Dr. Tom McDonnell:

The risk has always been there with windfall corporation tax receipts. I know there is a “boy who cried wolf” aspect to this by now but that does not mean the fragility has gone away. It is a very small number of companies. In fact, a change in a tariff regime creates an incentive to change the transfer pricing within companies, which could have an impact. On the other hand, BEPS pillar 2 would suggest that corporation tax receipts will increase again next year. There is no evidence yet that they are going to fade away.

The big concern is the concentration, the difficulty of explaining it and the possibility of the US changing its own corporation tax rules, which overnight could change how it treats its own IP assets in order to move them to the United States. I am not saying that any of these things will happen, but they are a risk. Therefore, the right thing to do with them is to either save the money or put it into once-off capital spending, which will permanently increase the productive capacity of the economy and generate an asset stream in a different way.

As to where we are in terms of our tax base, if we exclude the windfall corporation tax receipts, we are obviously running an underlying deficit, and we are doing so at a time when the economy has never been stronger, and on the cusp of a very significant deterioration in our public finances over the next generation arising from ageing demographics, the green transition and other reasons. To shorten my answer, yes, we do need to broaden the tax base.