You might have missed yesterday's editorial on inflation in the Guardian. This said:
Why should ordinary households be made poorer when a few groups operating at the top of the economy are driving so much of the price pressure?
The obvious solution to this would be for the Bank to ease off on interest rate rises and for the government to tax high earners. It is usually said of taxes on the rich that they don't raise much money, but the objective here would be to dampen inflationary demand. The cash it would yield could go towards investing in green energy, so as to make the UK less reliant on rollercoaster fossil fuel prices. Higher taxes are unpopular – when they are on you. When they're on someone else, on the other hand, they can be quite acceptable. If Mr Sunak is appalled by the idea of taxing his former workmates in the City, perhaps one of his opponents might take it up. Did someone mention the shadow chancellor, Rachel Reeves?
I do, of course, agree with the sentiment. Why not tax the wealthy more?
What I do not agree with is the suggestion that doing so might not raise much. I can now show that many tens of billions are available.
My work on taxing wealth more is progressing. Most of the sections that still need to be completed are underway. I think my editors have been through seventeen chapters already. I think there will now be more than 25. As soon as I can go through the edits publishing will begin.
The aim is simple. It is to show that the capacity to tax wealth more exists in this country. Anyone who disagrees or won't do so having proven that point is then accountable for their decision to deny those in need what they require - from healthcare onwards.
That makes it worthwhile getting this right.
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Reducing VAT down from 20% is most important or linking a rebate scheme to it for those on low incomes. In the United States sales tax averages roundabout 6% to 7% across the individual states.
It would help those on lowest incomes
But better benefits would work much better
Well there’s no easy answer. Benefits are very much reliant on the politicians elected. UK state pensions are very low for a developed economy for example so developing a tradition of low sales taxes is important to counter heartless governments.
How do you ensure that the retailers pass on the VAT saving to customers? It hasn’t happened for period products. https://www.theguardian.com/society/2022/nov/10/uk-retailers-not-passing-on-tampon-tax-savings-to-women-report-says
It cannot be guaranteed
A “Women’s Needs Tsar” is needed. For example, getting the right hormone therapy products for menopause is problematic for some women.
It is remarkable that a newspaper like the Guardian still thinks it worthy of consideration to mention the lie put about by the rich since Roman times that raising taxes on the rich does not bring in much tax and may even reduce total tax revenues.
If I have remembered correctly your anecdote of the occasion, this was not even the conclusion reached by an audience of American businessman when you debated Mr Laffer on the subject.
Quite why a news source like the Guardian does this is a mystery because as Trump has demonstrated if you repeat a lie often enough, eventually even people who should know better will start to think of it as a legitimate point of view.
Correct
The Guardian is still in the Stone Age in regard to understanding money creation and taxation issues. I rarely find anything they so on these issues worth reading all though full marks to Phillip Inman who is effectively arguing the Bank of England is pursuing class warfare by not taking into account profiteering by some oligopolistic businesses.
Dear Richard, can I send you an email about an accountancy matter that relates to a major UK retailer? The major company has stated that its ultimate parent company at 31/12/2022 and end of the financial period was a company based in Jersey but this company was closed in 06/2022 and all of this is on companies house. This company recevied dividend income of over £2bn and I thought that this was potentially a bit fishy and wanted to dig a bit deeper but I suspect I will need a little help. Only if you’re interested I’d love to send over the details…
I can promise nothing, but send away…..
Bellis Acquisition Company Ltd (12855280) owns Asda and most of their UK companies. They filed their accounts which can be seen online and show dividend income of £2bn+. On the final page of the accounts (https://shorturl.at/lqKU5) it also states…
“At 31st December 2022 and at the date of approval of the financial statements, the ultimate parent company and controlling party was Bellis Topco Limited, which is incorporated in Jersey and is jointly controlled by the Issa Brothers and TDR Capital LLP.”
Bellis Topco Limited was closed on 1st June 2022 (https://shorturl.at/mvJL1).
This seems quite a glaringly obvious mistake to make and it struck me so much that I thought it was worth mentioning. Obviously the ownership of the companies cannot be tracked in real time on companies house because we do not know what vehicle/company the Issa brothers/TDR capital are utilising.
Is this common practice is really what I want to know?
The parent company has not been closed
It has ceased to have a UK establishment, but it can be and I suspect is still in existence in Jersey.
My apologies about that. I cannot believe how they can put £2bn into a bank account where the revenue comes from a UK company and the tax payer get none of it.
Dividends when received by companies are tax free in the UK so the fact they went to Jersey makes little difference in that regard.
What about a foreign jurisdiction which doesn’t consider “income” as taxable…this is the world we live in. This business (Asda) used to be wholly owned in the UK. Why isn’t the government clamping down on this…madness
But as I sod, dividends aren’t taxable income here.
There are many other reasons why use of a tax haven entity is egregious, but not that.
I used to work in the city and we used to help companies establish trusts in the Isle of Man, these trusts would receive financial contributions from UK companies and then the trusts would make loans to the shareholders of the UK company, the value identical to the value of the contributions.
Once fees were settled for the work trustees (who incidentally were legal professionals based in the Isle of Man) then the loans would be considered by the trustees to no longer be of interest to the trust.
I saw Queen’s Council representative opinion pieces to state this was tried in court and was a safe and effective tax planning strategy (not worded like that). Unfortunately I forget the QC.
This is the world we live in.
It was.
Such things are getting harder.
Why would the Issa brothers establish a company in jersey to be the supposed owner of Asda?
It states on companies house the owner of Bellis Acquisition Company Ltd is Bellis Finco Ltd who the company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.
What could that mean? Surely even if the ownership of a company is diluted between thousands of shareholders the company would have a relevant legal owner…
That is a question for their advisers and them, not me.
Sorry, other work is distracting me this morning.
The two tax reforms I would go for are:
1 Increase taxation on unearned income i.e. profits, capital gains, etc to a sufficiently higher level above the rate of earned income so that it greatly discouraged receiving remuneration as anything except wages.
Not only is PAYE a relatively easy (and cheap?) way to collect tax it also, unlike unearned wealth, is not a tax dodger’s paradise.
2 Abolish the Upper Limit on the payment of National Insurance. It makes no more sense than having an upper limit on Income Tax.
In addition apply National Insurance to Unearned Income.
They will be addressed
Wouldn’t that make every pensioner with income of more than £12576 12% worse off?
Possibly I am a bit slow on the uptake but you will need to explain that.
I am not sure how removing the upper limit of earnings subject to NI makes pensioners worse off? Prior to Thatcher all earnings were eligible for NI deductions. Introducing an upper limit was one of Thatcher’s first big giveaways to the rich.
It is tempting to conclude that introducing the NI upper limit was simply one of Thatcher’s many wheezes to ensure that the North Sea Oil revenues were exclusively a gift for the rich.
I also struggle to understand your remark about the tax free pay limit.
I am nit proposing changes to NIC rules for those below 66 or for lower earners
Richard, do you mean
I am not proposing changes to NIC rules for those ABOVE 66 or for lower earners
Sorry – yes – shouldn’t write on my phone when out having a coffee with a head full of birdwatching 🙂
Paul, you said unearned income, which is what pensions count as according to the tax people.
At the moment any pensioner, like any working person, pays income tax on anything above £12576. If all unearned income above the tax threshold was charged national insurance at 12%, that would mean someone on £16,000 pension would pay an additional 12% national insurance as well as the 20% income tax.
So someone on £16,000 pension would be paying nearly £1100 to HMRC, instead of the £684 tax they pay now.
I agree there should be a tax charge on unearned income – including pensions, but a substantial allowance should be permitted before that happens. If a pension is above national median wage does it need an NIC exemption?
No, a pension above national median wage does not need an exemption from NI, but in Paul’s example he would include anyone earning above £12,756.
National median wage is twice the amount I gave as an example. I used £16,000 as an example as that is the amount at which pensioners can apply for various government handouts. What’s the point of taking money away with one hand and giving it straight back with council tax discounts with the other?
I agree the first thing they should do is raise the personal allowance for tax and NI. The next government should also end the ceiling for NI contributions at the top.
Can’t see Starver doing any of those things.
So, we have to apply pressure
Thinking Willie Sutton. “Why tax the wealthy?” “Because that’s where the money is.”
I would avoid calling it an increase in tax for the wealthy but rather a redistribution of tax, with the overall tax recovered starting the same. This would knock the tax increase argument in the head
I’d also try and move to a standard tax rate for all taxes so there is no benefit in paying people dividends instead of wages, etc. which is a common way to reduce your tax paid buy the well off but not available to the lower paid
But it may be increased tax because more needs to be spent on public services and to control inflation more tax needs to be recovered.
Collecting the all outstanding taxes, including previous years, would be a huge sum. Therefore manning up the tax office and giving them the power, like the VAT inspectors, would be essential as well as full transparency to ensure there are no more gentlemen’s agreements being made
I suspect HMRC understate the scale of bad debt, but it would not change government funding much of it was all collected, and there is no chance of that, especially when fr too much time usually elapses before action is taken.
Like a lot of postings here, I agree that it is the ignorance about just how much the wealthy have benefited since 2010 from austerity and even BREXIT that is the problem.
I also think that this goes back to 2008, where the sums that were losses revealed just how much money and profit was REALLY sloshing around the financial sector due to derivatives and other frankly criminal behaviour . If I remember things correctly, after that the UK Central Bank Reserve Account was never the same again and was increased many times over.
All the clues as to who has been benefiting are there so to me all the reasons to tax these funds are there.
The rich have got substantially richer. Not only that, it is the legal tender provided by their government that has enabled this as well as the nation’s markets and infrastructures. They need to give something back. So tax ’em I say.
Using outdated notions of the tax take based on old data is simply stupid and a gift to capital and wealth when one considers what is happening.
The rich can afford it. And in the absence of Green QE and MMT funded growth and too many hungry people, there is nothing ideological about this – it is to me a moral issue – whether the tax take is enough or not.
What is wrong with some people? Honestly?!! Moralising about taxing rich people when we’ve got feral hungry children in our towns and cities and an unfit system to look after our elderly citizens?
From The Guardian on how ‘income’ is taxed relative to Capital Gains
https://www.theguardian.com/money/2023/aug/20/earned-income-taxed-more-heavily-than-capital-gains-in-uk-thinktank-finds