[Closed] Tax avoidance/minimisation - what's realistic?

the tax avoidance schemes that the very rich take advantage of are all available to the rest of us.

No they are not, there is very little you can do as a PAYE tax payer.

No they are not, there is very little you can do as a PAYE tax payer.

+ 1,000,000

Only way the "ordinary" man can make substantial tax savings is to go contracting / LTD.

What they said re: salary.

You can of course put money in a pension, invest in ISAs etc which have positive tax implications. I guess the tax-avoidance nay-sayers don't do this however and elect to pay full tax on any investments 😉

The costs of avoiding tax don't increase inline with the amount of money you save either. To avoid tax you either need to put in a lot of time or pay an expert to sort it out for you. If you save £1000 you will lose overall but if you stand to save £100000 it would be worth the accountants fee.

Having said that I would and do take of advantage of opportunities to save money (legally) so can understand why other people do as well. With larger companies it may come back to haunt them from a coorporate responsibility view point. They may lose business if people feel they are cheating in a similar way to green issues are thought of now.

Taxing large companies is complex my understanding is that they essentially negotiate how much they should pay with HMRC. HMRC have a duty to chase up and negotiate hard to maximise their takings(something the civil service doesn't have a good public image for).

My point is that super rich people who avoid paying taxes they don't need to represents perfectly normal behaviour that any of us would also adopt given the opportunity.

The problem lies with the tax structuring itself, not with people/companies avoiding them.

That's a damning indictment on human nature really! Basically you're saying that we are all essentially selfish when it comes to paying tax.

I'm not sure I agree because despite getting a bit annoyed about the waste that I see tax income spent on, I'm well aware of the good it does re: NHS, eductaion, helping the vulnerable and generally keeping society going. I'd have difficult alligning my moral compass to a lot of what I hear the super rich doing.

That's not to say there isn't a big problem/s with the tax structure either though!

I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people [i]really[/i] need?

Yep, the tax system is flawed.

The problem is that society has become skewed in favour of the top 2% of the wealthy who can pretty much get away with anything because we'd rather they spent their wealth here than anywhere else.

The system needs to be fairer, not just to ensure that HM Treasury receives more tax income but also for the common good of society.

What about avoiding stamp duty on house purchases? How's that done?

There are various ways of minimising your tax liability and any actions to that effect constitute tax avoidance which, in my mind, is perfectly justifiable - if you're willing to put in the work to structure your finances in such a way that it saves you money, crack on. If the Government thinks that a way to avoid paying tax is unjust then they should close the loophole if possible. Tax evasion, however, is not paying the tax that is due which is wrong and tantamount to stealing in my opinion.

As for the schemes that the "very rich" take advantage of not being open to Joe Public, I imagine that's because they're avoiding paying tax that Joe Public doesn't have to pay anyway.

Basically you're saying that we are all essentially selfish when it comes to paying tax.

More or less yes; what I am saying is that everyone acts firstly in their own self interest and then secondly in the interests of society.

For example, I would do absolutely within the letter of the law to give my son the very best I can, including not paying any tax I didn't legally have to pay in order to afford him a better education (for example by saving for university, private schooling, extra tuition, whatever I felt was going to be the best for him).

Once I'd taken care of him, then I would think about my fellow man/society.

As for tax minimisation for anyone and everyone on PAYE, it's not really the point. The point is, if there were the opportunity to legally not pay tax, the vast majority of people would take it.

Zilog....i think that post was trolling but i'll bite anyway.

Its not about need, if somebody chooses to work long hours, have two jobs, work overtime etc then why on earth would you penalise that person with a 95% tax on their higher earnings?....seems like punishment for having a work ethic.

I mean, how much money do people really need?

Depends on where you live, but in London, £50k goes virtually no where and £100k doesn't make you well off!

Glad I no longer live there!

More or less yes; what I am saying is that everyone acts firstly in their own self interest and then secondly in the interests of society.

From your example I can see where you're coming from.

However, I don't think the two are mutually exclusive, it's just much harder to view the interests of society as directly impacting on you compared to how your direct actions can be viewed.

Also, is there a limit? I mean what kind of actions would you consider appropriate and inappropriate? If you found a (hypothetical!) way to reduce your tax to 0.1% of your income would you take it? Or would you feel any gult at the money not going to fund society? Maybe everyone has a different point they draw in the sand...

zilog6128 - Member
I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people really need?

It's a reasonable point BUT I don't agree with it. What matters for me is whether those people deliver value - if someone genuinely brings in millions to a company in a job that other people couldn't do then I see no issue with them earning lots of money. Where the issue lies is where those two aren't properly linked and people earn silly money for something that many others could do. Or if they do it in a way that isn't morally sound. That's the far more complex issue and something that requires legistlation to control - something which is unlikely to ever happen or be that effective IMO.

My solution is much simpler - simplify the tax system massively so that people simply pay fair rates of tax on their earnings and so that except in a few very uncommon loopholes, people can't avoid it.

Also, is there a limit? I mean what kind of actions would you consider appropriate and inappropriate? If you found a (hypothetical!) way to reduce your tax to 0.1% of your income would you take it? Or would you feel any gult at the money not going to fund society? Maybe everyone has a different point they draw in the sand...

That's a really good question.

Honestly, I think I would probably take advantage of that opportunity (it's purely hypothetical; it would never happen, at least I hope it wouldn't) and then end up donating more money to charity, or sponsoring some other type of initiative. Which is pretty much what the tax system is supposed to do, i.e. the redistribution of wealth as organised by government on behalf of society.

Its not about need, if somebody chooses to work long hours, have two jobs, work overtime etc then why on earth would you penalise that person with a 95% tax on their higher earnings?....seems like punishment for having a work ethic.

Depends on where you live, but in London, £50k goes virtually no where and £100k doesn't make you well off!

i.e. the redistribution of wealth as organised by government on behalf of society.

The primary role of taxation isn't about the redistribution of wealth, its about financing the fabric of society.

I don't think income going to pay off your mortgage (for the property you live in) should be taxed which would help with that!

That would be OK as long as profit on homes was taxed as earnings.

The primary role of taxation isn't about the redistribution of wealth, its about financing the fabric of society.

In the way I was using the term 'redistribution' they are the same thing.

an unhealthy obsession with material wealth

That's a total value judgement. Are we all supposed to then subscribe to your definition of what is healthy? I happen to agree with you to some degree but I don't believe I have the franchise on what is right.

I don't think income going to pay off your mortgage (for the property you live in) should be taxed which would help with that!

That's an eminently sensible suggestion. If only it hadn't been abolished (along with tax exemption on pension investments).

[i]I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people really need? [/i]

You've not a family them - and/or live in the south?

Is this a Tony BLiar 'promoted' post?

tbh A single rate of tax and a high (enough) tax allowance would reduce vastly the admin. costs all round - for people. Companies is somethng different.

"I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people really need?"

Thats a very short sighted, naive view. People who earn £100k plus add more to the economy by spending, creating jobs etc etc. If you are going to put a 95% tax bracket in then why the hell would people bother working?

Its already affects a lot of people already at the 40%. Mrs FD will routinely way up whether its worth covering additional shifts because she will get relatively little reward for it. At 95% the answer would be a definate no.

Ok three students with same background/qualifications etc graduate from Uni at same time and make three different, independent career choices:

Tom - chooses to substitute financial returns for leisure. Takes average holiday x50% but earns average salary x2
Dick - takes average holiday, earns average salary
Harry - chooses to substitute leisure for financial returns. Takes average holiday x2, but earns average salary x 50%

[ps I know the maths doesn't hold here!]

So Dick looks at Tom and is envious of his salary. He then looks at Harry and is envious of his holidays. But on balance he feels ok - he has the best of both worlds.

But along comes Mr X and decides that there are different values associated with these free choices. Specifically, he thinks it is unfair that Tom earns average salary x2, so he decides to take some of it away and give it to Dick and to Harry. But is this fair. No, so he takes Harry's holiday and makes him work on some of those days for the benefit of Tom and Dick. But is this fair? No, but at least its consistent (not that this would ever happen!!!).

Of course, none of the above (T,D,H, MrX) have a moral right to the chosen returns of the others free choices - but when has that ever stopped anyone? So funny that those who think that there is too much focus on money are often the first to focus on redistributing it?

Is this a Tony BLiar 'promoted' post?

Given how much tax he's paid lately (it was on Radio 4 this morning; something like £350,000 on earnings of £12m IIRC) I would say it is not.

[i]along with tax exemption on pension investments[/i]

Pension contributions are still tax-deductible. Dividends are taxed, but investing in a pension is still hugely tax efficient.

Personally, I don't think that there should be tax-exemption on mortgage payments. House purchase shouldn't be subsidised and all it would do would be to drive prices higher, keeping more people in the rental 'trap', which, assuming you make rent payments tax-deductible too, would seem to be hugely unfair.

THM, your argument assumes that we have free choice over our careers and the benefits it brings, in reality we get a very limited pick, otherwise I would have chosen to be a wealthy international playboy.

I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people really need?

I would definitely be in favour of flat rate tax regardless of income. Hell 25% even. I mean how much money does the state really need?

Pension contributions are still tax-deductible. Dividends are taxed, but investing in a pension is still hugely tax efficient.

It's tax efficient relatively speaking, but it's far less profitable than it used to be and as such as contributed (significantly but not uniformly agreed on by how much) to the pensions crisis.

Abolishing MIRA in the late 90s didn't seem to stop house prices from spiraling out of control though. Maybe it would have been worse or maybe the bubble would have popped sooner (because it would have inflated even quicker) if we'd left MIRA in place.

I don't think it's healthy for a tax system to be predicated on what is morally right for everyone as an individual (i.e. we won't let some people have vastly more money than others) at the expense of what does the most good for society overall (i.e. at the cost of there being a massive gap in relative wealth, we will still all be better off).

everyone acts firstly in their own self interest and then secondly in the interests of society

hence why society is in the state that it is ...

That's a total value judgement. Are we all supposed to then subscribe to your definition of what is healthy?

You've not a family them - and/or live in the south?

Is this a Tony BLiar 'promoted' post?

Thats a very short sighted, naive view. People who earn £100k plus add more to the economy by spending, creating jobs etc etc. If you are going to put a 95% tax bracket in then why the hell would people bother working?

I would definitely be in favour of flat rate tax regardless of income. Hell 25% even. I mean how much money does the state really need?

Honestly, I think I would probably take advantage of that opportunity (it's purely hypothetical; it would never happen, at least I hope it wouldn't) and then end up donating more money to charity, or sponsoring some other type of initiative. Which is pretty much what the tax system is supposed to do, i.e. the redistribution of wealth as organised by government on behalf of society.

My initial reaction to that is "You trust the charities you're donating to to do a better job than the Govt?" Then I had a bit of a double take and realised that if the Govt, and society, did a proper job in the first place Charities would be unecessary. It's a bit of a can of worms that whole line of thought, possibly worthy of another thread.

In the meantime I guess you aren't quite as selfish as you suggest your fellow humans are (now there's a veiled compliment!) because you're still contributing to society via the charities, why not keep it all for your sons education/inheritance? Is it not that you do value society, you'd just like more control over what an where you contribute to that society?

You know on reflection, one of the hardest things to achieve in working life is balance.

You either work to earn above the mean national income (upwards of £35k, which is above the mean of £22) in which case you are asked to put a huge amount of discretionary effort in, at the compromise of family life/work life balance. Or else you're stuck in a low paid job with few prospects; you have more free time, but less money to spend it doing anything rewarding.

You don't have to move that high up the pay scale before you start having to work silly hours just to keep you where you are.

There is a simple fact that tax inspectors going after tax avoidance / tax evasion generate far more than they cost but are cut. People investigating benefit abuse generate far less than they sand are being increased.

Tax avoidance should be chased hard and loopholes filled - and retrospective swinging fines levied.

Its totally wrong that rich people pay a far smaller % of their income in tax that poorer ones

Then I had a bit of a double take and realised that if the Govt, and society, did a proper job in the first place Charities would be unecessary.

Is it not that you do value society, you'd just like more control over what an where you contribute to that society?

It's not really any of that. I like contributing to society and feel good about the taxes I pay and the contributions to charity that I make. I feel it's important to be a good person and a good citizen, i just don't want that to mean my family and I are compromised too far.

It only takes a little imbalance in the system for the system to become unsustainable.

Consider this:

You structure the tax system in the way described above. At first more or less everyone behaves in the way I said I would, i.e. relatively altruistically, contributing as much back in charitable contributions as they do now in taxes.

But a few people don't behave that way. They act entirely selfishly. Those around them/close to them, see this and feel aggrieved at this and adjust their behaviour accordingly.

This is then replicated among society, passing like a ripple through it, that becomes like a standing wave reinforces itself.

Pretty soon everyone is forced to act entirely selfishly until the system collapses.

THM, your argument assumes that we have free choice over our careers and the benefits it brings, in reality we get a very limited pick, otherwise I would have chosen to be a wealthy international playboy.

The hypothetical argument has many assumptions indeed. But that is helpful to test the underlying logic.

But Ok, lets ignore the three scenarios. Lets assume instead that we would both like to be a wealthy international playboy - a football player or someone born with a silver spoon in their mouths. Bit unfair that talents/advantages, be they sporting, intellectual, birth etc, are so randomly distributed. So we want a "fairer" (sic) system. Whose value system should we impose to re-address the balance? Lets take the money of the toff and lets make the talented footie play with his laces tied together to make things fairer, then see if he makes as much money?

Or lets take geetee's concept that we should maximise the happiness of most people before respecting the rights of the individual. To be fair, we shall apply this to all aspects of life - tax, education, health etc.

Sounds great.

But then geetee falls of his/her mtb and cuts his/her arm and needs stitches. He goes to A&E and is waiting in his booth. But at the same time, there are three critically ill children in the booths next door - one has heart failure, another kidney failure and the last liver failure. Without immediate transplants all these children will die as there are no donor organs available. I am the doctor and I have been told to live by geetee's logic. So I sneak into his booth, slip him some drugs and then whip out his heart, liver and kidney. I transplant them into the kids and they survive - all three of them. Sadly geetee is not so fortunate and he passes away.

Not very nice that but at least we have all been consistent 😉 and geetee will be happy (?) because we have looked after the greater good for society and three have lived. Who knows he may even go to heaven - but that is assuming there is a God and a heaven!!!

Whoa hang on a minute. How the hell did I suddenly become an extra in the film 'Coma'?

Just having a bit of fun geetee!!!

Its the age old question to which there is not easy answer - the right of the individual versus the right of society versus the right of absolute moral standards.

You can pick each viewpoint apart!!

Whose value system should we impose to re-address the balance? Lets take the money of the toff and lets make the talented footie play with his laces tied together to make things fairer, then see if he makes as much money?

We could just have a progressive tax system that, taxes the rich more but still allows them their relative wealth.

Zilog

I would definitely be in favour of 95% income tax over £100k. Hell, £50k even. I mean, how much money do people really need?

As I always say to such suggestions why don't you try that out at a Premiership football ground at half time, stand in the centre circle and tell the 50,000 fans their club will have a vauxhaul conference squad.

The other factor to consider is that as all the high paid jobs will go abroad you'll actually collect much less tax and all the remaining people earning 50k will have to pay a very high rate of tax (60% ?) or have no social services, police etc.

here are various ways of minimising your tax liability and any actions to that effect constitute tax avoidance which, in my mind, is perfectly justifiable - if you're willing to put in the work to structure your finances in such a way that it saves you money, crack on. If the Government thinks that a way to avoid paying tax is unjust then they should close the loophole if possible. Tax evasion, however, is not paying the tax that is due which is wrong and tantamount to stealing in my opinion.

Tbh they are both the same thing someone doing something to avoid tax…morally it is the same thing legally it may differ…..that is why most people abhor it [ and the fact they cant as we are all mainly PAYE]. Th erich dont pay the tax they should pay they pay the tax they can pay iof they choose to arange their finances ian manner designed just to minimise tax...Green paying his tax exile wife billions for example ..indefenssible morally IMHO

funny that those who think that there is too much focus on money are often the first to focus on redistributing it?

Why are you surprised? I dont want any mor emoney but i wish whats there to be spread around fairly...what is your problem with this? normally in these debates someone says the politics of envy …it can only be a matter of time.

I don’t get your example as society is complicated and you use three equal examples when it is probably better to use dave and a clone of dave who grows up in a sink estate with heroin addicts as parents…who you betting on achieving?. This is at least as much a factor in “success” as the individuals hard work…the rich like to deny it.. Take Rooney worked hard ata being a footballer YES lucky to be born gifted at footbal Yes. shall I go on?
We are not all given an equal chance and hard work alone wont make you a success ..it is not a meritocracy and not all efforts are rewarded...plenty of cleaners and other work hard for the minimum wage...the implication is all poor people which is BS

"You know on reflection, one of the hardest things to achieve in working life is balance.

You either work to earn above the mean national income (upwards of £35k, which is above the mean of £22) in which case you are asked to put a huge amount of discretionary effort in, at the compromise of family life/work life balance. Or else you're stuck in a low paid job with few prospects; you have more free time, but less money to spend it doing anything rewarding.

You don't have to move that high up the pay scale before you start having to work silly hours just to keep you where you are"

I actually completely agree with this. I earn just less than £30k, as it gives me the balance of home life that I think is reasonable. I know that if I was to move up the pay bracket just that little bit more than I would just become some ones work bitch, and that doesn't appeal at all.

Mrs FD is I guess a high earner, and not far off 50% tax bracket, she works stupid hours, stress etc etc. However because she works stupid hours it means I have to do more around the house, and look after our son more, which leaves me with very little free time too. So even though I dont earn big bucks, I get penalised for it 😯

And can the footie player have access to the labour of the guy who chooses not to work but have a lot more holiday? Perhaps he could do community work in the player's town? Then we can tax the leisure rich in the same way as the money rich. Sounds fair?!!?!

Flat rate tax plus minimum threshold would still be progressive and yet much simpler to implement and monitor?

it is not a meritocracy and not all efforts are rewarded...plenty of cleaners and other work hard for the minimum wage...the implication is all poor people which is BS

That is true.

It is also true that there are kids I was at school with, who sat at the back of the room, threw scissors at those in front and generally made other peoples' school lives pretty miserable and difficult because they weren't as cool as they were. They aren't all doing so well now and I do struggle to have sympathy for them!

jambalaya

As I always say to such suggestions why don't you try that out at a Premiership football ground at half time, stand in the centre circle and tell the 50,000 fans their club will have a vauxhaul conference squad.

The other factor to consider is that as all the high paid jobs will go abroad you'll actually collect much less tax and all the remaining people earning 50k will have to pay a very high rate of tax (60% ?) or have no social services, police etc.

You structure the tax system in the way described above. At first more or less everyone behaves in the way I said I would, i.e. relatively altruistically, contributing as much back in charitable contributions as they do now in taxes.

But a few people don't behave that way. They act entirely selfishly. Those around them/close to them, see this and feel aggrieved at this and adjust their behaviour accordingly.

This is then replicated among society, passing like a ripple through it, that becomes like a standing wave reinforces itself.

Pretty soon everyone is forced to act entirely selfishly until the system collapses.

It's a bit too simplistic and again relies on the overwhelming selfish instincts of humans. What about the people who see the benefits to society and despite seeing others shirk, still contribute? What about the wealthy Philanthropists? What about the strong moral conviction that many people still have?

I guess it boils down to your general view of humanity. Me? I'd like to remain optimistic so don't burst my bubble!

JY - this all sounds rather familiar - just need RPRT to join in now!!

I am not arguing for Tom per se, merely interested in the logic and symmetry of the debate.

You can make similar cases with the sink estate as your starting point but you will always have the same issue. On the face of it, meritocracy is a fine concept that most of us support. But dig down, and it is flawed for the simple reason that natural talents (or whatever you want to call them) are nor evenly distributed. Life is unfair. For every Rooney, there is a Rooney minus - same background, same work ethic but unlucky in the random distribution of talents.

[ps JY not making any value judgements on people who do/dont work hard and therefore earn little/less/lots/more]

They aren't all doing so well now and I do struggle to have sympathy for them!

But then the nobbers are simply abusing the system in the way that the rich are arguably doing now. Is that fair?

But then the nobbers are simply abusing the system in the way that the rich are arguably doing now. Is that fair?

Not on an individual level no, but from society's point of view you have to deal with both ends of the bell shaped curve.

So Peyote, do Tom and Dick have the right to take some of Harry's "excess" leisure time?

For every Rooney, there is a Rooney minus - same background, same work ethic but unlucky in the random distribution of talents.

yes and equality oif talent cannot be guaranteed but a better equality of outcome can be be achieved....tbh we dont need everyone to be completely equal we may wish to reward effort success etc...however the disparity between the rewards of the most well of compared to the least well of [especially] globally are repugnant.

FFS we have people with multiple million pound homes and yachts and wrth Billions and we have people dying from a lack of water and having to eat and live off rubbish dumps..thats capitlaism and the haves using the labour of the have nots to have more...it entrenchesd and exacerbates the inequities that may naturally be there. It does not liberate people

Lets not forget that the top 1 % own almost 40% of the WORLDS wealth ..indefensible
top 10 % 85 % and the bottom 50% own only 1 %

its not down to lack of effort on their part or the natural inequities of life it is man made

then the nobbers are simply abusing the system in the way that the rich are arguably doing now. Is that fair?

Of course it is not fair that the rich are abusing the system now...you may join me on the barricades commrade :wink:.

As above yes theywould and we would need top address this. Still fewer people would starve so I coud live with it

Comrade, we have debated equality of outcome before and I think we will have to agree to differ. For me it is a non-starter. But we can agree on other things!!

Emotions aside, whether this is a fault of "capitalism" or not is an interesting question. Try today's FT and read the Laurence Summers article. I am a bit loathed to C&P due to FT's warnings on the matter, so hope you can see the article. But in which country/economy have we had a free-market?

a clip from Summers in the FT today:

...that the roots of the problem lie deep within the evolution of technology.

The agricultural economy gave way to the industrial one because progress enabled demands for food to be met by only a small fraction of the population freeing large numbers of people to work elsewhere. The same process is now under way with respect to manufacturing and a range of services, reducing employment prospects for most citizens. At the same time, just as in the early days of the industrial era the combination of substantial dislocations and greater ability to produce at scale is enabling a lucky few to acquire great fortunes.

The nature of the transformation is highlighted by the 50 fold change in the relative price of a television set of a constant quality and a day in a hospital over the last generation. While it is often observed that wages for median workers have stagnated, this obscures an important aspect of what is occurring. Measured via items such as appliances or clothing or telephone services, where productivity growth has been rapid, wages have actually risen rapidly over the last generation. The problem is that they have stagnated or fallen measured relative to the price of housing, healthcare, food, energy and education.

As fewer people are needed to meet the population’s demand for goods like appliances and clothing it is natural that more people work in producing goods like healthcare and education where outcomes are manifestly unsatisfactory. Indeed as the economist Michael Spence has documented, a process of this kind is under way: essentially all US employment growth over the last generation has come in non-traded goods.

The difficulty is that in many of these areas the traditional case for market capitalism is weaker. It is surely not an accident that in almost every society the production of healthcare and education is much more involved with the public sector than is the case with the production of manufactured goods. There is an imperative to move workers from activities like steelmaking to activities like taking care of the aged. At the same time there is the imperative of shrinking or least slowing the growth of the public sector.

Interesting?

So Peyote, do Tom and Dick have the right to take some of Harry's "excess" leisure time?

It depends on the context I suppose. If Harry has chosen to live in a society that considers it to be a 'good thing' to do that, then Tom and Dick (as part of that society) have a right to take some of Harry's excess leisure time.

It's all a bit simplistic though!

THM - interesting if you read that in association with Orwells views on the socialist preoccupation with machine worship (esp ch12 of wigan pier) - that mechanisation may become the end of socialism rather than the source, and the effect on lifestyles and health of productive work being relegated to an unneccesary pastime making people economically wealthier but less free - [i]if machines were to do everything, what should people do?[/i] 😉

Flat rate tax would make life simpler for most but what about all those tax inspectors that would lose their jobs? We would want that would we? Anyway, the middle classes should be proud as they finance most of this country's spending and happily support lots of people who feel they are unable to work.

flat rates are simple but unfair. It is not rocket science to work out that the rich have the most and the burden should fall more on those with the broiadest shoulders. It may be ok to set a very high personal allowance then tax quite highly above that rate say 20 k ???
Ie you can have a living wage but I am obvioulsy a huge fan of progressive taxation.

Interesting as machinery and improvements in agriculture or mechanisation were meant to free us all up when in reality it seems liek the speed of life if getting faster for all. Dual income families trying to juggle work and childcare commitments for example..Wrap arounf care for school kids so we can all work our 40 hour week etc..,its really a very western issues but I dont se eanything i disagree with it...we have moved production form here to the east /cheapeer areas ...this will work well till we realise we have run out of oil then we are screwed.

Is wigan pier worth reading Zulu? read 1984 and animal farm but not this.. i am quite close to wigan pier FWIW

even the torries are admitting that the 50p tax rate is a good thing

[url= http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/9001307/David-Cameron-abandons-plans-to-scrap-50p-tax-at-least-until-2015.html ]http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/9001307/David-Cameron-abandons-plans-to-scrap-50p-tax-at-least-until-2015.html[/url]

in FT 2012 survey of top economists only 3 out of 80 thought scrapping it was a good idea iirc

why not increase it then?!

kimbers - politics or economics.

But JY - if you have an allowance and then a flat rate above that, it is still progressive as the marginal tax will increase with income. So if you think that is fair. you have a simple system that collects rev, is simply to apply and understand and is progressive.

Flat rate tax is only very slightly progressive. Its manifestly unfair. we have historically used the tax system to redistribute wealth from those who have the power to grab it to those who do not. flat rate taxation unless thresholds are very high and the rate is very high would increase inequality

The more unequal a society is the less happy it is - for the rich as well as the poor.

So if you want an unhappy and unequal society with more social strife go for a flat rate tax.

is simply to apply and understand and is progressive.

A poor person has a lower % of their income left after tax and other fixed costs than someone much better off...I would argue that it is actually regressive

I earn 40 k say you earn 100k

I pay out on housing costs, car insurance tax etc and am left with say 12 k to play with

100k person does the same but is left with 50 k to play with

Does not sound that progressive tbh in terms of what we have left over etc and a flat rate is technically neither regressive or progressive as it is a flat rate [ hence we need allowances and you are strecthing a point o say this makes a flat rate progressive - it is does indeed it will be very very marginal indeed if it kicks in at 20 k and you earn 1 million for example

The gretaest burden should fall on those with the broadest shoulders

Doe snay [ non tax haven] have a flat rate tax system ? Even the USA is progressive [ just] and was under Bush and I bet even Reagan

Junky, I'd thoroughly recommend it

free online here:

http://www.george-orwell.org/The_Road_to_Wigan_Pier/

as a piece of journalism, what he did in going "undercover" is amazing, and you can't help but see how he both looks down on, and at the same time respects, the carachters in the book.

if you read them in order, wigan pier, homage to catalonia and then animal farm and '84 it gives you an interesting insight to the process of thought that he went through over the years.

JY - when people talk of a flat rate tax it is usually assumed that you still have a tax allowance. As long as there is a tax allowance, a flat rate will still be progressive. Its pretty simple maths.

Assume 10k is un taxed
After that tax rate is 40%

A 20k earner will pay tax of 4k (ie 40% of 10k after allowance) ie an effective tax rate of 20%
A 50k earner pays 16k ie rate of 32%
A 100k earner pays 36k ie rate of 36%

so it is still progressive and gets more progressive the higher the tax free allowance.

100k person does the same but is left with 50 k to play with

Well, in your example it depends on their housing costs but it's hard to know how to deal with them. Interestingly we do have tricky tax situations now/soon. When a person with kids goes just into the 40% rate band they lose their child allowance so will be worse off than if they were under the 40% rate. I think the same thing happens at £100k as they lose the tax free amount as well right?

The complication of the tax system does not come from progressive rates of tax, it comes from the difference in treatment between different types of income and indeed whether income or capital. Therefore a flat tax is largely a red herring unless all income and profit is taxed the same. But even that is not as simple as that because we have concluded treaties with countries agreeing how we share the taxing rights over different types of income.

For instance, Philip Green did not pay his wife a salary of £400 million. She is the owner of a company that paid a dividend out of previously taxed income of £400milion. No matter where she was resident, other than the UK, no further UK tax would have been paid.

The complication of the tax system does not come from progressive rates of tax, it comes from the difference in treatment between different types of income and indeed whether income or capital.

This.....

The super rich simply do not earn there millions (PAYE). Their income comes from capital, which comes with a much lower tax rate.

At a guess, would the biggest loss to the exchequer from legal tax avoidance come from the avoidance of inheritance tax? It's a tax which seems aimed far more at redistribution than others, given that it is levied on already taxed income.

So income from capital comes with lower tax burden. Why? Err, it involves a much higher risk. Where is the problem in that?

Err, it involves a much higher risk. Where is the problem in that?

What the hell has risk got to do with the taxation of earnings?

Well if you want to encourage people to commit their capital to investing in growing companies at the risk of losing all their money, there needs to be an incentive. That is very different to normal income.

[i]Flat rate tax is only very slightly progressive. Its manifestly unfair. we have historically used the tax system to redistribute wealth from those who have the power to grab it to those who do not. flat rate taxation unless thresholds are very high and the rate is very high would increase inequality[/i]

But inequality is only a problem when those at the bottom starve (or live in the workhouse); its not a problem that one person earns a vast amount, as long as protection exists for those that have nothing (or less, I guess).

teamhurtmore - Member

Well if you want to encourage people to commit their capital to investing in growing companies at the risk of losing all their money, there needs to be an incentive. That is very different to normal income.

don't wash at all. they also get tax relief on losses and most investment income is very safe

BR - not at all - inequality breeds resentment and crime and unhappiness - lots of research to show this. even rich people are happier in a more equal society

TJ - be serious

[edit -dont bother. CGT is such a red herring. Less than 1% of tax revenues. lets not sweat the small stuff]

But incentives for people to invest capital should be encouraged not the other way round.

[i]BR - not at all - inequality breeds resentment and crime and unhappiness - lots of research to show this. even rich people are happier in a more equal society [/i]

While I'm not (fully) disagreeing with you, resentment only occurs when the have-nots have really nothing. As long as they get enough to satisfy them they accept that they can't have everything.

You've only got to look though the long boom to see that.

And in any society they will always be people at the bottom, the failing we now have is that its very hard to get out if you are born here - and this is a basic change in the UK over the last 20 years.

BR following on from my quote from today's FT, there was an interesting article a few weeks ago which compare the role of the great philanthropists of previous times (Ford, Carnegie etc) with the current ones (Gates, Buffet etc).

When Ford built his empire, he was employing more local people and so the trickle down effect was more noticeable. These days Gates benefits from his intellectual capital but outsources the manufacturing elsewhere, hence the trickle down effect is much less direct and less as a quantum. Linking this with the Summers article above makes for interesting concepts. How to adapt to this change that globalisation has bought. We may benefit from the cheap TV, car, PC etc but not if we dont find other skills and jobs than making them.

Trickle down effect - don't make me laugh!

Really guys - THM you claim to not be right wing - you are espousing far right policy here.

[img] [/img]

Well if you want to encourage people to commit their capital to investing in growing companies at the risk of losing all their money, there needs to be an incentive. That is very different to normal income.

What percentage of the money invested in stocks and shares is actually used to grow a company? Investment is actually a misleading description for the majority of trading that goes on. I can see the point of giving tax breaks for small start up businesses in the first 2 or 3 years of existence, but that kind of entrepreneurial investment is a tiny percentage of what is currently classified as investments.

And what if I take a job in a growing company? am I not also taking a risk worthy of a lower rate tax as well?

Making value calls on different forms of earnings is a dangerous path to go down, and as we see already panders to those with wealth and influence rather than to the values wider society would make.

don't wash at all. they also get tax relief on losses and most investment income is very safe

Just going to leave this here