James Ashton: Brexit and tech mean Britain must revamp tax

DONALD Trump has shown at a stroke how tax policy can be a game changer. American corporations are still working out what to do with the mountains of cash which, until now, have been held in overseas jurisdictions because of the prohibitive cost of repatriation.

Thanks to the president’s one-off discounted tax rate, these funds are coming home and promise to boost an already buoyant US economy. Apple is sitting on $252 billion of overseas cash and equivalents but is paying $38 billion in tax and has committed itself to $30 billion of capital spending over five years which should create more than 20,000 jobs. It will not be alone.

Corporations see at once an unexpected windfall and a fully funded opportunity to wrap themselves in the star-spangled banner.

Fresh from what approximates to a diplomatic success at the World Economic Forum in Davos, Trump might even gather all the funds he needs to fulfil the infrastructure spending plans that formed a core part of his election campaign.

In the UK, tax is at present changing another game. Rather than encouraging more in-work training, the £3 billion-a-year apprenticeship levy stumped up by businesses with an annual wage bill in excess of £3 million is actually reducing enrolments because of confusion over what the funds can be used for. It has created the “bureaucratic nightmare” Liberal Democrat leader Sir Vince Cable warned of in these pages last week and risks becoming the latest hypothecated tax flop after air passenger duty.

How tax receipts are deployed has varied significantly over the years, as has their origin. How much is collected has not.

Kevin Nicholson, the head of tax at PwC, estimates the UK tax take has remained in the range of 34% to 36% of GDP every year of his life. But just because the lemon cannot be further squeezed — or politicians are reluctant to try — does not mean the tax system should not be reformed.