A journalist asked me three questions on threats to the UK's tax base in the next decade this morning, in writing. I thought I'd share the responses:
1 - What do you see as the top threats to the UK tax base during the coming decade?
a) Brexit crashing incomes
b) Fraud arising from a lack of HMRC resources to deal with new tariffs and new tax deals resulting from new trade deals
c) On line abuse when we lack the back up of the EU
d) The corporation tax base as the UK tries to be a tax haven using ever lighter regulation that basically means tax declaration will become even more voluntary than it already is
e) The domestic tax gap as HMRC ceases almost all compliance checks for VAT and other taxes
2 - One of the threats to National Insurance revenues is said to be the growth of the "gig economy". In what ways, if any, do you feel governments should seek to solve the growing disparity between the NI tax take from employed and self-employed people?
Abolish NI over time and replace it with a progressive consumption tax charged on the flows through a person's bank account (having allowed for transfers between related accounts). This is green taxation and it does not penalise jobs, which is the last thing we need to do as we head for automation. Tinkering with NIC is pointless. We need a financial transactions tax for a new era.
3 - The OECD's Base Erosion and Profit Shifting (BEPS) programme has been making slow but steady progress. In broad terms, what do you feel ought to be the programme's priorities?
a) Public country-by-country reporting to embarrass multinational corporations into complying
b) Cooperating with the EU on the Common Consolidated Corporate Tax Base
c) Completing work on digital permanent establishments
The first is yield
The second is bringing CT into the 21 st century
The last is the same objective from a different angle.
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So I earn income which is paid into my bank account after paying income tax. Then whenever I spend money in my bank account you want me to pay tax again?!!
Yes
As you do now
But I would not ask for NI
If you’re referring to VAT, the optics are very different. After the initial bump from unpaid NIC, people will internalise the increase and instead see government inserting a tax on them personally.
I think I prefer Robert Shrimsley’s Selfie Tax!
https://www.ft.com/content/6bf8adfc-b390-11e7-a398-73d59db9e399
I have no idea what you’re suggesting
But people do notice NIC and rarely notice VAT
“So I earn income which is paid into my bank account after paying income tax. Then whenever I spend money in my bank account you want me to pay tax again?!!”
Absolutely.
All government spending (the source of our money) has to be taxed away, in order to avoid inflation – as the gov continues its spending… ad infinitum (hopefully!)
If the gov didn’t tax at each transaction, then yearly public spending would simply accumulate in the economy, until by the second, third and fourth years you would see quadruple the amount of money in circulation, chasing roughly the same amount of goods and services.
The massive inflation that would result would mean that the purchasing power of your wages would be drastically reduced – thus effectively acting as a tax on your income anyway.
There’s no escape, I’m afraid!! But taxing transactions is preferable to runaway inflation, so that’s why we use it.
It’s probably helpful not to actually see your money as *yours* at all – it’s actually the government’s money, but it allows you to accumulate the *real* things you need along the way, as it circulates around the economy, eventually to return, via taxation on all transactions, to whence it came – the Exchequer – where it’s eventually destroyed….. so that the whole process can begin again, without causing inflation.
Not precisely, but it’s better and picks up non consumption transactions as well
Hi Richard
Every month I transfer £100 from my bank account to that of my 85 year old mother. Will it be me who would get taxed on that or her, under your proposals?
Which journalist was it? For which media outlet? I would be interested in reading the article.
Both
For the record
So if I am to be taxed as the £100 leaves my account would it be better to take out £100 in cash and give it to my mum? Would that save her tax? She watches every penny since dad died.
When you say for the record, do you mean the journalist was from The Record? I confess I’ve not heard of that. Is it a music paper like the old NME? Reaching out to the young people I suppose? Good idea.
Thanks.
Some people would try to use cash. But cash is dying. And when she soebpbda the recipient will pay the tax and will have priced it in. Avoidance will be quite hard.
As for your second para, I think you have lost the plot. I am clueless as to what you are talking about and don’t much care either
What a nasty person you seem to be.
I asked which journalist asked you the questions as I wondered which media outlet was involved. You replied
“for the record”
I was trying to find out if you meant a paper called The Record.
If you are this rude to people who are trying to find out about your cause, it is a wonder you have any followers at all.
As for cash is dying. What nonsense. Cash is alive and well and if draconian laws were passed which taxed children trying to help their parents by transferring money by bank transfer them cash would become even more popular. People do not like being spied on and micro-managed. Especially by rude people.
Good day and good bye. You can reduce the numbers following you by one.
I have no way of following a thread when I am moderating: I do not see what you are replying to. So I tried to guess and got it wrong
Nasty? I don’t have to welcome you here
Actually, I would suggest you don’t bother. You felt like a troll from the outset
If a tax on the flow of funds through bank accounts was introduced it would make far more sense to give “things” rather than “money”. For example in the case of a person giving his or her mother 100GBP per month it would make more sense to start paying 100GBP of their utility bills each month to avoid the tax being applied more than once.
Actually it isn’t entirely clear what would happen if you overpaid a utility bill and it was refunded (this already happens with incorrectly set fixed amount direct debits), would people be expected to pay more tax if they overpaid their bills and received a refund? Similarly would they end up paying this tax more than once if they bought faulty goods and received a refund when they were returned?
Could you avoid the charge if you used a credit card to pay and received a refund on that instead of a debit card, or would credit card accounts need to be drawn in as well? It seems very likely they would need to be caught.
What happens if you decide to buy a house, pay the funds into the client account of the solicitor, it falls through and the funds are subsequently sent back? Does somebody avoid paying the tax multiple times if they are in a chain and the funds from their sale and subsequent purchase remain in the solicitor’s client account? They probably would avoid the tax on it coming back to their own personal account and going out again, but should they?
This is one of those ideas that sounds good on paper until you start to realise there are a huge numbers of potentially contentious scenarios and you will need loads of anti-avoidance measures. I can imagine the legislation for this simple tax being very similar in length to other simple taxes like VAT.
I accept paying for others may be effective avoidance
Refunds would, of course, be taxable
Credit cards could only be taxed once I.e. When incurred it settled, not both
The solicitor issue is interesting. And so rare I suspect an exception could be made under the rules I suggest should exist between related bank accounts actually under a person’s control. In other words, easy to manage
NICs bring in over £120 billion each year. What rates would have to be charged under this new bank account tax to replace NICs? The European Commission estimates the 0.1% FTT would raise about €57 billion across the whole of the EU, and the UK is about a sixth of the EU’s economy. So would the rate be something like 1% on each payment? Perhaps more if there are exemptions and progressive rates?
Coincidentally, the existing consumption tax also raises about £120 billion each year, so we could just double VAT to 40% instead. Or abolish VAT and charge 2% on every bank account movement.
Who will collect this new UK tax if I run a current account in say Ireland? Self assessment?
Hang on – that FTT is just on financial trading
I would use progressive rates
They would be very low
Andrew, Richard
I’m glad Richard has finally come to against NICs. In the first instance there would be no difference, w just increase the Income Tax a bit & forget NICs. It wouldn’t raise or lower taxes, just make them easier to comprehend.
The FTT won’t lower other taxes either. In an ideal world the FTT would raise little because the pointless activities it taxes would cease. In fact, I suspect, it’ll raise billions. In which case they would be used to put right the harm done by iterative computerised trading
Oh, Dear, Barry Smith.
“As for cash is dying. What nonsense. Cash is alive and well ”
It is at present, but it’s not here to stay. Large denomination notes have already gone in several major currency areas.
The rest could conceivably follow. And follow very soon if some people (Ken Rogoff for example) get their way.
The justification will be to prevent money laundering. The reason will be to control the financial economy by the implementation of headline aswell as, as now, real) negative interest rates.
On future sensible taxation.
Do the policies you are proposing around capital transfers cover the need for land taxation. Does it kind of do that by default. ?
The suggestion of dumping NI altogether and including it in incomer tax should have been done years ago… but…. I’d like to see income tax abolished completely. It’s philosophically silly to tax an activity that you would wish to encourage.
Mittens again ! ‘Incomer tax’ ! Please read INCOME tax.