According to The Telegraph, a Taxpayers' Alliance campaign to have national insurance renamed Eranings Tax is likely to be successful.
A number if, inevitable thoughts follow on. The first is that this is, despite all the claims, not a tax. There is still a contributory principle in national insurance, for example, in pension rights. Given how keen the government is on that idea I wonder how this renaming helps them.
Second, if this is to be called an Earnings Tax the obvious question to ask us why then only earnings are taxed. Why should unearned income such as rents, dividends and interest not be taxed?
And third, the question as to why such large scale avoidance of the tax is permitted in the case of small limited companies.
I happen to believe in national insurance. But if others don't that's their right. But given that we cannot do without the £100 billion or more it raises a year (whatever the TPA thinks, or claims, or is deluded about) then renaming the tax requires that fundamental questions on its equity must be answered.
And there is an answer, which is to apply it to all investment income in excess of the annual NIC lower earnings limit each year except, as is the case for earnings, for pensioners. Many of the abuses and inequities would then disappear.
But I somehow don't think that is what those supporting this move have in mind.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
If they do away N.I, Will that mean that on reaching pensionable age you won’t get any reduction in payment as you do now when N.I subscriptions stop.
It sounds like just another way to screw more money out of the already overtaxed population
I’m still confused as to why there are different rates of NI. Is it some historical thing?
If it’s earnings then the difference between employment and self employment needs addressing as well
The self employed get many fewer benefits
That’s the reason
This is a change by stealth, a sort “stealth reform” on a par with “stealth tax”. For once you call into question the whole insurance principle behind NI, you immediately weaken, and eventually erode completely, the contractual idea behind the Beveridge and Atlee Welfare State, as envisioned in the 1940’s.
That contractual idea – on a par, as I’ve said before with e.g. House insurance, means that Benefits are not even properly to be called benefits, still less the odious “Lady Bountiful” term “Allowances”, but are contractual payments TO the claimant.
No one says you don’t have a RIGHT to a claim, and its money’s worth,from your house insurer for e.g. fire damage, nor that that Insurer has a DUTY to pay.
Erode, and eventually abolish, that rationale, and it won’t be long before whole idea of Social Security is similarly eroded and then abolished, leaving behind a “You gets what you pays for” rationale, once more favouring the rich, who will manage to establish the lie that ALL money earned is theirs and that ALL taxation is misappropriation by the State (unless, of course, it ends up in their pockets, in which case “finders, keepers”)
You are absolutely right
One wonders how long it will be before these creatures abolish the National Insurance Funds themselves, which as it is provide only a weak firewall between NICs and general taxation. As it is, the treasury can get it’s grubby little hands on any surplus generated via the Debt Management Office (presumably the NIFs buy UK gilts?). I know Richard has said in the past that he’s not to fond of hypothecation, but I do rather think NICs should be paid to NIFs which are independently managed (so that they can invest OUR surpluses in a manor most conducive to growing the fund rather than funding the treasury). Otherwise our politicians might get the notion that *they*, rather than us, own the NIFs. I suppose under the sham that is parliamentary sovereignty, they do, but therein lies the problem to my mind. THEY own our ‘democracy’, THEY own our NIF and THEY have been intent on eroding whatever shred of ownership we once felt for the NI system (largely through Orwellian word-play; social security becomes ‘benefits’ etc…).
I really hope that this latest Orwellian slight of hand doesn’t go through. Does Labour have the spinal integrity to challenge it or, if the need arises, reverse it. Based on past performance, I doubt it. 🙁
Andrew, Richard and Lee; let’s be frank, any proposal by the Tax Avoiders Alliance should be viewed with a very sceptical eye. Actually, I’ll go further; given that the Tax Avoiders Alliance has always been very cagey about their financial backers, we shouldn’t trust a word they say.
Andrew is right, this is yet another underhand attempt by the right to chip away at, and eventually abolish, what remains of the achievements of the 1945 Labour government.
As I’ve said before, ‘forward to the 1930’s with the coalition!’ Perhaps they could adopt it as their slogan for the 2015 election?
The DT says that this is a step towards merging income tax with NI. If that plan goes ahead, it seems an excellent ruse by which to convince people they’re getting an income tax cut when in fact any cut would probably be offset by an ‘earnings tax’ increase. Perhaps conflating the two makes it easier to do some wool over eye pulling.
It doesn’t come close to paying for the NHS, never mind benefits or pensions. It’s just a tax as far as I can see and a bad one at that. A tax on jobs and hugely regressive to boot.
I think you have seriously misunderstood it
It is not “just a tax”. It is a unique form of tax in that paying it earns the payer the RIGHT to a full, non-means tested, Basic State Pension and also rights to other non-means tested benefits. I suspect that the government would very much like to terminate this contingent obligation on paying NI and get rid of the non-means tested pension; and what better way of preparing the way for that than getting rid of the tax that earns credits towards that pension.
Precisely
It is actually not a tax in that case
It’s a contract
This government wants to break that contract
Maybe. But it surely is regressive and why would we want to tax labour?
I’m nt sure I am following you
I simply mean that NI is itself a highly regressive tax and that every time an employer wishes to employ someone he has to factor in a tax to do so in the form of employers NI contributions. Hardly a remedy for unemployment but a tax on labour and therefore production.
And yet exemptions to induce employment have failed
That’s not really relevant unless you’re suggesting a casual link between employer’s exemptions from NI contributions and high levels of unemployment?! I presume you’re not since it would appear rather implausible. In contrast, adding overheads to labour in the from of employer’s NI would only plausibly be expected to reduce employment ‘other things being equal’ It’s that last bit that almost certainly explains why employment levels are not greater than they are…’other things’. Rationally we could expect some mix of ‘higher profits, greater numbers in employment and wage levels’ to result from the removal of employer’s NI.
We’d also get lower tax, fewer schools, reduce healthcare provision, worse pensions and much else besides
I’m not advocating a reduction in taxation or at least that’s a whole different debate. I’m assuming fiscal neutrality. Some other tax would have to be increased or instituted in its place. I have my preference. My point is that NI is one of the worst possible taxes if you believe in reduction of income inequality and in a more productive economy.
Once this is done could we re-name income tax “National Insurance Contributions”?