45p income rate brings in much more revenue

The Treasury official figures said putting the 50p tax rate down to 45p would entail a loss of £100m of tax revenue. Instead, as some of us forecast, it has led to a surge in additional tax.

Self assessed income tax reached £22.5bn in 2008-9 when the top rate was 40%. In 2011-12 it was just £20.33bn and in 2012-13 just £20.55bn when the top rate was 50%. As self assessment tax was up by £1.66bn this January on last January, the full tax year 2014-15 is likely to see a substantial gain on the receipts during the 50% years.

The Guardian tendency claim this is a one off event owing to delays in paying bonuses from the previous year. This does not explain why revenues were lower at the 50% rate in the years prior to the year of the announcement of a cut in the rate, nor does it explain why the revenues were always lower at 50% than they had been at 40% before the increase.

Far from costing the state £100 m the 45% rate will bring in substantial extra revenue. The figures also suggest moving up from 40% has lost the state billions.

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63 Comments

  1. Bazman
    Posted February 21, 2015 at 3:45 pm | Permalink

    More socialism for the rich. This is the Tories looking after their base support the 1% of the population. The top-rate of tax to 50p is a vote-winner. It is supported by six out of ten adults overall, with fewer than one in five against.
    Even Tory supporters favour it by a small margin. 95 %of the population will never pay it anyway.
    HMRC’s estimate that the 50% rate of income tax raised less than a billion pounds in the 2010/11 tax year has to be viewed as a premature and uncertain piece of analysis. The department was set a near-impossible task by the Chancellor in trying to evaluate the yield from the 50% rate based on data that have been hugely distorted by taxpayers shifting their income forward from 2010/11 to 2009/10 to avoid paying tax at the higher rate in the first year of its operation. This short-run effect swamps any longer-run trends and makes it pretty much impossible to identify how much the 50% rate would have eventually raised had it been left in place. Furthermore, the justifications from previous literature used to support HMRC’s contention that the taxable income elasticity for UK top incomes is as high as 0.46 are highly questionable. Finally, the reduction in the top rate from 50% to 45% is likely to increase the inequality of pre-tax incomes as well as post-tax incomes if bargaining effects for top earners are important – exacerbating the problems faced by the “squeezed middle”.

    • agricola
      Posted February 21, 2015 at 4:43 pm | Permalink

      So 95% should be allowed to dictate to 1%, does not seem very just to me. Remember that 1% already pay the largest amount of the total tax take. I would also point out that they are also in the best position to move their business or intellectual property at the click of a mouse. The none paying 95% should pay head because some of them could loose the means to their profligate life choices.
      , or put another way, using other peoples hard earned cash.

      You might find that shifting your tax liability forward one year was merely the first step in avoiding it altogether. Not that even this will stop socialism trying to breast feed on other peoples endeavours.

      • Bazman
        Posted February 22, 2015 at 10:12 am | Permalink

        They do not pay the most tax as VAT and other taxes account for the most tax take paid for by everyone with little or no avoidance.
        As I have said before they benefit the most from the state and should pay the most.
        You seem to think they are giving us charity handing out alms or the like. Nothing is further from the truth. Avoiding it is what the state should be spending money, time and stopping this toll avoidance like any other business. Why should the rest pay more to subsidise these already very wealth people? Well answer it.

        • David Price
          Posted February 23, 2015 at 9:43 am | Permalink

          You are not correct.

          According to HMRC receipts over the period 2001 – 2012 reported by the NSO; Income Tax, CGT and NICs accounts for 54-58% while VAT accounts for 17-21%

          So even allowing for alcohol, tobacco and other purchase taxes it is personal taxation that is the biggest contributor.

          You should encourage the means to increase overall tax return rather than pressing for a more spiteful tax regime, or do you simply want to punish those who have succeeded and earn more?

          • Bazman
            Posted February 23, 2015 at 6:57 pm | Permalink

            Its not just VAT though is it. What about fuel duty, alcohol, tobacco, vehicle, stamp duty corporation and many more taxes?
            It is not spiteful to collects the correct tolls.
            Presumably you do not see the bedroom tax and the cuts faced by millions in wages and services as spiteful just the financial aristocracy and other leisure classes being made to pay for the benefits they enjoy in this country.
            Selective and self censorship will not work.

          • David Price
            Posted February 24, 2015 at 4:25 pm | Permalink

            @Bazman
            The income tax, CGT and NICS account for more than 50% of the revenue recieved by HMRC so arithmetically they are more the any other taxes, including VAT, combined.

            The data is published by the NSO, go read it instead of inventing fictional tolls and taxes.

        • libertarian
          Posted February 25, 2015 at 11:46 am | Permalink

          Bazman

          As always you are wrong. I’ve just got back from speaking at a conference on employment. The next speaker up after me was from HMRC so I asked, this was his answer

          Income tax NIC income £230 billion

          Corporation Tax income £81 billion

          VAT income £67billion

      • graham1946
        Posted February 22, 2015 at 10:36 am | Permalink

        No, agricola, the top 1 percent do not pay the largest amount of the total tax take. This is a blurring of the facts put out by the super rich. In fact they pay the largest amount of INCOME tax, not all tax. This is to be expected because they earn the majority of the INCOME and pay a higher rate. Overall, most taxation is paid by the standard raters (VAT, Council Tax, Excise duties. et al).

        Where the rich score is that they do not pay a wealth tax on their assets, so are unlikely to upsticks because of income tax. For instance, a Russian Oligarch pays the same Council Tax as some of my neighbours. They have vastly more wealth than any other group and I find it hard to feel sorry for them. Most are not entrepreneurs like Dyson or Branson but have inherited wealth or have landed high paid jobs with big firms which they did not risk anything to establish. Very few entrepreneurs actually make it to this level of wealth.

        • libertarian
          Posted February 25, 2015 at 10:23 pm | Permalink

          graham 1946

          Well, see my post above. You’re plain wrong most tax is income tax/nic

          In fact the least tax is paid from VAT etc

          Why should they be taxed on assets, they’ve already paid tax at least twice??

          Oligarchs would only pay the same council tax on their properties if they live in similar houses to your neighbours !!

          According to Forbes ( the people that monitor the wealthy) only 6% of the wealthiest inherited their wealth, the rest made it via business.

          Graham, Bazman and other continually banging on about the 1% do you have any idea what this means? You do know that some Headteachers, more than 170 senior civil servants and local authority chiefs are in the 1% of earners

          This is calculation to know where you fit
          If over 20,000, in the top 50%
          over 30,000, in the top 25
          over 45,000, in the top 10
          over 63,000, in the top 5
          and
          over 150,000, in the Big Number One Club.

          Thats income, its even better on assets as almost everyone in the South East could qualify for the top 10% as you only need assets of £400k for that which includes your house value, pension, savings and other assets.

    • Jerry
      Posted February 21, 2015 at 6:47 pm | Permalink

      @Bazman; “More socialism for the rich.”

      No, it’s socialism for the poor, re read the figures, the “rich” (who ever they might be, many people caught in the high tax band are far from rich) kept more of their own money during the 50p rate set by Labour, of course just because the government now has more money coming in via the lower 45p income tax rate it still doesn’t necessarily mean it will be used how the left-wing would wish!

      • Bazman
        Posted February 22, 2015 at 10:44 am | Permalink

        What you seem to forget Jerry is that the rich have seen their incomes rise massively in the last 30 years whilst most have seen stagnation or fall in their incomes will still facing tax increases so forgive me fo not shedding a tear if thy have to pay a few quid.
        The apologist nonsense no no bounds. If you download a film or song somehow you are depriving a multimillion pound star or company from revenue. As if. Should we have whip round for them? Same with the rich.

        • Jerry
          Posted February 22, 2015 at 10:00 pm | Permalink

          @………………………………….

          Oh and you still haven’t grasped an understanding of what a Laffer curve is and why it is so important in discussions about deciding taxation rates.

        • David Price
          Posted February 23, 2015 at 9:52 am | Permalink

          But you socialists don’t target the rich, you target those who cannot move to another country or afford good accountants and tax advisors, or have influence with politicians. Instead of helping people to contribute more to the economy you strive to take from those who have succeeded in spite of your inept governance.

          At the end of the day you are worse than those you criticise because while claiming to stand up for the interests of the common man you do the reverse and let your spitefulness grind everyone down.

        • Bazman
          Posted February 23, 2015 at 7:02 pm | Permalink

          I have grasped the laffer curve as I have wrote previously. You do not lower taxes do not always mean higher returns as you want us to believe and much of it is theoretical. What happened to all the problems that would be caused by a minimum wage. Never happened and politically the Tories may be onto a loser. Why should the poor pay more and the rich less. That not jealousy and you simpletons like to tell us. More for having more? Yeah right. What else can we do for the financial aristocracy whilst the peasants starve?

          • Edward2
            Posted February 24, 2015 at 4:45 pm | Permalink

            We have data from income tax which shows the rate now reduced has resulted in more revenues.

            You claim the rich pay less and the poor pay more.
            This is not true.
            The rich are paying disproportionately more tax than the poor who unless they earn over £10,000 pay no tax at all.
            The figures from HMRC prove this.

          • libertarian
            Posted February 24, 2015 at 4:53 pm | Permalink

            Bazman

            Calling people simpletons because they believe that the wealthy pay more in tax than the poor . The rich pay less? Really no wonder you are stuck in a dead end job if you cant work out simple things like 45% of £150,ooo is £67,500 and that £27,000 x 20% minus £10K allowance is £3400.

          • Jerry
            Posted February 24, 2015 at 4:55 pm | Permalink

            @Bazman; “I have grasped the laffer curve as I have wrote previously”

            With respect, no you have not, as the rest of your rambling comment went on to prove, it wasn’t even a rant as it makes little sense.

    • zorro
      Posted February 21, 2015 at 7:03 pm | Permalink

      Ah I see….. There you go John, how beastly of you to assume that HMRC would be able to complete extremely difficult (sorry ‘near impossible’) tasks such as making a sensible estimate of how much tax certain percentages would raise within say 4 years of imposition. In fact, apparently…. ‘This short-run effect swamps any longer-run trends and makes it pretty much impossible to identify how much the 50% rate would have eventually raised had it been left in place’….. So, we can never, ever win this argument…. apparently.

      And, of course, the Tory Party are so desperate to lose the election that they will pander to 1% of the voters to ensure that they will do so by alienating the other 99% by lowering taxes…. apparently

      zorro

    • Richard1
      Posted February 21, 2015 at 7:39 pm | Permalink

      the facts of life are Conservative as Margaret Thatcher once pointed out. All you can do is deny and refute the overwhelming evidence. At anything around our current tax rates, rate reductions increase receipts, and rate hikes reduce them. You may be right that the politics of envy has superficial appeal, but I doubt this will be carried through to the ballot box. People can see where it leads by looking at disasters such as France at the moment or Britain in the 1970s.

    • Edward2
      Posted February 21, 2015 at 9:01 pm | Permalink

      The 50% rate is supported in opinion polls because people think it will make the rich pay more.
      They want the rich to pay more tax.
      But the 50% rate does not result in the rich paying more, as these figures show.
      So Baz, as you desperately want the rich to pay more tax you should be in favour of this current reduction to 45% and support a further rate reduction to 40%.

      • Bazman
        Posted February 22, 2015 at 10:18 am | Permalink

        This is debatable as I have said and why should the poor pay more as a percentage. What it tells me if it is true is that the tax authorities see tax payments by the rich as voluntary and should be made to pursue them more.
        Pay or leave we do not respond to threats.

        • Edward2
          Posted February 23, 2015 at 8:35 am | Permalink

          It is always debatable Baz.
          Its just ghe figures show what I have sais is correct.
          Some very rich may well leave, but the majority will just pay less to the Treasury by earning less.

          Faced with marginal tax rates of over 50% on additional income many, already well off, will probably swop extra hours for more leisure time and a change of lifestyle.

          Why press on building an even bigger company, with even more staff, when your marginal efforts see over 50% taken off you.
          As well as having to listen to a constant barage of anti business and anti rich rhetoric from the media.

    • libertarian
      Posted February 21, 2015 at 10:57 pm | Permalink

      bazman

      The higher rate tax kicks in at £31,800 ( the average UK wage is £27K ) so I think you’ll find its not the “rich” who benefit but the just slightly above average earners

      • Bazman
        Posted February 22, 2015 at 7:54 pm | Permalink

        150k is not earned by the majority. Who should this country by run for the benefit of Billy libtard the average person or the rich? Which is it? The two are not mutually beneficial. You are lying and so are the Tories. Its just wrong.

        • Matt
          Posted February 22, 2015 at 9:45 pm | Permalink

          @Bazman.

          I honestly don’t understand why you don’t get this. The 45% rate brings in more money.
          That’s more money available from the well off to be given to the poor and spent on services on which they depend.

          How can you possibly be in favour of a political decision to raise the rate to 50% which is damaging to both the 1% and the 99%?
          It just makes no sense.

          Not only that, it depresses economic activity, which means that there will be less money in the country overall. That means either fewer jobs or worse paid jobs.

          There may be a way to adjust the tax system such that you can collect still more money off the rich than with a 40 odd % income tax rate. If you want to argue that, then you might have a point. Just raising the top income tax rate to 50% doesn’t work.

          This is not about the morality of taxing the rich more. It’s about a strategy for taxing the rich more which doesn’t work.

          It doesn’t work!

          • Jerry
            Posted February 22, 2015 at 10:06 pm | Permalink

            @Matt; I’ve come to the conclusion that Bazman is not interested in the amount raised from the higher tax bands, the fact that he keeps trotting out the word “rich” makes it clear that what he really wants is a redistribution of wealth.

        • libertarian
          Posted February 23, 2015 at 9:58 am | Permalink

          Bazman,

          Why not come clean. You aren’t interested in the overall tax take, you aren’t interested in fairness. You just want the people you think are rich to be punished for having the temerity to be wealthy.

          Oh and of course the two are mutually beneficial. One ( the higher rate tax payers) pay significantly more for less services thereby making more available for lower rate payers.

          In your deluded world if you took ALL the money from the rich 1% and distributed it to the 99% it would amount to roughly £5000 for each person. So what would that achieve Bazman. 1) The tax take would collapse. 2) This is a one off At the start of the next year the now 100% would be back where they started & the country would have seriously diminished revenues.

          Baz your green eyed jealousy prevents you thinking straight about this. Its a give away prattling on about toffs, Eton, idle rich blah blah. Its the thing I detest most about our 19th century tribal politics.

          • Bazman
            Posted February 23, 2015 at 7:07 pm | Permalink

            Running the country for the benefit of a financial elite a leisured aristocracy is for the best? Russia is run for the benefit of about a thousand people is a good place to live and do business. As for jealousy do not see social justice as jealousy.
            Tax breaks for the few and cuts in services and tax rises to pay for them for the many is not the way to go and why should we stand for this? 19th century mill owner politics indeedy!

          • Edward2
            Posted February 24, 2015 at 4:49 pm | Permalink

            Never mind Russia Baz
            What we have in the UK is a tax system where the rich pay considerably more income tax and capital gains tax than those who are less well off due to higher percentage rates on anyone earning over approx £33000 and even higher rates on those on even higher levels of income.
            Both in cash terms and in percentage terms.
            The top 1% pay over 25% of all income tax with the top 10% paying over half the total.

          • libertarian
            Posted February 24, 2015 at 5:00 pm | Permalink

            Bazman

            Political slogans and cliches are not much use really, Thanks for confirming my post.

            If you took away ALL the money of the wealthy 1% it wouldn’t help the lower end of society in any way shape or form.

            So rather than keep bleating about wealth creators tell us what you’re going to do about the lower end of society, but bare in mind that if you get rid of the wealthy there’s no one to tax, if you get rid of the wealth creators there’s no one who can pay the living wage UNLESS we all work for the state & thats called communism and it pays its workers in turnips and has never worked anywhere its been tried

    • Terry
      Posted February 22, 2015 at 7:33 pm | Permalink

      If mandatory NIC is plonked on top of the 45% income tax then 50% is already here. NIC are a tax, of course. Are the British people so dumb that they cannot see what damage high taxation does to disposable incomes? Hello, there is less to spend!

      And what happens to any extra revenue income at the Treasury? Is it spent wisely? Yeh, of course it is!
      How about an increase in the Overseas Aid programme for instance? Or raising child benefits for the (people who chose large families ed) Or increase dole payouts? Be careful for what you wish for. Especially when it is YOUR money at stake!

  2. Lifelogic
    Posted February 21, 2015 at 3:46 pm | Permalink

    Indeed why are the treasury so poor with their predictions. Then again most there clearly seemed to thing that joining the ERM and the EURO and bailing out the PIGS were good ideas.

  3. English Pensioner
    Posted February 21, 2015 at 3:55 pm | Permalink

    Everyone tries to avoid tax by legal methods, often by postponing some taxable event.
    We’ve decided not to move home because of the high rate of stamp duty we will incur on buying another house. The money not spent on this tax will more than pay the extra cost of living in a house which is bigger than we need.
    My daughter, offered a pay rise which would move her into into the higher tax band, negotiated a shorter working week instead and will no longer need to pay for a cleaner.
    I’m sure people who are in the 50% tax bracket can afford experts to find ways that they can legally avoid tax, and this is what’s happening resulting in reduced tax receipts.

    • Denis Cooper
      Posted February 22, 2015 at 9:46 am | Permalink

      “My daughter, offered a pay rise which would move her into into the higher tax band, negotiated a shorter working week instead and will no longer need to pay for a cleaner.”

      So the law of unintended consequences has operated and the government has been defeated in its objective of increasing GDP, with your daughter earning no more and the cleaner earning less, which will reduce the GDP statistic; and this is because some people think that it’s a good and fair idea to impose arbitrary additional tax penalties on anybody who has the ability and opportunity to increase their earnings above what is not a particularly high level.

  4. Richard1
    Posted February 21, 2015 at 4:25 pm | Permalink

    The Guardian tendency just can’t take it. The plain facts are that at anything like the rates we have now for income tax and CGT, receipts go up as rates go down and vice versa. Laffer was right and Guardianista leftists are wrong. The left would be in a more comfortable intellectual position if they simply admitted that egalitarian policies such as high marginal tax rates do mean lower receipts, lower overall standards of living and less to spend on public services, but the extra equality makes it worthwhile. After all you often hear leftists such as Ken Livingstone extoling the merits of eg Cuba (GDP per head US$10k) as against the USA (GDP per head c US$50k) a few miles away.

    • Lifelogic
      Posted February 21, 2015 at 5:21 pm | Permalink

      Indeed. It is a great shame the Cameron never makes the highly moral and economic case for smaller government. Then he might actually win an election instead of throwing yet another.

      • Richard1
        Posted February 21, 2015 at 9:26 pm | Permalink

        I should think Mr Cameron would agree with the moral and economic case for small govt. but I think he’s also been convinced by some focus group based analysis that it would be marginally electorally better to try to get votes that would otherwise have gone LibDem, or even green. Therefore we get apologetic and rather trivial tax reductions whilst obeisance is still paid the the Green God and billions are shipped out with abandon in overseas aid. It’s frustrating to watch such nonsense, but Labour would be far worse, so I hope the focus group analysis is correct and these marginal voters will show up and vote Tory to stop Miliband. This election will tell whether this political strategy has been right.
        I

    • acorn
      Posted February 21, 2015 at 6:53 pm | Permalink

      Have a read of: HMRC, “The Exchequer effect of the 50 per cent additional rate of income tax, March 2012” .

      There is mention of the Laffer curve and without an accurate estimate of Taxable Income Elasticity (TIE) it is useless. Chapter 5 explains how the tax avoidance measures by high earners were measured. That is, shifting income to capital gains or “dividends”; pension tax relief and employee share schemes.

      • libertarian
        Posted February 21, 2015 at 11:01 pm | Permalink

        Acorn

        Out of interest how does one avoid income tax on dividends?

        • Bazman
          Posted February 22, 2015 at 7:55 pm | Permalink

          Should this be avoided libtard? Just asking?

          • Jerry
            Posted February 22, 2015 at 10:14 pm | Permalink

            @Bazman; “Should this be avoided”

            Are we talking legalities here or morality?

            The first is yes, if it’s legal to do so, if HMT doesn’t like it they are free to close off the loop-hole. The second is less easy, but then again how many times have you had that pint in the pub Baz rather than making a donation towards a charity, its the same sort of morality – others or self?

        • acorn
          Posted February 23, 2015 at 7:41 am | Permalink

          You don’t avoid it, it is the different tax rates that are applied.

          • David Price
            Posted February 23, 2015 at 9:55 am | Permalink

            So would you advocate the full VAT rate be applied to energy charges and children’s car seats, if not then everyone is avoiding tax.

        • libertarian
          Posted February 23, 2015 at 10:08 am | Permalink

          Acorn

          Yes I know I just wanted to be clear. Bazman I was being rhetorical , you don’t avoid income tax on dividends

          Dividends are paid with basic rate tax deducted at source. Dividends are paid from the profit of a company AFTER corporation tax has been paid. If you are a higher rate tax payer then the difference is declared and paid ( often “on account” and in advance) under self assessment and or on P11D. The only tax efficiency is that there is no national insurance payment on dividends

      • petermartin2001
        Posted February 22, 2015 at 5:00 am | Permalink

        Acorn,

        I think you’re perhaps making the same point I’ve been making about the Laffer Curve in relation to any single tax whether that tax be normal income tax inc NI , income tax as applies to dividends, CGT, Corporation and maybe some other taxes.

        Yes, if the tax rate on one is reduced that particular tax may yield increased returns. But what about all taxes? Do they yield increased returns too? Or is that increase simply the result of accountants switching tax payments from one to another?

        From what we read, it seems that tax yields, currently, are less than expected. I’d like to know how expectations are calculated. If government spending is cut by £10 billion, for example, is the expectation that tax revenues will be unaffected and therefore the deficit will close by the same amount?

  5. ian
    Posted February 21, 2015 at 4:35 pm | Permalink

    People lost their jobs and had their wages cut in 2009 and 2010. It a bad way to collect tax because every time you have trouble with the economy you lose jobs so you lose tax which in turn make the goverment put up taxes and lower interest rates and build more debt, you in a never ending cycle till the end comes oneday.

    Like i say you build the system for the rich and people in power who no the tax loop holes in the tax system the poor people would be better off if the rich pay only 5% tax on CGT and IHT and kept the money in the country instead of off shoreing it.

    Why the non entity is king and the laws make for them i have no idea and the people have laws made against them like slave taxes and so on, i can only conclued that it fear of the people, the old saying of keeping them down and in there place.

  6. ian
    Posted February 21, 2015 at 4:56 pm | Permalink

    If you have all the working taxes and companies tax all in one place, that with the non enties, it would be lot easier to bring down taxes because there all in one place and enties would benefit from that.

  7. ian wragg
    Posted February 21, 2015 at 5:13 pm | Permalink

    If the 50% tax rate cost the treasury billions. GOOD. They only waste the money on EU subscriptions to run a £77 billion deficit and giving India to fund their space programme.
    Talking of costs, how mush did the idiot Brown cost us selling our gold short. How much have we lost on the Euro’s he bought.
    How much return have we had on the lone by Gideon to Eire.? Why should we help you to maximise tax receipts??

  8. graham1946
    Posted February 21, 2015 at 8:37 pm | Permalink

    I find the logic of all this very difficult and not a little suspect.

    If the ultra rich were sheltering money at the 50 percent rate, why would they not keep such arrangements in place for 45 percent? It makes no sense. The Treasury predicted that reducing the rate to 45 per cent would cost only 100 million, yet it will actually bring in apparently, according to George Osborne 4.25 billion extra. So the logical conclusion is that the rich complained about paying 100 million at 50 percent, yet are very happy to stump up 4.25 billion at 45 percent. Are they that stupid? No, the only conclusion is that its all smoke and mirrors as usual and that the extra is actually being paid by standard rate tax payers somewhere along the line and of course the fiscal drag which has made many more tax payers 40 percenters. Also, many many more people are now self employed, so the self assessment figures cannot do anything but go up. Much more likely I’d say.

    If it truly is the rich paying more at 45 percent then I’d rather believe this is a one off and we need to wait a couple of years or more to see what actually happens. The fall in self assessment tax during the years you mention were during the recession, John. Don’t you think this might have a bearing?

    Reply The main reason is rich people have choices on how much income to draw and where to earn their income and place their savings. Cutting the rate will yield more revenue, until you get to the rate which represents the optimum rate for maximising tax.

  9. Jon
    Posted February 21, 2015 at 9:33 pm | Permalink

    What I feel many don’t get is that it is not in the main the individual that decides to shift their tax affairs following a tax rise, it’s the international corporations wanting to keep us, all of us as their shareholders.

    We demand return on our savings in pensions and general savings, if an international can better those returns by moving operations so they retain us as shareholders they will. It’s corporations moving. The firm I work for is moving their head office from Chicago to London. There are other reasons other than tax but if the tax rate changes they will make the same decision and move elsewhere if it better benefited their shareholders.

    Labour like to demonise the shareholder, all those recently and to be auto enrolled into a pension are shareholders. Something the likes Milliband in his tax payer final salary doesn’t understand.

  10. oldtimer
    Posted February 22, 2015 at 7:27 am | Permalink

    Reduce the top rate from 45% to 40% and even more tax revenue would be raised.

    PS Has Bazman acquired a ghost writer?

    • Bazman
      Posted February 22, 2015 at 10:21 am | Permalink

      Why not have no tax then with everything tolled. I mean everything. How many are in favour of road tolls? See what I mean? As long as it does not apply to me and one day I might be rich and would not want to pay this much tax! Dream on.

      • libertarian
        Posted February 23, 2015 at 10:20 am | Permalink

        Bazman

        Whilst I do think that some tax is important and some services are best provided by the state. i.e. Defence, Justice & policing etc. Your repeated use of toll roads as a scare tactic is totally misguided. Each of us already pays a separate road tax ( VED ) and duties on the petrol/diesel we use. I would suggest that toll roads would probably be cheaper per person than all that extra tax. Those two taxes already raise more than the state actually spends on roads. As it happens I’m happy for the state to provide the road infrastructure just pointing out that you could probably find a better example.

        Jerry I think used the better example of would you want private armies and private policing? Of course not.

        My personal choice would be that the state is legally mandated to ONLY provide certain services and for me that would be

        Defence
        Policing/justice
        Fire/rescue
        Health ( including far better mental health services)
        Education
        Foreign diplomacy
        Transport infrastructure

    • Bazman
      Posted February 22, 2015 at 7:59 pm | Permalink

      Yeah! Putin.

      • oldtimer
        Posted February 23, 2015 at 10:02 am | Permalink

        Thank you for that clarification. The KGB`s past interference in UK affairs (Jack Jones was posthumously revealed to have been on the KGB payroll) and the current Gazprom support of the green movement (to promote its own gas interests and EU dependency on them) make this an entirely credible situation.

        • Bazman
          Posted February 23, 2015 at 7:10 pm | Permalink

          You forgot to mention the City.

  11. Denis Cooper
    Posted February 22, 2015 at 9:50 am | Permalink

    I’m less concerned about the Laffer curve than about the way that high marginal income tax rates deter people from putting in extra work and effort.

  12. Terry
    Posted February 22, 2015 at 1:14 pm | Permalink

    This is all explained by one Arthur Laffer whose analysis in 1974 recognised and highlighted the inverse relationship between higher taxation and Government revenue returns. He even produced a chart to indicate the critical levels. The Laffer Curve.

    This is a well known economics tool and JR’s figures prove its worth. However given that Ed Balls is an ‘economics expert’, I would have thought he would have foreseen the obvious detriment to the Exchequer of introducing higher taxes and talked down such a move, recognising that the current level is OK. Ditto the thinking of Vince Cable, another ‘economics expert’ who enthusiastically supports a higher tax regime. Throw the other like-minded lefties into the pot like the Greens and the SNP for example and the electorate should end up with just two main choices, Conservatives and UKIP.
    Sadly, many of the electorate do not select their man from economic evaluations nor for the policies they may proclaim. No, they decide on looks, PR or inbred loyalties or in some cases, inbred hatred.
    Proper democracy calls for one man one vote but given the current abuse of that principle over our freedoms of speech and freedom of choice, I wonder if we should introduce an examination (like a driving test) to certify the ability to deliberate all manifesto points and then vote for the one believed the best party to run our country. And for the producers of the manifesto – they must be forced to conform to their programme as written down prior to any election. No more saying one thing then doing another and getting away with it. I’m sure the Judiciary system could ensure that. Maybe.

  13. Terry
    Posted February 22, 2015 at 1:39 pm | Permalink

    What is wrong and grossly unfair in the UK tax system is that Share Dividends are taxed at just 15% . For a person earning £1 Million per year from them he/she pays just £150K. Of course they have to be rather rich when most dividend payouts are not much more than say 2%. However, to a person earning £1M per year the tax bill would be at around £450K. Is that fair? So we can see that although the top 20% of earners here may pay some 80% of all tax revenue many of them are not paying enough.

    Now we can see exactly why the rich are getting richer and why they come from all over the world to live here. Is that fair? Is that right?

    • Ted Monbiot
      Posted February 23, 2015 at 4:19 pm | Permalink

      The dividends are paid after the company the profit came from pays corporation tax and then if you are a higher rate tax payer you pay that extra slice of tax on the dividend you receive.
      The main advantage is there is no NI payable on dividends.

    • libertarian
      Posted February 24, 2015 at 5:09 pm | Permalink

      Terry

      “What is wrong and grossly unfair in the UK tax system is that Share Dividends are taxed at just 15% ”

      No theyre not and never have been. Did you not even bother to check before you posted your guess?

      Dividends are taxed AFTER corporation tax has been paid at 23%

      Then basic rate tax of 20% is deducted at source
      Then higher rate tax payers pay 37.5%
      Those earning over £150 k pay 42.5%

      Your entire post is nonsense

  14. James Reade
    Posted February 25, 2015 at 9:55 pm | Permalink

    Are these numbers adjusted for the level of economic growth in the years you are comparing?

    The comparison between the 45% and 50% band is an important one to make, but it’s particularly important that the comparison is like for like, rather than apples and oranges.

    Depressed output growth in 2010-13 vs much more buoyant output growth in 2014-15 makes for more of an apples and oranges comparison.

    • Edward2
      Posted February 26, 2015 at 2:24 pm | Permalink

      Would you also adjust for the amount of growth created by having lower tax rates in the first place?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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