This September Income Tax receipts were £9.5 billion. In September 2010, a year ago, Income receipts were £10.3 billion.
An 8% fall in Income Tax revenue is unusual. The government hopes there are special factors. Perhaps you should not read too much into one month’s figures.
The problem is, there is evidence that successful and well paid people are taking action to avoid paying the 50% tax rate. Why not, they reason, leave some of their high remuneration in the company or other financial structure? Maybe the rate will come down, and then it can be distributed as income. Or maybe they can sell the company and get a capital gain with the accumulated extra profit. Or maybe there is a way to switch the company overseas. The one thing some want to do is to avoid paying too high a salary or bonus and having to part with 50% plus to the taxman.
Maybe some teams and highly paid individuals within financial institutions are simply going to lower tax centres elsewhere. In which case the income is permanently lost.
September also showed no increase in fuel duty receipts compared to a year earlier. The higher fuel price and the current level of fuel duty is stopping people from buying as much fuel as they could afford a year ago. The revenues have for the time being plateaued, after years of good growth.
I have written before about the lower revenues that follow naturally from slower growth, compared to the Chancellor’s five year forecast. We need to add in the impact that the squeeze on incomes across the income scales, and the 50% tax rate are having at the top end.It may be that higher rates of various taxes are self defeating. The Budget book forecasts less Capital Gains Tax next year when we get the full year effects of the higher rate.
This month there are also signs of a revenue squeeze on Income and fuel duties as well.
October 26, 2011
“…well paid people are taking action to avoid paying the 50% tax rate. Why not, they reason, leave some of their high remuneration in the company or other financial structure? Maybe the rate will come down…” So! We are not all in this together then? !
October 26, 2011
All can and should take action to reduce their taxes legally – it seems is probably the only way to stop government wasting it as democratic control is so week. Also to make sure it is spent rather better. Spent or invested directly by the earner rather than wasted – as the government so frequently seems to do.
October 27, 2011
By agreement I paid my builder in cash payments, some is declared some is lost or just used. The barter system is also in wild use where a bricky will do a days work on one project in exchange for that skilled person doing a day on his project. If you over tax and waste then real people will take action.
October 27, 2011
Let’s hope he did the job right and was not a fly-by-night, because if he didn’t you will have no comeback. Most reputable tradesmen are just concerned about being paid. Not how.
October 26, 2011
Indeed the high tax rates are having exactly the effect one expects – shifting activity and people abroad, reducing growth, discouraging people from working, moving house, buying petrol and all the rest.
So what does Cameron say yesterday? He said he wanted to “Keep Taxes Low”.
How on earth can he “KEEP” taxes low? – The UK has some of the highest, most damaging and counter productively high tax rates in the World (and high inflation too) discouraging activity and growth and shifting it away from the UK.
He will not get any “growth” if people are not buying fuel for their cars to go to work – the roads are very quiet I noticed traveling two weeks ago.
Cameron talks much of reduced regulations, “keeping” low taxes, making the UK business friendly but he has done (and is still doing) the complete opposite with exactly the result you illustrate above.
He should do the right things (as well as just saying them) it is the doing that really matters though.
No one now believes what he says anyway.
October 26, 2011
Almost one million under twenty fives looking for work in the UK I hear – the highest since records began in 1992.
How does keeping this number of our youth unemployed help our growth prospects for the future? Cameron and Clegg please listen for a change – they are not working because the government policies encourage them not to and discourage and prevent real jobs from being created.
We need cheaper energy, lower taxes, bank lending, fewer employment and other regulations and some confidence in the government’s true sense of direction – all are lacking or heading totally the wrong way.
October 26, 2011
To Clegg & Osbourne in particular – keeping the 50% rate and the green energy (just for pathetic political appearance) when you must know they both destroys growth, destroys jobs for people and reduce overall tax revenues is evil and morally repugnant.
October 26, 2011
You really should do more investigation as none of the things you listed are causing so many young people to remain unemployed.
Employers are not employing the young because they don’t want to pay for the cost of training them to do the job (especially small companies as the larger companies tend to poach their staff). So they hire older staff with more work experience who don’t require training.
Even if companies do create more jobs the young with little work experience will not benefit as companies will only hire them if there is no one else. Until the Government is willing to offer training for young people so they can develop the skills employers want youth unemployment will continue to rise.
October 29, 2011
In Russia young woman are employed in large numbers. They are so cheap to employ and the shortage of men forces employers to employ them sometimes more than necessary for the work required, though other services may be needed by the male employer. As soon as men become available they are sacked. So much for woman’s rights. If you think they are any good, even for that, you are wrong. Maybe this is what the minimum wage is holding back?
October 27, 2011
Almost one million under twenty fives looking for work in the UK I hear – the highest since records began in 1992. Clearly useless as employers would be bidding for their services.
As you say if they were any use they could get a job easily right next to their house paying decent wages, but no doubt they are bleating about how the government is causing them to be unemployed by high taxation and regulations.
If they got a job and got sacked for getting a bad cold or sick relative and not turning up, then they should have already have another job.
Bone idle young people today huh? All they need is a chance for a tax dodging business to exploit them, their benefits cut and they would have job. Until they got sacked on some trumped up charge because a more desperate, cheaper, thinner person was found. They would in turn be hopefully more desperate and not get the sack next time? Getting ill is against the rules anyway. Look! It’s in your employment contract next to. I like being sacked and agree to this.
If I could find someone to clean my car for fifty pence. I would have it cleaned every week, but no! Some want a fiver! What do you need to clean a car? I would even provide the water. School boys seem to do OK at this price. Ad lib ad infinitum or at least until the next G&T.
October 26, 2011
The UK has one of the highest tax burdens for both low and high earners of any major economy, reveals new research by UHY, the international accounting and consultancy network. The 7th highest taxation in a recent survey in both categories.
The result is the declining revenue you report above and lots of unemployed or under employed people and much excess wasted capacity.
Still perhaps Cameron can sort out the “hugely important issue” of a change to the 1701 Act of Settlement, which would scrap rules that put a male child ahead of his older sister in the line to the throne and drop anyone who marries a Catholic from the royal line of succession. Or perhaps finding yet more second rate woman to push into save seats and join the rest of them as lobby fodder.
October 26, 2011
We last killed off a monarch in 1649. Since then, there have been occasions when a monarch was found to be unsuitable, regardless of the line of succession. So we found ways around it: the Bloodless Revolution of 1688, the Regency, the Abdication. I’m sure we’ll manage to do likewise if necessary. It certainly seems bizarre to legislate now for an issue that is unlikely to become pressing for another 60 years.
October 26, 2011
Yes he seems to like such silly distractions but then he says we cannot have an EU referendum as it would be a “distraction” from the EU’s Titanic journey.
It seems not all distractions are equal to Cameron.
October 26, 2011
The economy did not crash due to government spending or high taxation. Another one of your fantasies. You have an almost cult like belief in this that companies making money will somehow pass this on for the greater good and higher living standards. Much evidence seems to show this to be untrue.
October 27, 2011
The do not pass it on “for the greater good” it is just that as they build up their business they have to pay people and bills so it is passed on.
October 27, 2011
They are not here to use resources and infrastructure without contribution and many are.
October 26, 2011
Have have the 6 countries with higher tax rates reduced unemployment?
October 26, 2011
Unlikely
October 26, 2011
I am not sure what special factors would explain income tax receipts (down 8%) other than fewer people working and lower wages this would be consistent with the lower fuel consumption figure too. All pointing to very low growth and much wasted talent and capacity due to Cameron’s and the EU’s destructive, big malignant state, policies.
Can we not have a video of your speech in addition to the text I cannot get the debate on the BBCiplayer I only caught a bit including the Bagpuss speech between meetings?
October 26, 2011
The odd thing is September had 5 Fridays, so those paid weekly will have had more than the average number of paydays in the month.
October 26, 2011
Mark – so it could be even worse in reality than the appalling 8% down then – what proportion are paid weekly I wonder?
October 26, 2011
The roads have been more quite during the last few weeks because it’s half term in most schools, so there are fewer parents are taking their children to school.
October 27, 2011
We need to start to make things in the UK. Jobs are the only solution. Without work we could see a revoloution. A man needs to work, to support himself, to feed his family. Without this politicians are of no value or use.
October 26, 2011
“This September Income Tax receipts were £9.5 billion. In September 2010, a year ago, Income receipts were £10.3 billion. An 8% fall in Income Tax revenue is unusual. The government hopes there are special factors and perhaps not too much should be read into one month’s figures”.
A statement of the blindingly obvious, I would have thought? If I am typical of a very substantial number of taxpayers with a real income being almost continuously reduced by inflation, energy costs and lowered return on investments I simply spend less and my contribution to fuel tax, VAT and the raft of other tax-take measures goes down accordingly. Q.E.D.
October 26, 2011
£0.8bn / £75bn = 1.06%
No need to panic, plenty in reserve.
Carry on spending.
The problem with debasing the currency is that it cheapens the value, both real and imagined, of money. In a day where we read that we’ve already given £12bn to try and save the Euro (and no one can doubt there is going to be plenty more where that came from) £0.8bn seems like a rounding error instead of a colossal sum.
Now we simply shrug our shoulders and say ‘£0.8bn down? Hardly worth getting in a sweat over, things will improve over time let’s just pretend everything is going to plan and carry on regardless’.
October 26, 2011
When Mr Brown was in office, we noted that taxes were already higher than sustainable. The UK is well to the right of the Laffer curve, where revenue falls as
Governmental greedtaxes climb ever higher.The election of Mr Camerons Coalition has seen no change, partly because of the dead hand of expensive Lib Dem policies (especially Mr Huhne), but also because of the natural inclinations of Mr Cameron and Mr Osborne.
The quickest way to balance the books is to spend less money – printing more merely kicks the proverbial can further down the road. It is only possible to start paying off the debt when the UK is out of deficit and back in surplus – I am not convinced that Mr Osborne is aware of this…. Although there have been a few savings through cuts, this has been wasted on propping up Eurozone countries, and giving the money away to foreign aid.
We have seen just how disconnected Westminster politicians are from the Country by their actions on Monday. The fact that wealthy front bench Ministers have no concept of how difficult it can be to survive (never mind flourish) out here in the real world should come as no surprise.
October 26, 2011
What?!?! UK well to the right of the Laffer Curve?!
Show me some evidence. I’m prepared to be convinced by some good convincing evidence on this, but you provide no links, nor anything here that would even start to convince me. Just stating something doesn’t prove it is the case.
October 26, 2011
Well it is hard to say many used to think that the maximum revenue is around the 70% tax take if all the world were at the same rate then this 70% would perhaps be right. Hence the push for world higher rates from the likes of the EU.
Personally I think it is far lower (and the figures above suggest I am perhaps right) because we are in a more and more international market with cheap flights, transport and instant communications. Also more and more people are happy to move. Many actually want to try living elsewhere out of interest even if tax/pay is very similar. If a company is just 5% more expensive production can go fully to India say at the drop of a hat or two.
I think about 35% is the optimum for maximum tax take. About 20% the optimum for maximum benefit for the public in general.
Clearly it depends on what level and quality of services and infrastructure is being provided and how efficient this is. There is also a long time lag initially if you lower rates then tax take goes down initially. Then it rises as people adjust their behaviour. If you put rates up you get more tax but only for a period until people & business adjusts again.
An expectation of lower rates to come is also very beneficial (Cameron and Osbourne please note)
In the UK with employers and employees NI circa 22%, council taxes, fuel duty, flight taxes, vehicle duty, alcohol tax, 20% VAT, capital gains 28%, landfill tax, income tax up to 50%, fines, stamp duty 5%, penalties, charges and all the rest it is very, very, high. Also in the UK government services and infrastructure is generally poor on both services and infrastructure by comparison with many developed nations. Furthermore huge amounts of pointless effort go into collecting and avoiding these many highly complex taxes.
Many so called government services are just another way of fining, charging or inconveniencing voters in some way or another anyway.
October 26, 2011
Proof? Impossible. If there was such a thing as proof in economics, a large number of “experts” would lose their jobs overnight!
My knowledge is personal and anecdotal. I now approach my work differently as a direct response to high taxes, and I know many people running small businesses who have rearranged things to take the smallest tax hit. Five years ago, it wasn’t the case. Now we are all comparing notes to make the most of the smallest oportunity.
It’s not all about links on the internet. Lies, damn lies and statistics to be found there! Taxation has a direct effect on the confidence and mood in the economy, and you only have to talk to those who are affected to understand the situation.
The nearest I can give you to numbers is this. According to the latest Government statistics, the amount of money raised in fuel duty has dropped radically (in spite of the rate rise the the start of the year). Higher tax has not resulted in more tax take, which is exactly what being to the right of the peak of the Laffer curve is all about.
Now, you might say that fuel duty is not the only thing that affects car useage. Quite true, but the number of people employed has not changed by much – certainly not by enough to explain the flagging fuel sales. It is an effect of the overall lack of money that people have to spend. Taxes have gone up (VAT, NI, fuel duty to name but three) and the revenue raised from at least one of these taxes is demonstrably falling, even with related factors not changing.
So, I still believe that the UK is on the wrong side of the Laffer curve, whether you like it or not.
October 27, 2011
I too believe that the UK is on the wrong side of the Laffer curve. Anyway taxes should certainly not be at a rate to maximise the tax receipts. That might mean virtual slavery with the state just providing the occasion meal and drink and the population forbidden from escape.
It should be fixed by democratic control at the far lower level of “maximum good for the maximum number of people” about 20% of GDP I would suggest.
October 26, 2011
So Government monthly revenue is down. Who gives a hoot? Spending is entirely independent of revenue. Any shortfall is borrowed, and what they can’t borrow, they’ll print. They run their own rich publicly-funded expense-account lives the same way, so why should we expect the organisation to behave any differently.
Any awkward questions from the electorate are, like flies, simply flicked away.
October 26, 2011
If only it were as simple as just printing it .
October 26, 2011
Every now and then a little window opens onto the tax collection system. A Dragon in the Den remarks to someone who has received a government grant that if that is where his tax is going, then he is moving offshore. A lady in the gym has a line on offshore banking. She tells me that business is booming, especially at the moment. Pictures of a man with his baseball hat on back to front and casual clothes faces what seems like total chaos in the Treasury.
If you muck people about, then, of course, they get out of paying tax; they do not have to be Greeks.
But more sinister, are you absolutely sure that the vast bureaucracy that is the Treasury, running a system that the Scottish Genius made very complicated indeed, is not getting seriously unable to cope with the taxation system – hence the decline in revenue?
October 26, 2011
Reported in the Telegraph today:
A final draft of the Beecroft report for Downing street, says the first major issue for British enterprise is “the terrible impact of the current unfair dismissal rules on the efficiency and hence competitiveness of our businesses, and on the effectiveness and cost of our public services.”
“The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation.” Mr Beecroft in particular highlights abuses of the law in the public sector, where managers have been forced to offer under-performing staff large settlements because they fear costly tribunal rulings. The report says that the unfair dismissal rules have made public bodies “reluctant to dismiss unsatisfactory employees”. “ therefore accept inefficiency that they would not tolerate if dismissal of unsatisfactory employees were easier.”
Perhaps Cameron IS finally doing something at last? I suppose it will rapidly be buried now it has been leaked. Doubtless Cameron, Clegg, Huhne, Cable, Clark and the rest of the lefties will see to that. Anyway nothing is likely to take effect before the next election is lost at this rate of progress.
October 26, 2011
Working out the average income tax from you figures it is about £300 per worker per month so average pay is very low indeed how do they afford to pay £130 LEA parking fines, their council tax, travel to work and feed the family? The answer is they don’t many get it topped up with family tax credits & benefits so the companies have little incentive to pay any more as it all goes in tax and/or loss of benefits. So they cannot get them to work overtime and the like. Once again the state gets in the way of productive business.
October 26, 2011
I trust you’re referring to this article:
http://www.telegraph.co.uk/news/politics/8849392/Dismissal-law-stifles-growth-says-No10-report.html
It’s little more than bad employers whining about how unfair it is that they can’t abuse their staff or that they have to stop work place bullying.
It also doesn’t mention that France and Germany don’t suffer these problems despite having far more strict laws regarding dismissing employees, or that workers in UK branches are more likely to lose their jobs because it’s easier to fire them than their Continental European counterparts.
October 26, 2011
France and Germany have similar and even worse problems.
October 27, 2011
You should look into what Germany did in the early 200’0s.
They came to the conclusion that employment law was so strict and it was so difficult to fire people that it was ruining their economy so they ripped it all up and made it far easier to hire and fire people.
There was a lot of gnashing of teeth about it at the time and in some quarters there still is today with some people saying it was a good thing and others a bad thing but what most agree on is it transformed the jobs market.
It’s easy to fire off glib statements along the lines of ‘France and Germany have stricter laws’ and in France’s case it may be true as I’ve never looked into that but in Germany’s they faced the exact problem we face now and implemented a solution that makes a nonsense of that statement.
I learned this in a podcast from NPR Radio (kinda like a US version of our BBC so not right wing but I like it all the same). I won’t post the link here but if you google ‘NPR Radio Germany’s Painful Unemployment Fix’ you’ll find it.
October 26, 2011
If you want less of something raise tax on it. If you want more then lower tax on it.
This government has increased taxes on employment, income, transport and entrepreneurs in general. Why is it a surprise that all these things suffer? Just about every policy Dave & co have followed has had a negative effect on the economy. Add that to their contempt of the electorate and willingness to give away sovereignty and you have another disastrous government. How many useless, destructive regimes can Britain take?
October 26, 2011
“If you want more then lower tax on it.”
Or encourage it with tax credits, grants and other handouts.
Single teenage mums being a prime example.
October 27, 2011
Indeed the feckless in general.
October 26, 2011
Many people I trade with are not doing overtime. The roads are noticeably quieter at the moment round central Scotland. There may be other factors than the dislike of 50% tax rates (which I share ) for a fall in revenues. Our economy is not booming.
October 26, 2011
The roads are quieter because it’s half term, so parent’s aren’t taking their children to school.
October 26, 2011
Roads round London were very quiet two week ago – I had never seen it so dead in over 20 years.
October 26, 2011
Taxes will continue to reduce as the public tries to mitigate rising fuel and energy costs.
Contrary to the flyer in my tax demand stating that taxes are necessary to fund health and education, I think most people know that a good proportion is wasted on overseas aid and the EUSSR together with bailing out the doomed EURO.
We have a duty not to pay excess taxes and I will certainly do and have done jobs cash in hand to deprive the stupid government of revenue to waste on vanity projects
October 26, 2011
I would not encourage anything illegal but I think it is perhaps everyone’s moral duty to avoid as much tax as they can legally as this is the only way the government will have to stop wasting it.
Use gifts to charities, the Enterprise Investment Scheme, move your business/labour abroad, get a good tax accountant, do more DIY and bartering.
The less tax they get the less they will have to waste.
October 26, 2011
They get less tax and they will raise the taxes that are difficult to dodge to make up the shortfall.
It’s the Government’s moral duty to collect as much tax as they can legally.
October 26, 2011
That surely is slavery is that not illegal? Anyway they only waste it buying votes, on HS2, a dis-functional NHS, renewable nonsense or white elephant stadiums, feeding the PIGIS or similar.
October 26, 2011
“It’s the Government’s moral duty to collect as much tax as they can legally.”
Since when?
Surely, it’s their moral duty to keep it to a minimum, not to tax and squander. That’s how you ruin an economy.
October 27, 2011
Use cash whenever possible
October 26, 2011
I would…
October 26, 2011
I had to laugh at the absurd figure of Vince Cable as reported in the telegraph:
Vince Cable fined for failing to pay £25,000 VAT tax.
It is rather easy to stumble over the VAT threshold and penalty rules (doubtless they were written with this ease in mind) and therefore get the payments wrong as he has seems now to have discovered.
One has to ask, however, why would people want to pay this rather dopey man an estimated reported £192K from speeches and book deals. Is the public really getting value with whatever is left of his time spent at his full time job as business secretary? I tend to think he is doing far more harm than good. Perhaps release him to do more speeches and help the tax receipts.
Reply: All of the income is prior to becoming a MInister. A Minister is not allowed any outside income.
October 26, 2011
Perhaps he should be released to work freelance again it would be good for the tax receipts and business.
October 26, 2011
Indeed, Laffer is probably laughing.
A small observation if I may, when I take my son out on the weekend to various petting farms, zoos or other locations which interest two year olds, it invariably costs me more in fuel than admission. Madness.
October 26, 2011
Take them to Lego Land in Windsor ,
Will cost you over a hundred quid .
Almost enough to drive them their in a Centurion tank .
October 26, 2011
I have long believed that only Labour would ignore common sense regarding taxation, purely to “show the poor people how cruel we are to rich people”.
Now it seems that the UK’s left-wing media really do drive everything and the Tories are unfortunately too afraid to do the right thing, because of the media backlash.
Again, this plays into Labour’s hands, if, for example, tax on fuel had been cut by 50%, and the economy had grown instead of shrunk, then Labour would be looking at another 10 years in opposition instead of only 2 more.
It is crucial, if you care about the country, to make the BBC less of a haven for left-wing idiots who hate the Conservatives. CUT THE LICENCE FEE. TO NOTHING. MAKE THEM EARN THEIR WAY, LIKE EVERY OTHER MEDIA ORGANISATION IN EVERY OTHER COUNTRY. Oh, except for dictatorships and socialist countries, there it is important to control the media and ‘ensure the message’.
In a true democracy, the media NEEDS to be free.
October 26, 2011
Erm, the media is free. You can take refuge in the Torygraph and Daily Mail. They cater to your kind of paranoia.
October 26, 2011
The TV licence fee is an anachronism, the BBC should be forced to compete for viewer subscriptions and pay tax on their profits.
That would put a stop to all their mass jollies to various pop concerts and sporting events. They should be filling out P11Ds for such freebies?
October 26, 2011
James – It seems to me that the BBC is politically biased; especially in drama where there always seems to be an underlying left-wing message.
Call me paranoid if you will. I’d call myself aware.
Papers are paid to be biased. The BBC isn’t. It forms the background noise to our daily lives and has far greater influence and reach than the press.
This might explain why people might not be worried about Europe as you say. (Personally I think the polls are right) That the BBC had not done its duty in offering a balanced view of things.
Do you not think the people should be worried about Europe and interested in a referendum ?
Wouldn’t it be more incredible to you if you found out that they weren’t ?
I have to say I was always very concerned about Europe and I too was vilified as being ‘paranoid’.
Turns out I was right. It’s an unfolding disaster which is, quite frankly, beyond belief.
October 27, 2011
No media are free: I have to pay for a TV, licence, power, laptop, broadband connection… Council tax and train fares go towards the cost of disposing of the Metro and local papers.
October 26, 2011
Of course the true rate of tax paid on earnings above £150,000 is 65.8% when employers and employees NI are taken in to account.
The key issue here is less the unwillingness of a business to spend almost £300 in order to leave their employee with £100, it is the fact that the impact on net profit and therefore the return on investment for the business owners is so significant. That is stopping people from investing in the UK and starting businesses here.
I wonder what the start-up rate is for new businesses and whether the 65.8% top rate has affected it?
October 26, 2011
Can we PLEASE get the arithmetic right?
Each extra £10,000 of nominal pay costs the employer £11,300 because of the employer NI contribution, while the employee pays £5,000 in income tax and £200 in NI. The total tax bill is £6,500 on cost of £11,300, or 57.52%.
James Mirrlees assessed the burden of indirect taxes such as VAT and duty to increase the overall take to 63.7%.
October 26, 2011
I am pretty sure it is not 65.8% and 13.8% of this is paid by the employer who prices the job in the first place and takes this into account.
Employers/businesses should be paying more into the pot to offset the tax credits that their low wages are being supported by.
Too much of the burden of government spending (increasing still) is borne by individuals, time for companies to pay in training (youth not imports) and tax.
By all means drop 50% tax rates but find the extra from employers.
October 26, 2011
How many folk starting up businesses are already earning £150k? Why this preoccupation with this high tax? If I wanted to start up a business, I personally would not be put off by the 50% tax band but many of the other bits of red tape getting in the way.
It’s hard to escape the obvious conclusion for this rabid focus on the 50% band but I’ll resist the urge to state it.
October 26, 2011
Some data from the astute Alice Cook:
http://ukhousebubble.blogspot.com/2011/09/uk-income-tax-who-pays-how-much.html
Last year those 327,000 taxpayers contributed £43.6bn in income tax (and more in NICs, VAT etc.). I’d rather they were numerous enough to contribute even more, rather than melting away and leaving a higher burden for everyone else – but perhaps you think we all need to pay more?
October 27, 2011
You may not personally have to pay the 50% rate but you are very likely dependent on people who are, for example senior surgeons, senior executives of companies which provide you service and employ people at the lower wage scales who pay you for goods and services.
If I want to start a business I am likely dependent on such a company.
If a board decides to move that company or work offshore because of unweildy regulations and taxes and the management encourage them because they can then move to a lower personal tax environment what then? I can tell you from personal experience – you eventually lose income or your job and our economy loses yet another element in it’s critical mass or my startup is increasingly unable to source key goods and services locally.
The problems you are ignoring are the same the unions have always chosen to ignore – competitiveness, complexity and time. Mess with an economy founded on complex inter-relationships and eventually your choice will come back to bite you and others.
October 26, 2011
According to the HMRC website you pay 12% NI on all your earnings between £139 and £817 per week (£7,228 to £42,484 per year). Anything over £817 per week you pay at a 2% tax rate.
http://www.hmrc.gov.uk/ni/intro/basics.htm#4
http://www.hmrc.gov.uk/rates/nic.htm
So the 50% tax rate + 2% NI is a 52% tax rate, not 65.8%.
October 26, 2011
Revenue 8% lower?
On Libdem logic this should lead to a call for 60% income tax rates. Clearly the rich are paying less tax so tax rates at the top end need increasing.
October 26, 2011
I see that our Business Secretary hasn’t got a perfect record in paying his tax either. The media today report his failure to register for VAT and consequently failed to pay the VAT due at the appropriate time. Apparently such a failure is normally punished with a £1000 fine but in Cable’s case it was only £500 – I wonder why? Cable must be relieved that he isn’t a Conservative MP as Cameron would have him out but since he is a Lib Dem – ‘hey these things happen in a busy life’.
October 26, 2011
Of course, a more sympathetic view would be that the various Adminstrations over the years (especially the last one) have conspired to make the tax system increasingly complicated. It’s now so bad that even an intelligent and educated man like Mr Cable can make a genuine mistake and be fined for it.
If Mr Cable wants to learn from this experience, perhaps it might be used as a spur for him to drastically reduce legislation and red tape within his own department, and to lobby strongly for the simplification of both the tax system and Treasury.
It doesn’t seem likely, though.
October 26, 2011
VAT Threshold
But not too difficult to find out if one wants. I am busy too.
October 26, 2011
I have been VAT registered since I went self-employed a couple of decades ago. However, most people do not have to register because of a bit of extra work that they are doing aside from their normal day-job.
So, however annoying I might find Mr Cable, I do have some sympathy with his not realising that he should have registered.
There are probably lots of taxes that could apply to me (and probably you) on statute that you might not immediately be aware of without research. My general hope is that if I behave responsibly, I shouldn’t fall foul of an unexpected law. However, there might be some things that I have done (or failed to do) in all innocence that could be seen to be wrong – I just don’t know what they are. No matter how careful you are, you will never know everything.
Mr Cable has had the situation explained to him by his accountant. If he had not employed the accountant, which he is not obliged to do, perhaps nobody (including Mr Cable) would ever have known. As he was not registered, I shouldn’t think that he has included VAT on any invoice he issued and kept the money – it’s not exactly Carousel Fraud, just a mistake.
I can’t believe I’m defending Mr Cable. Time for a rest in a darkened room….
October 26, 2011
Mick
Whilst I agree with you sentiments about not being aware of all of the tax laws given the huge and complex subject it is, ignorance is no excuse, at least that is what you will be told should you fall foul of anything.
Indeed we now have a system where you are assumed guilty, and have to prove your innocence, should the revenue automatically fine you for an alledged offence.
October 27, 2011
Ignorance of something you cannot reasonably be expected to know should be a valid defense.
Company directors cannot possibly have read let alone know and understand all the laws and regulations they are governed by they can only try their best.
October 26, 2011
Ah yes, almost the workings of the pocket money plan.
I outlined this many months ago.
At the moment, work hard, let the State take most of your income, take a huge slice of your spending, take some of your savings interest, take some of your estate when you die, and you (or family) can keep what is left.
The simple solution with the same effect, but less overhead cost, is the pocket money plan.
The state simply takes all of your wages and gives you back 25% of what you could earn (state set limits for each job) completely and utterly tax free, for you to spend as you like. simple solutuion which requires no VAT calculations staff or collection, requires no tax form to compete or inland revenue officers, no national insurance staff, infact it only requires a few people to calculate how much each job should payand calculate the pocket money to give you.
Indeed such is the wonder of the scheme that you could advertise the UK as a nil tax (tax free) society/country.
Indeed the government could even claim with the pocket money plan that there would be no tax dodgers to catch, although the problem may then be with people doing barter trades, which seems popular in southern europe.
The above is of course rubbish, or is it ?
Calculate exactly how much government take from your gross income, from the many and varied forms of taxation and it probably is close to 75%. for those who actually do work, and earn above the average wage.
Makes you really wonder if working hard is really worth it.
Makes you wonder if setting up a business is really worth the risk-verses-reward.
Makes you wonder if employing more staff is really worth the hassle.
No surprise that fuel duty is down John, whe have noticed a reduction in traffic (other than at school run times) on the A329 outside our house for the last 18 months, and no new roads have been constructed to take traffic away.
Also consider that new cars are more efficient than older ones, so it is clear that less fuel would be used for the same number of cars on the road doing the same amount of mileage.
Thus private industry is doing its job to reduce our carbon footprint with advanced technology without the subsidised so called expensive green widmills.
We need to get back to encouraging the work ethic with rewards, not penalties.
Simples.
October 26, 2011
It should be no surprise that people and businesses are trying to reduce their spending and tax burden. It is a fact that some financial businesses and their highly paid employees have moved to more tax friendly regimes. I know of a couple of companies that accelerated dividend payments to beat the 50% tax and have paid nothing in the interim. I suspect the same applies to bonus earnings. For entrepreneurial types the contrast between a top rate income tax rate of 50% (62% including NI?) and CGT at 10%(?) could hardly be greater; the choice is obvious. On the roads, it is noticeable that vehicles are driven more slowly – presumably to save fuel. It is what happens when dogma and the politics of envy overtake rationality in setting tax rates to maximise tax revenues.
October 26, 2011
Make a flat 15% tax, and the govt will probably collect more revenue.
Why wont they even consider that ? Because they are so wrapped up in attempting to rig the market and bribe participants with tax favours that they cannot extricate themselves.
October 26, 2011
Gary
Why wont they even consider that ?
Its too simple and you would not need hundreds of thousands of people to run it.
You should know by now, government is only interested in complicated systems which cost a fortune to run, a fortune to purchase, a fortune to investigate, and a fortune to get rid of.
Why cahnge the habit of a lifetime !.
October 26, 2011
Mr Redwood
I wonder if the loss of revenue may be a symptom of a broader issue? I do have the feeling that the earning / striving segment of the population is slowly losing faith in the political process (“they are all the same” etc etc). I have anecdotal evidence that many of that class, who were of the most law -abiding, are doing whatever they can to limit the ability of the government to take their money.
October 26, 2011
I’m starting to wonder what the point of working is .
Fully expect whatever I have saved to be confiscated and not just silently by way of inflation .
Why flog yourself to death for mediocre money ?
The only jobs which pay well are either in particular segments of the public sector or the finance sector . It’s hardly worth doing a proper job .
Little incentive to try and better yourself .
October 26, 2011
The demographic prospects don’t look good for Britain either.
Ms MSc having one carefully raised child whilst Vicky Pollard has six. Billy BA can forget breeding as can Alice A Level – they’ll be to exhausted struggling to pay rent to …
The disasterous effects of such skewed incentives should be obvious for all to see now.
Perhaps a Government without money might be a good thing.
October 27, 2011
A government with just enough money for defense and law and order would be a wonderful thing.
October 26, 2011
I think you are right that in effect the turkeys are not voting for Christmas. I’m aware of several very wealthy families that have over the course of the last year very quietly moved overseas (Madrid seems popular for non-doms too) and find myself in the position you highlight- money builds up in the company but I have no present intention of converting it into personal income. The cost is too great. The challenge is politicians in general (with your good self as a notable exception) don’t understand the outcomes of their policy choices. Removing retirement obligations in aggregate diminishes the future value of the workforce while probably increasing youth unemployment. Translating the swing workforce (temps) into permanent employees ( the largest component of business costs) increases cyclical business risks such that the risks become all too easily seen as to skewed to failure and the rational business decision is move the jobs outside the EU (again I have done this myself this year hiring in the US rather than the UK). Probably the most serious error has been raising taxes on fuel. Mostly getting into a car is done for the purpose of earning money or spending money; rarely do people drive around the block. If we want to encourage economic activity then cut fuel costs by printing some further QE and use the proceeds to cut fuel taxes. There is a lot government can do to encourage recovery but not a lot is being done.
October 26, 2011
“I’m aware of several very wealthy families that have over the course of the last year very quietly moved overseas (Madrid seems popular for non-doms too)”
Did they leave their job behind or were they able to take it with them?
October 26, 2011
Many jobs are quite portable. There are of course a few very well paid jobs that aren’t: at the top of the BBC, quangos, and some local authorities for example. Top surgeons and doctors have no difficulty abroad, and the same is true of other professionals, top entertainers and musicians etc.
October 27, 2011
Yes, all the jobs and their unfunded liabilities that we pay for!
October 27, 2011
Effectively they took their franchises with them. They are economically active and, as is the nature of proximity, over time their new domiciles will benefit as their UK connections wither
October 26, 2011
Blame it on the massively disproportionate power the Libs have in Government. If Cameron does not see the mistake of this Coalition and soon I can see him being toppled as Conservative Party leader long before 2015.
October 26, 2011
“Cast Iron Dave” clearly needs to go. He is a PR man who lacks the competence to manage his own PR. He clearly is intellectually lazy. He lacks the guts to do what needs to be done; i.e. actually cut government spending, get out of the EU, radically change our tax structures, cut back the powers of an activist judiciary, fix the MoD and ensure we can actually defend ourselves. None of these things is easy but he appears not to have the nerve to attempt it.
October 26, 2011
“cut back the powers of an activist judiciary”
Can you provide any reasons as to why this is necessary?
October 26, 2011
We don’t need to pay for Parliament, the EU and the judiciary to make our laws. One law making body really should suffice.
October 27, 2011
The Human Rights Act. Every week provides another example of judges cramping the government on issues as diverse as uncontrolled immigration and votes for prisoners. Nobody voted for any of this. If judges want to do this, they should stand for election.
October 27, 2011
Leadership need a sense of direction and an ability to get people to follow Cameron lack the sense of direction but is good otherwise. Alas the sense of direction is the most important thing other wise you just lead happy people over the cliff.
October 26, 2011
A.Sedgwick: “I can see him being toppled as Conservative Party leader long before 2015.”
First thoughts.
1. Could you Tories elect a competent TORY this time?
2. Cameron has/is in the process of destroying the Conservative brand again.
3. Leading to the accusation when his successor gets elected (assuming it’s someone right of centre )” The British people don’t want Conservatism”.
In fact what our host says all the time, Right wing Tory leaders were rejected, referring to Hague, ADS and Howard.
Well we have now discovered that Hague was pretending to be right wing and Eurosceptic all along. If he had no confidence in his political posture is it any wonder he couldn’t rally anyone else to support him.
ADS might have been, he was trying something radical at W&P but who knows, his personality is so low profile no one probably noticed he was leader.
Nothing to say about Howard. Other than he was not so much right wing more authortarian, his love affair with Id cards for instance.
Reply: Hague, Duncan Smith and Howard all became Leader
October 26, 2011
JR: “Hague, Duncan Smith and Howard all became Leader”
Yep.
And as a result you often say, the British people rejected right wing leaders of the Tory party and by implication right wing policies.
Well, with Hague, we now know why. Just not convincing old chap, you know something a bit fishy about that one. Turns out he was pretending to be right wing all along.
Howard rather too much of the authoritarian about him, his ID card fetish.
Then there was IDS. Who? You may well ask.
October 26, 2011
Non were electable because Blair was not all that bad at the time and they still remembered the disaster Major and his ERM endless repossessions and 15% interest rates. Major destroyed the Tory image of economic competence for three/four elections.
Cameron seem to be on the same track so far.
October 26, 2011
Wait til the figures for Jan 2012 come in. They will show a BIG drop. Because that’s when all the tax repayments will be due for all the people who artificially increased their income in 2009/10 (ie when the top rate was 40%) and had to pay big sums on account for the tax year 2010/11. Tax revenues in Jan and July 2011 both showed unexpected rises (that is when the forward looking payments are made), and a lot of that money will have to be repaid by HMRC when people’s accounts are finalised for the tax year 2010/11 and it is found that they have paid too much on account.
October 26, 2011
It applies to the last tax year as well. I was ordered to pay a large amount on account while my tax code was altered so that my second pension was taxed at 40%. My letters were not answered, and my telephone calls were not returned. I gave up on the telephone finally because it cost too much listening to recorded messages for over 30 minutes each time.
I have just received a large refund – presumably it will come off this months tax receipts, so they could be lower as well. I cannot be alone in this, given last years cock-up with tax codes. However, it won’t be January’s figures that will be affected, as you still have to pay up and then wait for a refund after your return has been actioned.
October 26, 2011
Economists create toy models of economies and suggest insights – they do not create economies. Simple rules and laws create economies and societies. A bit like the way fractals works.
The Government needs EQUALISE TAX RELIEF ON DEBT AND EQUITIES.
Creating an economy where debt is preferred to investment has created the broken economy that can’t compete with the GROWTH from the BRIC countries. That is the most important thing the Government must do if they wish to “FIX” the economy. Government will encourage investors, investors will encourage people, people will realise reward comes from work and not debt.
October 26, 2011
How would you equalise the tax relief Javelin ?
Would you remove tax relief from interest on debts ?
October 26, 2011
The son of a close friend works for a medium sized British company which has operations in Vancouver and L.A.
Two of the senior management have recently relocated in these cities, apparently doing exactly the same work as previously, with the excuse that they need to keep a closer eye on these subsidiaries, notwithstanding the fact that they already have good British managers.
He’s pushing to get re-located to their Melbourne office, as not only would it be financially advantageous, but he feels that the education would be better for his children.
I wonder what the loss to the revenue is here, and how many more companies are doing the same sort of thing.
October 26, 2011
Fuel duty may be flat but I bet the sales of heating oil are up.
October 26, 2011
As an accountant in practice acting for many small businesses the fall in receipts is no surprise to me. I see practical examples of why this may be every day with my clients. As an example, I act for a hairdresser who last year had turnover of £90,000 and employed one full time staff member earning around £15,000. As a result of the VAT increase and the increase in Employers NI she has taken the view that it is not worth carrying on at this level and she has made the one employee redundant and started accepting fewer customer bookings so that she has now reduced her income below the VAT threshold. She previously worked all hours but now works much less and only makes marginally less money as a result of not paying VAT and not having the employee overhead. Therefore, as a result of these seemingly small tax increases, HMRC will collect around £20,000 less from this one small business. At the same time, the employee is now on the dole and I believe claiming unemployment benefits, Housing benefit, reduced council tax payments etc.
At the same time, HMRC have introduced stiffer penalties for things like late PAYE returns, late tax returns, inadequate business records etc. I have also noticed HMRC taking a much more aggressive stance in all sorts of areas. The time to pay initiative that is allegedly still in place has also been very much tightened to the extent it is almost impossible to get a positive decision.
This is coupled with ever incraesing (mostly EU inspired) regulations such as the agency workers directive etc. All of this is causing many small business owners to wonder what is the point of carrying on.
John, your government is doing precisely nothing to help businesses as far as I can see and indeed continues to implement and gold plate further regulations as they previously crticised the last government for. No wonder the tax take is down!
October 26, 2011
Steven
Your points about the VAT turnver threshold level effect on prices, staff employment costs, and working hours (effort – reward) are commonsense, which many small busineses have taken up.
Whilst you have a much smaller business, the work life balance is often better, the rate of income per working hour actually goes up, because of the fewer hours at work, means far less in variable overheads and tax, especially if you work from home, where fix overheads are already low as well.
You need a huge increase in turnover to cover the vastly increasing costs of running a small one man/woman type of business.
October 26, 2011
Straight from the horse’s mouth, but don’t expect them to take any notice. You are quite right about HMRC, it is getting more like the Gestapo every day. Possibly due to the Customs part of its make-up, they have always been out of control and power mad.
October 26, 2011
If this hairdresser is accepting fewer customers then doesn’t this mean that its rivals will have more customers? Thus the money HMRC loses from this business will be gained from rival businesses.
October 26, 2011
It’s probable that the customers will find alternatives: many of those may be outside the tax system altogether. The ex-employee in this case may offer some services on a part time basis from home – but there will be no VAT, no employers’ NI etc. even if the income is otherwise fully declared (it may not be large enough to incur income tax).
October 26, 2011
That’s making some pretty wild assumptions that all the benefit to the treasury will be re-couped by the hairdressers clients moving on.
Some might not bother to have their hair done so often or decide they can get it done cheaper cash in hand.
To encourage Businesses to limit their growth so that they operate just up to the vat and other tax thresholds can’t be good for the economy. But this is what the current tax system does.
And what about other more specialised industries or services? – these can’t always be replicated..and some can be outsourced abroad.
October 26, 2011
uanime5
Competition would gain customers etc.
Your analysis would be correct in normal times, but we are not in normal times, I would suggest many could, and do, lengthen the time between appointments, perhaps have less work done, choose not to dye their air anymore, etc all in order to try and either save some money, or make it go further.
Prices for Gents haircuts has now gone down in Wokingham, due to more barbers opening up in the last couple of years.
Many ladies we know now dye their own hair instead of paying a fortune at the hairdressers, some have even decided to go grey naturally.
October 29, 2011
Hairdressing like undertaking is a dying trade. Pish. Ting. I thank you.
The interest of small business people in their business goes up and down like their workload. I would take these stories with a pinch of salt.
Doesn’t seem to apply to energy companies and supermarkets. As prices of raw materials rise so do their profits. Any other business doubling their prices because raw materials has risen 25% would find themselves without customers.
October 26, 2011
There is no evidence to support your view that the 50% tax rate correlates with the decline in income tax receipts in September.
The subject has been examined in detail. The Mirrless report on tax reform for the IFS, for example, found no taxable income elasticities at higher levels of pay.
Going further than that, there is evidence to support the opposing view. If one takes into account the impact of higher rates of tax on bankers’ bonuses, when more than £1bn was taken against an estimate of £500m by the Treasury, then there’s a case for raising taxes on higher income earners ( and making an even higher super premium rate for local authority chiefs … especially bleedin’ local authority social entrepreneurs whatever they call themselves these days )
Reply: Why do you think revenue fell?
October 26, 2011
Micheal
Business is all about risk verses reward.
If the reward is not worth the risk, there is no point in making an investment.
Do you run your own business ?
If yes, I would love to hear how many extra staff you intend to take on in the next 12 months.
If you do not run your own business, may I ask why not.
October 26, 2011
That’s an easy one. Mr Read thinks tax revenues fell because the government isn’t employing as many people as it did. Come on Mr Redwood!
October 26, 2011
Revenues could fall for the following reasons:
1) Fewer people working.
2) People working fewer hours.
3) People have had pay cuts.
October 26, 2011
The number of employees in employment is virtually unchanged over last year at 29.1 million according to ONS data. Because those on lower incomes contribute relatively small amounts per head (see the data I linked to from Alice Cook), there have to be either large changes in their numbers or large changes in their pay to have much effect. Only small changes in the numbers of the better paid can have a dramatic effect. For example if just 20,000 “average” £150k+ earners emigrate, they will obliterate all the extra income from the 50% rate on the 300,000 of them who stay behind.
The bank payroll tax is accounted for separately from income tax by HMRC.
October 26, 2011
I am now semi retired and, in the present uncertainty, choosing not to take my pensions but electing to live more frugally. Life is none the worse for it. The name of this approach is ” prudence” – a term much devalued by a recent occupant of high office.
October 26, 2011
Martin
After a lifetime of work, I am in exactly the same position, but trying not to be too frugal.
Now upgrading the house which I designed and built 30 years ago, not employing anyone other than a legally required electrician for the electrics, doing it all myself to keep costs to a sensible level.
Kitchen and utility now completed, bathrooms next.
So far:
Tiles from Italy,
Adhesive and grout from Italy.
Appliances from Germany.
Sinks and taps from Germany.
Worktops from German Company but distributor in UK.
Carcass cabinets made in UK, but pre made boards used from abroad.
Doors manufactured in UK, but raw material from Abroad.
Timber from Canada.
Screws from China.
Lights from Germany.
Paint from UK.
We do not seem to make much good quality stuff which is competitive on price in the UK any more, which is a shame for our balance of payments.
It did not used to be like this !
October 26, 2011
“legally required electrician for the electrics” yet another daft imposition from the state I used to rewire houses when I was about 13.
October 26, 2011
Indeed: while it is reasonable that a third party should deal with meter installations and the company fuse so as to avoid fraud, there is nothing particularly complex about 240V domestic wiring, switches and plugs and sockets.
October 26, 2011
I did too, Lifelogic.
Sorry to spoil your point here. My nickname is not a complement !
October 26, 2011
Lifelogic
I agree but:
Have a house fire, they investigate and they find electrical work done without a certificate of safety, and your house insurance may be classed as void.
Electrical cables have a manufacturing date on them, and coincidence of coincidence, they changed the colour of the cable when certification was introduced, so any work with a grey outer cover has to have been/should have been, done under the new certification regulations.
It was done to protect the customer from cowboys, problem is it has increased the cost of the legitimate electricians prices, which make him even less competitive against the cowboys on price.
October 26, 2011
It’s all about the Laffer curve of course. Ever increasing levels of taxation achieve only decreasing returns. No coincidence at all then that the recent Natwest Personal banking survey shows that highly skilled and highly paid Brits abroad have no intention of returning.
The NatWest report also shows that British professionals abroad can earn more than their UK based peers – on average bringing home up to £20,000 more per year and continue to enjoy pay increases despite the global financial downturn. Another recent report, from Diageo, suggests that the company is struggling to persuade it’s high earners to live and work in the UK because of excessively punitive taxes; what happens? The office then doesn’t relocate and the business taxes flow elsewhere.
Finally, it’s interesting to see how Chris Huhne is turning his nose up at those vast fields of Shale gas found in the North of England, especially considering that by embracing it the USA is forecasting that over 50% of it’s gas needs will be met by this source within ten years.
October 26, 2011
Many cannot afford to come back even if they wanted to due to high taxes & property prices.
October 26, 2011
“It’s all about the Laffer curve of course. Ever increasing levels of taxation achieve only decreasing returns.”
This only applies if it’s always possible for increased tax avoision to be greater than increased tax collection. If taxes are difficult to avoid then higher taxation will always produce increasing returns.
“No coincidence at all then that the recent Natwest Personal banking survey shows that highly skilled and highly paid Brits abroad have no intention of returning.”
And this has nothing to do with the lower salaries offered in the UK. I doubt the £20,000 difference is entirely due to higher taxes.
October 26, 2011
“Ever increasing levels of taxation achieve only decreasing returns.”
Yes, I’ve noticed that. When I increase my prices, sales decrease, and when I decrease my prices sales increase. Maybe I should write to Mr. Osborne and let him have the benefit of my experience, since he appears to have had no experience outside of politics himself.
October 26, 2011
John,
I wish people would not refer to this subject as the 50% tax. It is not. We all know that NI is added so the true figure is about 62%. Why should any individual receive much less than the taxman?? They can dress NI up any way they like, but it is still deducted and put in the UK tax pot; just vehicle excise licence and community charge. It appears to me that we are Taxed Enough Already (TEA).
Do you know the figures for people making themselves private companies so they pay less tax and draw what they need to avoid this stupid 62% tax? I have heard a few people making themselves a limited company (footballers started it with David Platt’s case against HMRC). It would be interesting to see if this is being used as a method to overcome the heavy taxation burden.
Secondly, I think more cash in hand jobs will inevitably rise. Small businesses in rural settings will be forced out of business by huge fuel and VAT costs if nothing is done. In some cases it is more expensive for the tradesman ie plumber, electrician, builder to travel to and from the location than the labour cost for the small job required. People will not pay huge sums of money for small jobs to be carried out. Some people simply cannot afford it. Alexander might be employing 2,000 tax collectors but there are better ways to increase tax. Follow the Gibraltar example and increase the number of stages to graduate the percentage increase reaching a maximum of 40%.
It would be reasonable to make MPs pay the same tax as the public. The contempt MPs show the public is an abuse of power. MPs always treating themselves differently from the public sector in relation to standards, pay, expenses, second jobs and lobbying is an outrage. Right to recall and a truly independent body to oversee these functions is urgently required. The roles of IPSA and the Parliamentary Commissioner are discredited and serve no purpose to enhance public confidence or improve standards at Westminster.
Reply MPs do pay the same tax as everyone else. They also pay for items like Remembrance wreaths out of their own taxed income where other public officials have them paid for by their employers.
October 27, 2011
John, I do not think your reply is accurate. MPs exempted themselves from paying tax on expenses ie benefit in kind. This year they exempted themselves from tax legislation imposed on everyone else. My MP was criticised by a local newspaper for paying for a wreath from office expenses.
Reply: Businesses too have arangementes to exempt employees from paying for business travel and overnight accommodation when working away from the main office. MPs typically pay for a variety of items themselves which others would be able to claim without criticism.
October 28, 2011
Was tax paid on the furnishings of second homes? Flipping second homes to avoid tax?? Allegedly living with family members in a second home paying rent??How about the £20,000 tax free payment when minsters leave the Treasury like Byrne and Darling? You could hardly say their payment was based on performance!! We saw yesterday how former PMs get public payments- they got paid a salary and receive a pension and now another lump on top. It is outrageous. All claims need to be paid against receipt.
The 302 MPs who were overpaid or fiddled their expenses should have been referred to the police to be investigated for the criminal offence of false accounting- John, how many were referred? How many were prosecuted and charged to court? It defies the law of probability and even the poor prosecution rate of the police could not justify such a low number.
How many MPs or leaders of parties had the moral fortitude to stand up and say the rules were rotten and needed to be changed? All clamoured for position before the election and none have taken any substantial action to clean up Westminster.
Reply: Most of the MPs claimed items that were legal under the rules and were backed up by invoices/receipts. They may well have been ill judged but not illegal. The rules were then changed retrospectively – it was like a company saying to executives who had for years been claiming alcoholic drink with dinner when staying overnight on business thatdrink was no longer acceptable for exepnses and all past legal claims for wine would have to be repaid.
No MP queried the system because the system was you could claim more or less anything spent to run a second home which you needed because you had to live and work in two places.Now Parliament is rightly limiting claims more strictly under new rules, though the requirement that colleagues swap from a mortgage to renting a property in some cases means the taxpayer will be paying more to help with the 2nd home.
October 26, 2011
I would agree with all Steven Granger said in his post (10.47am) and I could add several other examples of small business owners I know, making very similar decisions.
I visit a number of businesses in the Midlands as part of my job and some of them have deliberately scaled back because the owner doesnt feel working harder, expanding and taking on more staff is worth the effort any more.
On a personal level, at home we have cut back on our annual car mileage by over 20% by keeping more local and better planning.
My salary and my wife’s salary have seen no increases for two years and our once regular end of year bonuses and opportunities for promotions have stopped, so we have to manage todays greatly increased bills on yesterdays lower levels of income by making economies.
So I am not surprised tax revenues are lower than last year. My prediction is that these will fall sharply again over the next year.
For example a company I visited today who paid a decent amount of Corporation tax last year and now are just about breaking even , will pay no Corporation tax in the next financial year, whereas the Revenue have predicted in the estimate they sent them, that they will be paying more tax than last year.
And, dont forget, that if they end up making a loss, which is quite possible, they will then be in line for a refund of the Corporation tax they paid last year.
October 26, 2011
Is this government ensuring the the evolving nature of employment is properly understood and the proactive practical steps are being taken to ensure the as many as possible of those who work in new types of employment, who work independently and who are taking steps back into earning from having on benefits are paying the full amount they should?
October 26, 2011
And stop cutting deals with rich people and large corporations tax bills and make them pay or be prosecuted like the rest of us?
No wonder mobile phone bills are so high.
October 26, 2011
I’m self-employed, have a strong work ethic, and usually take very little holiday. However, this year, as a direct result of the 50% rate, I made a conscious and deliberate decision to take several weeks more holiday than usual. Of each hour that I would have worked during those weeks, the product of half an hour would have been confiscated by the state; so I decided I might as well take indulge myself and take the other half-hour off too. I have culled various aspects of my expenditure to compensate. I shall do the same next year and each year until the rate goes down again.
October 26, 2011
You do realise that by doing less work this has enable someone else to get more work and that the Government will be able to tax this person to recover most of the amount they lost when you decided not to work. Just because you haven’t done the work doesn’t mean that no one will do it.
October 26, 2011
You are assuming that DIY isnt an option, and even if another person does enter the market and takes up the vacant opportunity for work, that they already have income levels which would be taxed at the highest marginal rate.
The argument is about whether these high rates disincentivise people to keep on working for more income.
These are really the same arguments made often in reverse by Union leaders when saying overtime rates should be higher than standard rates because pepole need an incentive to trade marginal extra hours of leisure time for extra hours of labour.
I would guess it is more likely that the Revenue would a the net loser by setting rates higher than the “top of the curve”
October 26, 2011
That isn’t necessarily so. Consider a first rate dentist. Someone who wants top level dentistry may find that they need to fly abroad to get seen to if there aren’t enough domestic appointments to go round. The overseas dentist pays no UK taxes at all. If you think this doesn’t happen, you’d be wrong: I’ve done it myself.
October 26, 2011
@uanime5
Maybe someone will do it, but will they tell the taxman they’ve done it?
October 26, 2011
uanime5
The other person may not be on 50% tax though, so the difference between the tax rates could still be lost.
October 27, 2011
uanime5
You are also ignoring the impact of my directly connected decision – and the cumulative impact of similar decisions of many others like me – to cull numerous aspects of my business and personal expenditure; which range from deciding to put off a proposed building project right down to deciding to make my own lunch-time sandwiches rather than buying them as I have done hitherto.
October 26, 2011
A lot of people have lost their jobs and the economy is slow. Millions are facing the squeeze. Unemployed people do not pay much tax. Maybe that and government policy to cut everything has something to do with the lost tax and not rich people avoiding tax?
October 26, 2011
So even though tax revenues are up by 5% they’re still lower than they were last year?
http://www.johnredwoodsdiary.com/2011/10/23/deficit-reduction-on-track/
John do you have any evidence that the loss of tax revenue is related to the rich trying to avoid the 50% tax rate, as opposed to the rich taking voluntary pay cuts due to lower profitability of their companies, companies reducing the hours or wages of their staff to reduce costs, or the rich trying to avoid paying any amount of tax?
Also is there any evidence that those who earn over £150,000 per year are leaving the country to go to countries with lower tax rates? For example UK companies finding it more difficult to recruit directors that would be paid over £250,000 per year than other European countries.
Reply: Total tax is up, Income Tax is down
October 31, 2011
The 50% tax rate will explain the crashing London house prices and private schools loosing their pupils in droves, so having to give massive discounts to keep educating the world elite. I think not.
October 26, 2011
There are many reasons to be gloomy about the economy . 18 months after the election there is little hope of serious reform of an unaffordable public sector.
Economic growth looks like being extremely low or tipping back into recession for many years ahead. Denied an ever increasing torrent of spending from private and public borrowed money, only a madman or a treasury official would believe otherwise.
Banking is under threat from new EU regulations. The construction industry is in decline because of the collapse in the housing market and lack of credit. Manufacturing is being choked by uncompetitive taxes and regulation.
Our economic competitiveness is shot to pieces. According the the EU International competitivenes review :-
‘UK government spending is
more wasteful than that of
Tunisia, the Gambia, Malawi,
Ethiopia or Albania, and
government regulation is
more burdensome in Britain
than in Bulgaria, Nigeria,
Pakistan or China’
Revenue is now showing signs of slowing down. Tax rates are set for political – not sound economic reasons.
Despite wisely staying out of the EU, we still have to pick up many of the bills.
I look forward to hearing George Osborne’s excuses for why his trumpeted ‘deficit reduction plan’ is going so badly wrong.
October 27, 2011
I don’t know the figures but anecdotally a lot of people have left the City…if you are an American they paying federal US tax – starting at 10% on 50k and rising upwards means that London is not worth the candle…still the left should be delighted that those horrible financiers are leaving. Never mind the fact that Balls/Brown based their splurge on receipts from these people and used the credit to indebt our future generations.