50p tax rate delivers

The data shows that income tax receipts in January came in at £2.38bn – up by 17.8% on the year before. However receipts from national insurance contributions (NICs), which one would expect to move with income tax, rose by only 4.2% over the same period.

Last week’s labour market statistics showed that there had been no improvement in the overall labour market with the percentage of people aged 16 to 64 in work being static at 70.5% between December 2009 and December 2010. The same report said that average weekly earnings had grown by only 1.1% over the past year.

So we have a mystery – the number of people in work is fairly constant, earnings have only increased by 1.1% and NICs are only up by 4.4% and yet income tax revenues are up by nearly 18%.

The most likely explanation is that higher income tax receipts partially represent the new 50p rate kicking in and rasing revenue. How else to explain the figures? Receipts are up way in advance of earnings or employment growth.

We can all pull out an idealogue. From the right, Mr Fraser Nelson.

http://www.spectator.co.uk/coffeehouse/6722113/the-50p-tax-in-action.thtml

Today, we have seen the 50p tax in action: reflected in January’s bumper tax receipts. A jubilant John Rentoul has just tweeted: “Where is Fraser Nelson when you need him? The 50p income tax rate has brought in a ton of money. He said it would probably reduce revenue.” He is absolutely right – but not for the reasons he thinks. Were John self-employed, he’d know that the tax paid last month was in respect of the 2009-10 tax year – when the top rate of tax was 40p. Of course, many of the super-rich are on PAYE – but that has happened since last April. It doesn’t explain a January uplift. Today’s surprise tax haul can be partly explained by the fact that folk sucked forward their income, to avoid the 50p rate. That’s what high-paid people do. They shift money, suck forward earnings, move cash abroad, work less, incorporate, take payment in other means, do anything they can to minimise their tax exposure. Those on the highest incomes can usually afford an accountant to make sure they don’t hand money over at what is (when you count NI) a 51p tax. (This will rise to 52p in April, due to tax rises which the Chancellor is planning).

The way to tap the rich is to reduce the rate. This basic paradox is grasped across the world. The reason that so many countries have cut the top rate of tax is to squeeze more from the well-paid, not less:

hat doesnt make it the wrong thing to do, the 50% rate is only justifiable on idealogical grounds. You never hear anyone in Labour claiming it raises much extra cash and they are super-sensitive the the charge that is makes us uncompetitive. It appeals to the Labour base just as a cut appeals to shire Tories.

It is a daft point only the ideologically motivated would argue that tax cuts dont improve our tax yield – event the tories increased VAT to raise money.
Whatever evidence is presented you will argue about it as you have your idelogical position – re the VAT revenue may have declined due to the economic slump for example so you could argue it does reduce earnings but you would be taking a very narrow view.
I think a priori most folk would agree that increasing tax would increase revenue – can you cite any example of countries such as Ireland, Greece being told by the IMF or others to cut taxes to help them out the current cash shortfall?
EDIT: The method of dealing with avoidance is legislation and I would tax comanies on what they earn here as well rathe rthan let them take money earned her and paty tax on it in a tax haven to avoid it here. However bad we make it they would stilll be abel to make more money that not doing it so someone will probably just someone with more morals

We’ve got to pay our taxes, all anyone is saying is that they should be effective and fair. Me I think inheritance tax is the way to go, set it at 70% or so across the board, no ifs, no buts, use the revenue (you guessed it) to get the lowest paid out of income tax. Who needs a tax cut, some family with 3 children, someone trying to get a small business off the ground, or Richard Branson’s kids?

Sorry fella’s I’ve got to go to Harley St to see my urologist.

Toodle-pip.

➡

The figures support the tax rate delivering rather than not though. Fraser Nelson is basing everything on the Laffer curve, which is complete testicles. Where’s the evidence of the TPA’s £4billion loss?

Theres’s also the one off bankers bonus tax where the revenues far surpassed the treasury’s estimates which kind of flies in the idea that “They shift money, suck forward earnings, move cash abroad, work less, incorporate, take payment in other means, do anything they can to minimise their tax exposure.”

But ultimately there’s not enough evidence to yet tell whether it’s working or not, so why should it be scrapped?

Bizarrely and somewhat inexplicably I feel compelled to ask how mcboo’s appointment with his Harley Street urologist went. 😯

why? so you can take the piss?

Waaaaaaaaaaaaaaaaa. You boys is funny.

Just had my meat and two veg examined…..and my (cough) prostate.

“Get used to it. As you get older you will have to go through that every year.”

I’ve been getting infections all year, chest and now the second urinary tract. Seems cyclists and runners are prone to them, beating their bodies up, not eating enough, not getting enough sleep, full time jobs etc etc.

Put me on a long course of anti-biotics, going back in 3 weeks for a bunch of scans, could be a kidney stone. Had a lovely coffee and bit of cake in the waiting room…..I do love private health insurance.

Was supposed to be racing XC in Perth this weekend, thats kicked into touch……just as well, I’ve been rubbish this season, time to get well.

Hey you asked!

Seems cyclists and runners are prone to them

Did you pay good money to be told bollox like that ? I don’t get ‘urinary tract infections all year’, nor am I aware of any cyclists who do. In fact I don’t get them at all.

Ah OK if you dont get them it must be bullsh1t.

I suppose he must have just made it up because let’s face it, he’s a consultant urologist who does private work so is therefore a lying devious scumbag. I mean why wouldn’t he?

He must be having such a laugh at my expense!!!!! Expense get it?

he’s a consultant urologist who does private work so is therefore a lying devious scumbag

It’s good to hear that you’ve sussed him out. I wouldn’t bother going back if I were you.

Of course it could be that you’re a lay-dee, in which case I guess that a sweaty crutch due to excessive cycling could increase the chances of infection down there. But since you claim to be in possession of a “meat and two veg”, I suspect that’s unlikely.

BTW I said that I am not aware of any other cyclists who get ‘urinary tract infections all year’, it was not just my personal experience. Mind you urinary tract infections are pretty rare for blokes……you been doing stuff with your nob that perhaps you ought not of ?

Let me know if you want anymore advise btw……and save yourself a trip to Harley St.

Thanks I will. You sound like a well informed and perfectly balanced individual.

and it’s free

mcboo – there is an upper earnings limit for NI at 40 000 a year ish

http://www.hmrc.gov.uk/ni/intro/basics.htm

“if you earn more than £139 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £139 and £817
if you earn more than £817 a week, you also pay 2 per cent of all your earnings over £817
“

So no upper earnings limit on NI ?

over 817 per week you pay 2% not 12 % so once you go over the 817 per week you are taxed at 10% less than you are below 817 a week.

Yes, I can read the link/text I posted.

So no upper limit then on paying NI.

You cannot be a UK GP while in Aus

Nope, but they can be an Australian GP, just as I am now an Australian scientist. Given the current climate, I have no interest in returning soon. Whilst in the case of scientists this may be an issue for the future profitability of the UK in terms of advancing R&D, it doesn’t take much imagination to work out the more serious implications of the best doctors leaving the UK.

In my case, my primary motivation for leaving was being offered a permanent, as opposed to fixed-term job. The fact I am now paid more than double what I was on 18 months ago in the UK (and taxed considerably less for it) is besides the point.

I’ve been getting infections all year, chest and now the second urinary tract

How many urinary tracts do you have? 😯

there is an upper earnings limit for NI at 40 000 a year ish. so actually all the 50% band does is make sure that the rich pay a similar amount of tax as the folk in the middle

No it doesnt

*sharpens pencil, fires up Excel*

The uk effective income tax when incorporating NI and allowances, but not tax credits looks something like this (Im not a tax buff, but I think my maths is right). Based on data available here:
http://www.hmrc.gov.uk/rates/it.htm
http://www.hmrc.gov.uk/rates/nic.htm

This is an interesting little piece from the FT, which suggests the windfall tax on oil companies cost the country 0.2% of growth as firms cut their exploration of North Sea oil fields.

looks like the value of our stake of lloyds bank is heading south