Tax doesn't have to be taxing

In the UK we don't generally reflect on how our tax code can be used more creatively to fulfil policy goals.

I am not sure how much this strapline from the TV campaign urging people to submit tax returns on time is really convincing.

It's a topic almost guaranteed to make normally creative and thoughtful business people blanch.  But (and for want of a better title) there's a kernel of truth in it as I've been talking about how to make our tax system work better for social enterprises.

We most often think of tax as a system by which national government receive dues - from workers and companies in the form of income and corporation tax - to pay for our common goods. 

The Chancellor's recent bid to try and hold back UK plc's debt burden with a new 50% tax rate has reinforced that view.  Tax is seen as a way of generating income. 

When times are bad, as they are now, we must try and balance the books by increasing that income and driving down expenditure (oh, and borrowing £23,000 per head).

In the UK we don't generally reflect on how our tax code can be used more creatively to fulfil policy goals.  Providing tax incentives - either in the form of reliefs (money off your tax bill) or credits (money back) - is another strategy.  

In difficult economic times, it's more rather than less important to find other ways of helping social enterprise to flourish as everyone feels the pinch.

Commercial investment and philanthropic giving have both been shaped and supported through tax policy and incentives. The enterprise investment scheme and Gift Aid have both had an effect in these spheres.

Appropriate tax policy and incentives could have significant impact in investment in social enterprises.

The first step on this path is simply to understand how existing schemes work and how they might be used for social enterprise before going on to think more creatively about how the tax code could create a more encouraging environment for investment to flow.

About the author

Sarah McGeehan is NESTA's Public Services Innovation Lab's Head of Social Finance. She leads the Lab's risk capital programme which aims to give high growth social enterprises the resources they need to scale.