Naughty or nice? Even before the first Christmas decorations appeared on shop shelves, the Prime Minister seemed to have put business firmly on the naughty step, undeserving of any treats .
Rewind to September: corporates weren’t to be trusted; employees should sit on their boards, and her predecessor's panel of advisors from the highest echelons of commerce were sent on their way. In her party conference speech, Theresa May warned that those tempted to get creative with their tax bills would be punished:
"If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you too”.
Now, however, she's suggesting she'd like to slash the corporate tax rate to even less than the 15% favoured by Donald Trump.
A change of heart, a softening of stance in this season of goodwill? Or is this a canny move in the endless battle to deter tax offenders?
Governments of all shades have tried and failed to close tax loopholes and catch wrong-doers. Such efforts are costly, complex and require international cooperation. Meanwhile, tax advisors have remained one step ahead, concocting increasingly sophisticated schemes that can take a team of dozens of tax inspectors years to unravel. Yet in a decade, HMRC’s budget has fallen by a quarter; it is now smaller, for example, than the amount Google earns in the UK alone. No surprises then, that an exercise to name-and-shame repeat offenders revealed not billionaires or multinationals but hairdressers and other small businesses.
Why not slash companies' tax bills, and perhaps persuade them that intricate tax avoidance schemes aren’t worth the cash their architects charge? Facebook may have a way to go before its tax affairs are perceived as fair but plans to increase its workforce here by 50% signal a big vote of confidence in the UK. Engineers can be situated anywhere; our location (midway between major time zones), skills base and common language make the UK a good bet.
Similar factors lie behind London’s huge popularity as a financial centre despite the decision not to join the Euro. ING Bank's opted to move jobs to the UK, despite Brexit, due to the quality of staff on offer. Other banks are exploring options for moving to Paris or Amsterdam out of reluctant necessity - because the removal of passporting rights may not allow them to operate in the rest of Europe from a London base- not out of desire or petulance. Banks have clamoured for reassurance. The Prime Minister is not a position to offer them much yet; but a tax cut would send out the right message.
But if companies get a tax cut, who picks up the slack? Do the JAMS - those "just about managing" face a further blow? Maybe not, if a lower tax rate persuades more companies to set up in the UK, thrive and hide less cash under the corporate mattresses (or rather, tax shelters). That could - in theory- lead to higher tax revenues, as well as growth and jobs. A win all round?
That was the argument of President Reagan, prompted by economist Arthur Laffer. Rather aptly perhaps for a man born in Youngstown, Ohio - a city that achieved fame as a bellwether in this month's election - Dr Laffer's re-emerged as an advisor to America’s new president-elect. Dr Laffer famously illustrated his concept on the back of a napkin with a hump-backed graph, which he claimed showed the relationship between tax rates and revenue raised. Raise tax rates when they are too high, he claimed, and you could actually collect less tax, cut them, you get more.
But that assumes the tax rate is already too high - and the problem is, no one knows where on the curve they are. If, for example, once Brexit gets underway, trading conditions suffer and profits stumble, a lower corporate tax rate could instead deal the public purse a nasty blow. It would be a big gamble - and one which, as Reagan learnt, can come at a hefty price.