Comments on: Micheal Meacher speaking on Tax Justice in the Budget debate http://www.taxresearch.org.uk/Blog/2008/03/23/micheal-meacher-speaking-on-tax-justice-in-the-budget-debate/ Richard Murphy on tax and corporate accountability Thu, 28 Aug 2008 11:30:33 +0000 http://wordpress.org/?v=2.6 By: Tax Research LLP http://www.taxresearch.org.uk/Blog/2008/03/23/micheal-meacher-speaking-on-tax-justice-in-the-budget-debate/#comment-403752 Tax Research LLP Mon, 24 Mar 2008 10:13:14 +0000 http://www.taxresearch.org.uk/Blog/2008/03/23/micheal-meacher-speaking-on-tax-justice-in-the-budget-debate/#comment-403752 Mark You're 100% right The Lib Dems are the only ones to be on the ball on this, bar the TUC But I admit, they took that from The Missing Billions, which I wrote for them Richard Mark

You’re 100% right

The Lib Dems are the only ones to be on the ball on this, bar the TUC

But I admit, they took that from The Missing Billions, which I wrote for them

Richard

]]> By: Mark Lee http://www.taxresearch.org.uk/Blog/2008/03/23/micheal-meacher-speaking-on-tax-justice-in-the-budget-debate/#comment-403722 Mark Lee Mon, 24 Mar 2008 09:26:13 +0000 http://www.taxresearch.org.uk/Blog/2008/03/23/micheal-meacher-speaking-on-tax-justice-in-the-budget-debate/#comment-403722 Obviously another fan of yours Richard :smile: On the subject of treating short-term gains as income, I was half expecting just such an announcement in the Budget. After the pre-budget report announcement all attention was focused on the effective increase from 10% to 18% CGT on Business Assets. I heard no justification given or policy reason for the REDUCTION in CGT from 40% to 18% on non-business assets. As of 6 April 2008 the rate of CGT on speculative gains will be less than half the top rate of Income tax. This is much as it was when I started in tax and the top rate of income tax was 83% and the CGT rate was 30%. As light follows day so will tax planning focus on ways to convert what would otherwise be income into short-term gains with a consequential reduction in tax thereon from 40% to 18%. If short-term gains were to be treated as income there would be no such incentive of course. The Treasury have scored another own-goal. The new regime will result in predictable behavioural changes that will reduce the tax take. Is it acceptable or unacceptable tax avoidance? That depends on your perspective. To my mind it's much the same as when the 0% small companies rate of CT was introduced. The Treasury ignored prediction of behavioural change (and the consequential incorporation of thousands of small businesses to reduce the tax take on their earnings). The tax change was seen as an irresistable gift to small businesses if they were prepared to incorporate. So they did. Much the same consequence will ensue after 6 April with the effective encouragement to structure transactions so that what would otherwise be income will instead be taxable as capital gains. It is human nature to want to arrange one's affairs such that the minimum amount of tax is payable thereon (in accordance with the law). Tax changes that effectively create incentives to do so will have the inevitable consequence of encouraging this. Obviously another fan of yours Richard :smile:

On the subject of treating short-term gains as income, I was half expecting just such an announcement in the Budget. After the pre-budget report announcement all attention was focused on the effective increase from 10% to 18% CGT on Business Assets. I heard no justification given or policy reason for the REDUCTION in CGT from 40% to 18% on non-business assets.

As of 6 April 2008 the rate of CGT on speculative gains will be less than half the top rate of Income tax. This is much as it was when I started in tax and the top rate of income tax was 83% and the CGT rate was 30%. As light follows day so will tax planning focus on ways to convert what would otherwise be income into short-term gains with a consequential reduction in tax thereon from 40% to 18%.

If short-term gains were to be treated as income there would be no such incentive of course.

The Treasury have scored another own-goal. The new regime will result in predictable behavioural changes that will reduce the tax take. Is it acceptable or unacceptable tax avoidance? That depends on your perspective. To my mind it’s much the same as when the 0% small companies rate of CT was introduced. The Treasury ignored prediction of behavioural change (and the consequential incorporation of thousands of small businesses to reduce the tax take on their earnings). The tax change was seen as an irresistable gift to small businesses if they were prepared to incorporate. So they did.

Much the same consequence will ensue after 6 April with the effective encouragement to structure transactions so that what would otherwise be income will instead be taxable as capital gains. It is human nature to want to arrange one’s affairs such that the minimum amount of tax is payable thereon (in accordance with the law). Tax changes that effectively create incentives to do so will have the inevitable consequence of encouraging this.

]]>