reason people do business in the first place.
2) If you start to tax profit then it incentivizes certain behaviours depending on how the tax system is set up. For example in Estonia it is possible to pay 0 corporate tax if you re-invest everything in to your own business for development. I am not sure if the same arrangement is in the UK but I doubt it. Then this probably means that several things will happen like tax evasions that becomes a must or people will try to make sure to move the excess profit overseas to use it their instead of cashouts for profit. Same goes for expansion, there are certain limits but this will incetivise expansion of business overseas to hide the profits of sorts.
3) Financial markets like fat profit margins and reducing those profit margins by taxes will make the companie values less compared to what they could be meaning that those companies will get less investment from the financial market etc.
4) Higher taxes on profits will lead to less people want to establish companies in the Uk and just start them somewhere else either in reality or on paper. But this would usually mean that they will pay a large chunk of taxes somewhere else also if not all of them.
Now put the problems regarding Brexit on top of that and then it gets even worse. I suppose there are more complications but I am not exactly an economist to point them properly out. The basic ones I can see though.