Reply to: If we can do this...

[doodab]

When every firm does it then its different.

Well, yes, it would be, but we're talking about measuring something in the real world not hypothetical situations in la la land.

[BrilloPad]

It depends on how exactly productivity is measured. There might be some distortion if the entire output of a particular firm is considered to be zero due to a sale being booked in another country but it's going to be pretty small in comparison to the size of the entire economy. That can probably be corrected for on a case by case basis. Profit has little to do with it though, even people who work for loss making firms are productive.

When every firm does it then its different.

[doodab]

if the sale is set so no profit is made in the UK then the majority of the cost will be made abroad.

It depends on how exactly productivity is measured. There might be some distortion if the entire output of a particular firm is considered to be zero due to a sale being booked in another country but it's going to be pretty small in comparison to the size of the entire economy. That can probably be corrected for on a case by case basis. Profit has little to do with it though, even people who work for loss making firms are productive.

[BrilloPad]

if the sale is set so no profit is made in the UK then the majority of the cost will be made abroad.

So pay no tax! Wow - great idea! Have you thought of approaching Starbucks with that one?

[vetran]

How so?

if the sale is set so no profit is made in the UK then the majority of the cost will be made abroad.

[doodab]

yes but monetary value is distorted too.

How so?

[vetran]

This is why we tend to measure productivity in units of monetary value added (i.e. value of outputs - value of inputs) per worker hour. That way it doesn't matter what the workers are making, and how much they cost is actually irrelevant as well as it's just part of the inputs figure.

yes but monetary value is distorted too.

[doodab]

sorry my sweeping statement left out high value manufacture. where you make one or two a day as irrelevant.

>90% of our sales are made on stuff made abroad, the customised stuff assembled in the UK has a higher gross profit but much higher labour costs even when using cheap imported labour.

The measure of X widgets made an hour is therefore pretty pointless we don't make widgets, we may assemble widgets into complete assemblies on a low run rate. Even that is being near shored. Most customers will wait a week or two for custom products. Its the 6- 11 weeks wait from the far east that made it sensible to assemble in the UK, now its assembled in Eastern Europe.Cheap factories, cheap skilled labour and low taxes every company is a winner.

This is why we tend to measure productivity in units of monetary value added (i.e. value of outputs - value of inputs) per worker hour. That way it doesn't matter what the workers are making, and how much they cost is actually irrelevant as well as it's just part of the inputs figure.

[vetran]

So, basically, as the link says there are a lot of other factors in play other than the local tax rate which makes little difference in the grand scheme of things. Ergo tax rates make little difference to productivity.

We actually make loads of stuff "in country" BTW, It's just not the sort of stuff you see in tesco. Most of it is very high value add stuff like top end recording studio & broadcast equipment, advanced weapons systems, spacecraft and so on.

sorry my sweeping statement left out high value manufacture. where you make one or two a day as irrelevant.

>90% of our sales are made on stuff made abroad, the customised stuff assembled in the UK has a higher gross profit but much higher labour costs even when using cheap imported labour.

The measure of X widgets made an hour is therefore pretty pointless we don't make widgets, we may assemble widgets into complete assemblies on a low run rate. Even that is being near shored. Most customers will wait a week or two for custom products. Its the 6- 11 weeks wait from the far east that made it sensible to assemble in the UK, now its assembled in Eastern Europe.Cheap factories, cheap skilled labour and low taxes every company is a winner.

[doodab]

FWIW I suspect the vast majority of productivity growth arises from innovation, which happens disproportionately in new businesses and younger, smaller companies. These generally aren't profitable at an early stage so reducing tax rates makes little difference to them. It would be better to beef up incentives for investment.

[doodab]

Thanks for the random and complete dumb**** link.
Apart from being a complete straw man...

Those figures don't show productivity, but growth in productivity.

Yep, and it appears they show it grows just as fast or faster when taxes are high as it does when they are low.

It's only highest earners, and excludes corporation taxes.
And the definition of productivity used is production per hour worked, which is not the kind of productivity were talking about.
Productivity under harsher tax regimes are less meaningful - if I tax your productivity in order to create more 'productivity' which involves pissing the cash up the wall, then were actually seeing less real productivity than if I didn't tax you at all.
it doesn't say how 'productivity' is measured.

The link is pretty meaningless in in isolation, even ignoring the other points. If anything it looks to me as though the numbers show the exact opposite of what is claimed- there's a higher growth shortly after ww2 now that people are making stuff rather than killing each other, but with really high taxation growth falls during a period where technology should cause productivity grow more rapidly. Than as tax rates hit their lowest point there is a time lag before growth picks up accordingly, just like there was a time lag on the way down.
Except of course it's just income tax. CT is probably more interesting because if lower tax results in capital investment (in machinery for example) then productivity (especially per hour) would likely see a rise given a short delay.

Lower nmw though - GDP might fall but productivity will increase. GDP is a meaningless measure anyway.

While those may be valid criticisms of that particular link none of them are actually evidence that lowering taxes increases productivity. Why don't you try and produce some evidence that lowering taxes does increase productivity?

[SpontaneousOrder]

There is actually no historical evidence that lowering taxes increases productivity. Here is some data from the US:

10 Tax Questions the Candidates Don't Want You to Ask - #5: Relationship Between Tax Rates and Productivity

Thanks for the random and complete dumb**** link.
Apart from being a complete straw man...

Those figures don't show productivity, but growth in productivity.
It's only highest earners, and excludes corporation taxes.
And the definition of productivity used is production per hour worked, which is not the kind of productivity were talking about.
Productivity under harsher tax regimes are less meaningful - if I tax your productivity in order to create more 'productivity' which involves pissing the cash up the wall, then were actually seeing less real productivity than if I didn't tax you at all.
it doesn't say how 'productivity' is measured.

The link is pretty meaningless in in isolation, even ignoring the other points. If anything it looks to me as though the numbers show the exact opposite of what is claimed- there's a higher growth shortly after ww2 now that people are making stuff rather than killing each other, but with really high taxation growth falls during a period where technology should cause productivity grow more rapidly. Than as tax rates hit their lowest point there is a time lag before growth picks up accordingly, just like there was a time lag on the way down.
Except of course it's just income tax. CT is probably more interesting because if lower tax results in capital investment (in machinery for example) then productivity (especially per hour) would likely see a rise given a short delay.

Lower nmw though - GDP might fall but productivity will increase. GDP is a meaningless measure anyway.

[doodab]

is that apples or oranges you are comparing there?

in 1951 offshoring your income was something only the top 0.1% could do. now the top 20% can do it with ease. Some of them get caught but most manage it.

Also in 1951 the vast majority of large companies had armies of workers doing manual work which is really what they are talking about as productivity, the profit was mainly made in country. We don't make anything in 'first world countries' and when we sell it only enough profit is made in the high tax country to cover costs.



what you see is a reaction to global tax planning and change of employment practices.

Pretty much every Global company I have worked with since the 90s has made most of its profit outside the UK or US.

So, basically, as the link says there are a lot of other factors in play other than the local tax rate which makes little difference in the grand scheme of things. Ergo tax rates make little difference to productivity.

We actually make loads of stuff "in country" BTW, It's just not the sort of stuff you see in tesco. Most of it is very high value add stuff like top end recording studio & broadcast equipment, advanced weapons systems, spacecraft and so on.

[vetran]

But, as BP says - with a net influx from migration of 200k + , where are we to put them all? We just don't have the resources. Stop (or cut it drastically) now!

they have a habit of producing more kids, they are creating two new secondary schools in Slough to keep up with demand. 4 or so primary / middle schools have opened as well.

As most companies are making more with less people in the UK (I have been to so many large sites built in the 50s-80s that are nearly empty) so not sure what all these new people going to do.

[vetran]

There is actually no historical evidence that lowering taxes increases productivity. Here is some data from the US:

10 Tax Questions the Candidates Don't Want You to Ask - #5: Relationship Between Tax Rates and Productivity

is that apples or oranges you are comparing there?

in 1951 offshoring your income was something only the top 0.1% could do. now the top 20% can do it with ease. Some of them get caught but most manage it.

Also in 1951 the vast majority of large companies had armies of workers doing manual work which is really what they are talking about as productivity, the profit was mainly made in country. We don't make anything in 'first world countries' and when we sell it only enough profit is made in the high tax country to cover costs.

Productivity as used here refers to the amount produced by the private workforce for each hour worked.

what you see is a reaction to global tax planning and change of employment practices.

Pretty much every Global company I have worked with since the 90s has made most of its profit outside the UK or US.