I’m not qualified or intelligent enough to work out viability of tax reforms, but there are so many things wrong with how the government currently collects income that I’d like to open the topic for discussion/argument
My 2p worth is that income tax and NI should not exist until earnings of £100k a year. At that point a rate of 51% income tax comes in. But to stop avoidance that tax is on everything. £1m a year in shares? £510k tax to be paid. Sold those same shares for a £1m profit? Another £510k tax to be paid.
VAT shouldn’t exist on anything classed as a necessity. Fuel, energy, food, water… no taxes. Transport… no tax. Things that promote active lifestyles have low VAT added. Luxury goods with no intrinsic value to life (expensive jewellery for instance) has huge VAT added.
This is just a start. A lot more could be reformed to help society become more equal and greener. So shoot me down, agree or whatever… let the argument begin
£1m a year in shares?
Shares, stocks or financial equities in general?
When do you impose the tax? On a specific day when equity values may be low (or high)?
How much fuel is a necessity to avoid VAT? Do I have to drive two minutes to the shops, do I need my CH at 25C?
Forget taxes, let's reform water supplies, energy supplies, farming subsidies, etc.
My 2p worth is that income tax and NI should not exist until earnings of £100k a year.
I'm assuming you yourself are under that threshold? 😀
VAT shouldn’t exist on anything classed as a necessity.
Jaffa cake anyone?
My 2p worth is that income tax and NI should not exist until earnings of £100k. At that point a rate of 51% income tax comes in
This threshold is way,way too high and setting such a threshold is massively open to abuse. You wouldn't see many salaries of 100,001 would you because it would become 49000.49. That's why tax needs to be graduated.
One assumes it would be 51% of everything over 100k?
I’m not qualified
Apparently…
One assumes it would be 51% of everything over 100k?
Maybe that's what the op meant but it wasn't clear.
Either way it's still too high a threshold.
When do you impose the tax? On a specific day when equity values may be low (or high)?
They said "sold", not owned.
Agree with equalising treatment of incomes and a standardised rate.
UBI is also worth a look
https://en.wikipedia.org/wiki/Universal_basic_income#:~:text=Universal%20basic%20income%20(UBI)%20is,independently%20of%20any%20other%20income.
VAT-wise, you've pretty much just described how it actually worked in the UK between 1976-1979:
https://en.wikipedia.org/wiki/Value-added_tax_in_the_United_Kingdom
But there are also a myriad of other taxes too, such as Fuel Duty, Council Tax (which contributes a very low percentage of the actual Council spending) - needs a wholesale revamp IMO.
My utopia would be worldwide taxation system where every single bank transaction had a flat rate if tax applied and then the tax paid from the bank to the country where the "spender" is registered. When I say bank, I also include any crypto currency clearing house. I'd also apply a flat tax based on you property values.
Completely unworkable I know, but the only way I can see of making sure everyone and every company pays tax. There is an old adage about the richer you are, the less you pay tax as you can afford "creative accounting". That wouldn't apply here as, unless you leave your wealth alone and never spend any of it you'd be paying tax.
Investing in equities carries risk which has been the arguement for lower capital gains tax compared to income. We want to encourage investment in productive activities.
I'd say the current system is too complex. It costs a lot to administer (government, people, companies) and is open to abuse.
The idea of a universal basic income is one that I'm curious about. It would also tidy up the benefits system.
It's not a situation to be resolved easily. One step would be a discussion around how we spend public money. Politicians promise lower taxes and better public service when that just isn't possible. But when there is a large collective pool of money how do you ensure it is handled responsibly and we agree where it needs to go (nurses vs. my local pub landlords new PPE company).
Some discussion around what wealthy is may also be worthwhile. 100k is a lot of money to earn. What's the median these days, around £35k? But then it's not just about personal income, it's about social care, transport networks, medical facilities, education etc.
Do we need to talk about how we use tax to influence behaviour as well. Outside of income it is added to activities we'd like to discourage as a society - sugar taxes, alcohol, smoking, fuel use etc.
Jaffa cake anyone?
That deserves more recognition than it got.
Tax avoidance makes for good headlines as it makes people pissed about the rich, however if only 2% of people earn over 100k (and those folks already pay 45% tax) there is nowhere near enough money there to pay for everything in the country with an extra 6% tax. You'd probably be dropping the countries tax take by 75%
The reason tax/ni kicks in at a low level is because paying a small amount of tax engages people in politics/makes them feel like they are contributing to society
What's the rationale for separating NI from income tax?
They said “sold”, not owned
They said both...
£1m a year in shares? £510k tax to be paid. Sold those same shares for a £1m profit? Another £510k tax to be paid
...or that's how I read it. Loophole there straight away 🙂
Left wing populism as bad as right wing populism.
That deserves more recognition than it got.
Why thank you. 😀
They should probably concentrate on wealth and self employment taxation, actual employee tax generally appears to bear the brunt of any “great” ideas and who already appear to be taxed quite well.
I seem to recall Malaysia(?) has their entire tax legislation down to 200 pages, ours is 20,000 and counting.
From my tiny corner of the Dark Side, we have way too much badly written legislation, with way too many (intentional?) loopholes, an entire industry built around exploiting the loopholes in and out of the legal system, and a national attitude that thinks "beating" the tax system is a good thing, rather than a loss to public services.
The fact that "we" collect just over 95% of taxes due amazes me. The fact that the government has refused to provide details of what resources HMRC needs to meet it's compliance goals, despite evidence that every £1 spent generates £18 in tax take, tells you where their focus is.
My tax reform proposal:
Section 1 -
1.0 Rule#1 applies and has precedent over any other consideration
Investing in equities carries risk which has been the argument for lower capital gains tax compared to income. We want to encourage investment in productive activities.
Asset ownership and investment are not the same thing, even though the language around it try to convince us otherwise.
MCTD:
I have very considerable doubts over that 95% figure of tax due being collected. My experienced perspective suggests we miss a great deal higher proportion than the carefully massaged figures that are reported currently.
However, respect sir, I salute your attempt to apply common sense to a system that will never contain significant common sense in our lifetimes.
Now, I'm off to see whether there are any 'cakes' lurking in the biscuit tin...
this is useful background
https://ifs.org.uk/taxlab/taxlab-key-questions/where-does-government-get-its-money
Tax avoidence and evasion costs the country far more than benefits cheating - but we put10X the effort into chasing benefits cheats
Each person chasing benefit cheats brings far less money back than their salaries, each person chasing tax cheats brings in far more than their salaries
Income tax is only a small amount of the natins total tax take but making the starting point £100 000 is way too high. so few folk have incomes that high
the worst anomaly is that at the highest incomes they pay a lower % in tax because of the NI cuttoff
Personally I would see income tax become a smaller part of the total tax take but move to carbon taxation
Tax avoidance makes for good headlines as it makes people pissed about the rich, however if only 2% of people earn over 100k (and those folks already pay 45% tax) there is nowhere near enough money there to pay for everything in the country with an extra 6% tax. You’d probably be dropping the countries tax take by 75%
Not if that 2% have 90% of the wealth.
This is where we have to discuss what tax is really for, government spending and the economic growth it drives is really paid for by "quantitative easing" taxation distributes the wealth created throughout society. The current tax system is allowing that 2% to horde all the money.
I do think 100k is too high, however I do think raising the personal tax allowance to say 25k could be part of a series of policies to start a fairer distribution of wealth. Much fairer than trussenomics attempt to redistribute even more up the wealth pyramid.
I’ll give that some thought once I’ve paid the 26.5% fractional rate for corporation tax before I’ve paid myself a penny.
And after that the tax on dividends goes up to 40% and is also subject to the loss of personal allowance - just like employees.
My 2p worth is that income tax and NI should not exist until earnings of £100k a year. At that point a rate of 51% income tax comes in.
That's a very generous reduction in tax. How will you make up the shortfall you've created?
Income tax itself doesn't need much reforming, just the occasional adjustments that happen anyway.
What does need reforming is the way that unearned income (ie income that does not come from employment) capital gains tax mostly, is taxed at a flat rate, not a progressive rate like PAYE. Therefore, if you are fortunate enough to have earned, or been gifted though previous generations work, such a pile of cash that you can bang some away in investment opportunities (properties, Stocks etc) your tax liability is a lot less.
I'm not a tax accountant, so if I'm wrong, do put me right.
Also, all the other taxes we have, VAT, Duty etc, need a deep review. These taxes are paid the same by everyone, so, in essence are less of a burden for people on higher incomes. I would personally rather pay more in Income tax, but have cheaper stuff in the shops.
Don't get me started on Tax avoidance... The preserve of the rich.
Well played @spin. Can I have a coffee with that.
I couldn't do details - but I do feel we have a very complex tax system, that should be more progressive and simpler across every tax.
Big question - why do we still separate NI and Income Tax? Let's roll them into one.
I'm sure there's more if I scratch my head some.
Is there an example of a more equitable and simpler tax regime elsewhere in the world?
Tax avoidence and evasion costs the country far more than benefits cheating – but we put10X the effort into chasing benefits cheats
The government know that people who have gained a little extra through the benefits system, don't have, and can't afford, expensive lawyers to argue their case...
I'm answering my own question via Googleage.
https://taxfoundation.org/publications/international-tax-competitiveness-index/
I just got my annual tax statement and it tells me my tax was spent like this...
Health (22.8%)
Welfare (20.4%)
State Pensions (11%)
Education (10.5%)
National Debt Interest (7.6%)
Business and Industry (5.4%)
Defence (5.1%)
Transport (4.7%)
Public Order and Safety (4.4%)
Government Administration (2.3%)
Housing and Utilities, like street lighting (1.6%)
Environment (1.5%)
Culture, like sports, libraries, museums (1.3%)
Outstanding payments to the EU (0.7%)
Overseas Aid (0.6%)
I would like to be able to adjust these %s within certain thresholds. Clearly a minimum level on some topics like debt but I would want to tweak Defence down, Education up. Maybe that's just called a democracy where we pretend to choose who runs the country.
Oh and payments to EU, Overseas Aid - come on, that is not what we voted for! Is that where our £350 million a week to the NHS Brexit promise is going? 😉
the worst anomaly is that at the highest incomes they pay a lower % in tax because of the NI cuttoff
The highest incomes pay an effective tax rate of 47% that's higher than any other category excepting the odd 62% band between 100-120k.
You'll never get it right. I think all tax should be fair. To me that means we pay the same or better still acording to our need. But who defines all this? Transport Fuel taxes penalise those who have to drive. Sugar taxes penalise those who want to be fat gits. I would have several VAT levels. 0% for some things, basic foods, maybe ? A bit more for other foods, heating costs etc and a huge amount on luxuries such as virtually all electricals, new cars, take away food, booze and smoking, in fact anything that damages health and thus costs the health service more.
No VAT on basic bikes, stacks on the posh ones.
I think the step from 20% to 40% to 45% should be smoothed out some both by reducing the middle rate and increasing the top rate back up to 50%.
Anyone that avoids tax should be thrown in a pit of hungry tigers and their belongings sold off and the value redistributed where needed.
Anyone that avoids tax
The trouble with that is "avoids" is a wide net. Tax avoidance is any activity that means you pay less tax. A lot of these are intentional - I get childcare vouchers, cycle to work and pay into a pension, should I be punished?
I just got my annual tax statement and it tells me my tax was spent like this…
A nice idea, which will never happen, would be to allow us to decide where our tax is spent. Maybe even just a small fraction, lets say 20% of your tax burden, you get to pick from the list of the country's needs, NHS, Defence, Policing, Benefits etc etc... and allocate that portion of you tax directly to that.
Would send a clear message as to what the nation feels it should spend it's money on, and what we prioritise.
I get childcare vouchers, cycle to work and pay into a pension, should I be punished?
Punished is a very pejorative term. I just want everyone to pay their taxes fairly.
The highest incomes pay an effective tax rate of 47% that’s higher than any other category excepting the odd 62% band between 100-120k.
Is that really so? NI is a tax and has an upper limit so one you go over the upper limit for NI your taxrate goes down
Would send a clear message as to what the nation feels it should spend it’s money on, and what we prioritise
It's a nice idea but the trouble is the people who pay the most tax (in absolute amounts) thus control more of government spending, and so you'll likely end up with less being spent on things like services for the poor (as folks with high incomes tend to see less of the impact of that)
OP. I'm moreconcerned about the fact that you put the words " discussion thread" in the title of your discussion thread.
There's going to be DBAs across the country this morning grinding their teeth at the enormity of this transgression.
Sold those same shares for a £1m profit? A
Depends on how long you owned them for. Only a year then fine, owned them for 40 years you return may only be keeping rate with inflation in which case the person would be better off keeping the money in the bank if there is going to be a 51% tax.
Also I think the idea that only over say 100k threshold creates a us and them mentality it's their problem etc. I think the threshold is broadly right a he moment for when tax is paid.
Punished is a very pejorative term. I just want everyone to pay their taxes fairly.
Define fairly there are so many cases where a simple rules seems "fair" then a set of circumstances comes along that hugely and "unfairly" effects a group of scenario. These case are then added or tweaked as an exception. Now the law is more complicated. Now some people take advantage (happens at all levels people taking advantage of exceptions not ment for them). Simple it is not.
The highest incomes pay an effective tax rate of 47% that’s higher than any other category excepting the odd 62% band between 100-120k.
I think you mean marginal, rather than effective.
The effective rates are much lower. Not the group you are talking about but non the less illustrative: Last year I was in the high rate tax band ( or whatever 40% band is called) and paid around 11% tax overall. Which just illustrates how easy it is to avoid tax, even without the help of the highly paid accountants that the actual rich would employ.
I'm in. When do I get back my £30k back from last year? But more importantly why should I get my £30K back?
IMO, we should set the lower limit for income tax at something like 25k, with a minimum income guarantee of what ever 52*40*a living wage is (index linked to higher of RPI/CPI) doing some quick maths, this is around the £21700 mark.
I think NI goes away if there's a guaranteed minimum income as you wouldn't need to prove pension eligibility.
