The FT has an editorial headline this morning that says:
I was pleased to see it, given that the tax gap has been an issue I have explored for more than 15 years now.
Unfortunately, this statement of FT opinion then rolled out nonsense after nonsense, after yet more nonsense.
It claimed that growth alone will not increase tax revenues, which is an interesting idea when it always has.
Then, it claimed that looking at the wealthy as a way to collect more tax was a mistaken idea. It trolled out the age-old claim that they are mobile - and so pay tax voluntarily (I summarise what I think they meant). Instead, they said we should celebrate the wealthy for actually paying tax. I kid you not; apparently, that is something we are meant to be grateful for.
Then they noted figures suggesting that they desperately uncritically accept the HM Revenue & Customs. The estimate of the UK tax gap is correct. As I have noted time and again, there is no hope that this is true.
And after that, they relapsed into the standard right-wing mantras. The Laffer curve was hinted at, for example. And nowhere was there a hint made that simple things - like equalising capital gains and income tax rates, reducing vast numbers of allowances that favour the rich, and making sure we get data from banks on the turnover of every company in the UK so that tax not paid by the UK small business community - which is a massive cost - might be addressed.
In fairness, they did call for more resources for HMRC, and Labour is hinting at 5,000 more staff, although that will not be nearly enough.
And they did call for simplification - but you can tell from the tone that this is all in the style that the flat-tax brigade do, demanding, for example, the end of taxes like inheritance tax as if that is a simplification when it is not.
I noted that the same newsletter of the FT that announced this also had a headline saying:
They could start with the Taxing Wealth Report 2024. That explains how to close the tax gap, and more. The Editorial Board should read it.
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Hello Richard,
Some typos:
UK tax hap -> gap*
by the UL small business community -> UK*
is a massive ossie?
might be address3ed -> addressed*
And they did call for simo0lification -> simplification*
Angus
Done
Sorry
In OO much of a rush this morning
The Laffer curve was an insight, but it simply notes that between a tax rate of zero (no tax revenues) and 100% (next to no tax revenues) there must be at least one point where the tax revenues are greatest. A mathematician will tell me if we need to assume the function is smooth and continuous but I guess it would help. Not that there is a simple mathematical function “f(tax, base, rate, …)” anyway. And I don’t think anyway knows the shape for sure.
Typically this is only about income tax, as if that was the only tax that ever matters, and it is somehow unfair that the people with the most income pay the most tax (in absolute terms and as a proportion of their income). With NICs, income tax is about half of UK tax revenues, which is a lot but not all. I could imagine a punitive VAT rate at 100%. Canada just introduced a 100% tariff on Chinese electric cars, but some will still be sold, so tax rates at or above 100% don’t necessarily mean no revenues, just strong pressure on taxpayers to stop doing whatever they are levied upon.
The Laffer curve always seems to be raised as a simplistic argument for lowering taxes. But that assumes we are above the highest point. What if the peak is at say 60% or higher? Perhaps total tax revenues would higher if tax rates were increased. Is that so astonishing?
The only person I can think of who claims to know the shape of the Laffer Curve is Murdo Fraser(MSP), candidate for the leadership of the Scottish Tory Party (lol)
Some witty French economists have done the real maths and come up with a Laffer curve on public debt that is horizontally S-shaped. I am sure Fraser is deeply familiar with the literature, and has done the maths.
After all, Scottish Conservatives are well known to know everything there is to know about everything, better than anyone; and belligerently lecture everyone in Scotland how they alone really represent everybody, in spite of the fact that virtually nobody under eighty will vote for them.
Seems a weird position from the FT. I can’t work out if they are actively supporting supplyside economics or warning against it.
I am very skeptical the AI can catch tax evaders. You can’t train algorithmic AI when the data is missing.
The FT article = “shaping the tax policy narrative”. Provides ammo/talking points to assorted LINO talking heads (cue hand wringing – oh dear there is nothing we can do – we need to wait for the growth fairy to come).
The usual trash from the usual suspects. Richard, you are far to polite wrt the FT – the only thing they deserve is contempt, & slight regard. A newspaper with columnists that for the most part regurgitate tired establishment lines, & functionally incapable of stepping back and questioning.
Thank you and well said, Mike.
I know some of their financial services team. With the rare exception of Izabella Kaminska, no longer at the parish, most of the others rely on briefings, leaks etc. from insiders.
Izabella was good….
I see that in Norway, following an increase in taxes, there has been an exodus of high net worth individuals, with over 100 of the richest Norwegians leaving between 2021 and 2023 taking over $54 billion with them. Rather than the extra $150m extra which the Norwegian government thought the tax increases would bring in, it’s been estimated that the tax take will fall by nearly $600m
Why wouldn’t increasing taxes in the UK result in the same thing?
There have been a tiny number leave
Their wealth does not love with them – beliueve it or not, they do not keep it under the bed
And the number leaving makes no dofference to he economy
Now do you know why they left – and how manya returned
I’m so tired of the old trope that the rich are mobile so they pay tax voluntarily. What rubbish. Why do so few commentators challenge it?
I agree with that bastion of capitalism, the US, that if you are a UK citizen (or resident) then you should pay tax on your world wide earnings to the UK (subject to no double taxation). As a US citizen or Green Card holder you have to fill in a US tax return. Whilst one might debate the beaurocracy of the US system, the idea seems sound.
I think the UK should follow the US on this policy. If you don’t wish to pay UK tax then relinquish your UK citizenship or right to residence. For all it’s many faults, people, especially wealthy people, like living in the UK. They will not leave because they are taxed a little more.
When rich people bring their foreign wealth to UK it is in a foreign currency, say Russian rubles. Such currency cannot be spent in the UK – it has to be exchanged first. So it doesn’t bring new wealth into the country. And, even if it did, that wealth does not trickle down to UK citizens. AFAICS encouraging wealthy foreigners to the UK does not, on average, enhance the wealth of those already here.
Even without worldwide taxing on earnings I doubt the net effect of excessive untaxed wealth in the UK is a net benefit to others in the UK (the reverse I suspect). After all, their fixed assets, such as houses, remain the UK. And their sterling balances can only be spent in the UK (even if they exchanged them for foreign currency).
So, if the wealthy wish to throw a tantrum and go, because taxes are raised a little, let them go. The UK would be better without them.
I have long advocated passport taxation, as I call it.
Even if the Govt gets 5k extra staff for HMRC, they will be trained by KPMG…
Rich people leaving the country would free up fiscal space for government spending just as surely as taxing their wealth out of existence 🙂
And anyway too many rich people make things too expensive for everybody else.