My new report for the TUC is entitled 'Is 50/50 fair?'. It does, of course, discuss the 50p tax rate.
The report can be read here. The key conclusions are easily stated though. The first is that using HM Revenue & Customs' own data the 50p tax rate has potential to raise a sum well in excess of the £3 billion last officially forecast, and a figure at least as high as £6 billion could be generated. That estimate, it is stressed is for 2011/12, not 2010/11, when HMRC clearly expected some transitional avoidance. But as I show, it's hard to see how the tax could not raise such sums.
Second, I argue that the scope for revenues to fall as a result of the use of this rate is far smaller than claimed by many, especially since almost 60% of those paying this tax rate are employees for whom avoidance opportunities are, to be candid, often quite limited, whilst the number of people leaving the UK to escape this tax will be modest based on a reasoned analysis of the data of who will pay it, even if there can be no doubt that some will blame it for their reason to relocate when it is likely a wide range of other factors will also actually be involved in that decision.
Finally, I argue that whilst there are still routes open to those who seek to avoid paying tax at the 50p rate which do have potential to undermine the revenues that it could raise this loss of income to the Exchequer is not inevitable. These routes could be easily closed if the political will existed to introduce both a comprehensive general anti-avoidance principle in UK tax law and to tackle the issue of personal service companies to ensure that the profits of these companies were assessed on their owners at the time they arise and not at the time that they are paid out to them, as now.
To put it another way: the 50p tax rate is highly likely to be both fair and contribute significantly to UK tax revenue whilst encouraging long overdue steps to stop abuse in our tax system. for all those reasons it has to be welcome.
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The way you drum on about a GAAR being the panacea for what you perceive as tax avoidance is naive. Global experience will show that it isn’t necessarily so (look at recent cases in Canada).
While a GAAR may be welcomed by tax advisers and particularly lawyers it will certainly increase the cost of litigation fort HMRC and will certainly not bring the results you hope it will.
So we can learn from experience
Only neoliberals can’t. It’s your assumption of consistency that holds you back. It would be funny if it wasn’t so sad. And it shows remarkably little faith in evolution
Richard
In a way Justin is right. I understand that the Canadian supreme court is full of “Hoffmans”.
My own view is that any kind of GAAR approach needs to be underpinned by a minimum tax.
I am in favour of minimum tax
I also think a clause on interpretation – to tell Hoffmans what to do – is essential in any GAAR
An effective GAAR would need to be subjective to work effectively, and therein lies the risk. Hoffman’s manipulation of tax law and the abuse of human rights legislation in terrorism cases by “Hoffmans” at the other end of the political spectrum demonstrates that subjectivity will always be preyed on by those with ulterior motives.
My preference would be for putting the emphasis the other way around, minimum tax first then a GAAR if necessary.
Life is subjective
Deal with it
@belgraviadave
The more effective GAAR’s from a revenue authority perspective are those that apply objective tests to ascertain a taxpayers intention. Personally I don’t agree with that and feel it doesn’t make a proper enquiry into intent and can unfairly bring perfectly acceptable transaction into the ambit of tax avoidance.
And I don’t agree
And candidly – intent is not hard to establish, in my opinion
Why don’t you just go all the way and exclude the courts entirely from adjudicating on GAAR decisons made by HMRC.
Why waste time telling the courts how to interpret the GAAR – after all you would appear to prefer to have the HMRC’s decision final and binding on the taxpayer.
Making comments like that shows how desperate or silly you are
“That estimate, it is stressed is for 2011/12, not 2010/11, when HMRC clearly expected some transitional avoidance”
I don’t think HMRC planned for any substantial “substantial avoidance”. If anything 2010/11 might come in around about existing expectations if people thought it was going to be temporary (which it looked like being a couple of years ago). It is for 2011/12 and later years where HMRC would expect more avoidance, as it becomes apparent that the 50% rate might be here for considerably longer.
Wrong way round: 2010/11 was easily avoided. Later years are not. Read the report and you’ll see why
I would say the 50% tax rate is very very fair on the well off but unfair on the rest of us poor suckers.