50p - top rate of tax: keep or get rid?

[Guy Fawkes]

I thought that when the upper tax rate was increased by Labour it was widely accepted (even by Labour Government ministers) that this rise would actually bring in little or no extra money to the treasury coffers and was really more of a media publicity stunt to make them look to be tougher on getting high earners, getting them to pay more than actually being a serious way of raising more tax revenue for the treasury.

One problem was with tax avoidance, etc most of the extra gained by those willing to pay the extra would be lost by those who accepted the previous levels but were willing to take tax avoidance measures to keep down their tax burdon. I don't know if this has proven to be the case or not.

 

[Guy Fawkes]

Until the Philip Greens of this country are made to pay their fair share of taxes we should keep the 50p rate. With so many people suffering financial hardship it hardly sends the right message if we cut tax for high earners.

Catch 22 - if you over tax the job creaters, what incentive is there for them to work rather than just living off their savings and investments or to go to work abroad like in America ?
You could end up raising more by allowing people like that to pay small amounts in tax because their hard work is rewarded

Its a fine balancing act

 

[Half Time Pies]

Thinking out of the box how about getting rid of income tax altogether and replacing with Land Value Taxation (LVT)? Doesn't penalise productiveness and would be impossible to evade: Land value tax - Wikipedia, the free encyclopedia

 

[Pavilionaire]

It's not really about how much tax is being raised, it's more about the intangible benefit of job creation by incentivising those with access to capital to invest or start business.

For those that say 50% taxpayers get to keep half of the money think what effort goes into generating the 100% income that gets taxed. For sole traders / owner-managed companies the capital they risk and Sales they have to generate in order to make the profit in the first place, plus red tape re VAT / PAYE / Employment Law etc mean businessmen and women WILL look at their net income in order to see whether it is worth their while, and 50% is a damn sight more than many of our competitors charge, particularly those with 'flat' tax systems.

Right now with high taxation, massive red tape and low consumer spending risking capital in starting or expanding businesses is fraught with danger. Those with sense will seek PAYE'd employment until the economy shows signs of recovery, or until the Office Of Tax Simplification gets its thumb out of its arse and brings about real change for the better.

 

[The Birdman]

we been here before

 

[El Presidente]

Even as a leftie I think it's poorly thought out and counterproductive.

A well organised person can put a lot of their income and wealth overseas, and therefore avoid the UK tax authorites, and it will mean that companies with relocate to lower tax regimes, as the benefits of being in London are outweighed by the reluctance of high earning employees to come here.

Better to have 40% of a large cake than 50% of a small one.

 

[king Wombat]

Even as a leftie I think it's poorly thought out and counterproductive.

A well organised person can put a lot of their income and wealth overseas, and therefore avoid the UK tax authorites, and it will mean that companies with relocate to lower tax regimes, as the benefits of being in London are outweighed by the reluctance of high earning employees to come here.

Better to have 40% of a large cake than 50% of a small one.

If you're going to spend time and money avoiding tax - then the tax rate is irrelevant. You're going to do it anyway.

As to the people saying it doesn't encourage start up businesses - nonsense. How many businesses in their first year make enough profit to pay themselves a salary of 150k anyway? Answer is not many!!

This hoo ha is a load of crap, there is no or very little evidence that taxing at 50% has had any detrimental effect, and the fact is that it does raise money means it is working.

This is just an ideological move by the tories whom after all are the party of the rich.

 

[glasfryn]

I would give them a last ditch option before benefits are stopped , do 30 hours a week of unpaid voluntary work such as for charities or in the local community. Give them 30 days every 12 months to use as "paid benefit holidays" or "sickies" , if they breach the limit then their benefits are taken away.

thats a pretty good idea
most people would love to work and support their own family but if there no work how are they supposed to do that with the system above or similar it might just might give them a little self worth and confidence to go on and find work when its available

 

[Herr Tubthumper]

I was watching this on telly last night and there is not enough data to say if it's beneficial or not. Until then keep as is I guess.

 

[Herr Tubthumper]

Even as a leftie I think it's poorly thought out and counterproductive.

A well organised person can put a lot of their income and wealth overseas, and therefore avoid the UK tax authorites, and it will mean that companies with relocate to lower tax regimes, as the benefits of being in London are outweighed by the reluctance of high earning employees to come here.

Better to have 40% of a large cake than 50% of a small one.

Fair point. But there is currently no evidence to suggest its costing more money than it's raising, or 40% of a large cake is greater than 50% of a small one or whatever. Plenty of theory being thrown around though, but no decent stats. I'd prefer a decision to be made with some backing and not just based on theory and/or ideology.

 

[Storer 68]

a BIG Society NEEDS BIG taxes!

 

[El Presidente]

If you're going to spend time and money avoiding tax - then the tax rate is irrelevant. You're going to do it anyway.

As to the people saying it doesn't encourage start up businesses - nonsense. How many businesses in their first year make enough profit to pay themselves a salary of 150k anyway? Answer is not many!!

This hoo ha is a load of crap, there is no or very little evidence that taxing at 50% has had any detrimental effect, and the fact is that it does raise money means it is working.

This is just an ideological move by the tories whom after all are the party of the rich.

I can only speak from personal experience. Once I get close to £150k I stop working. As for detrimental effect, I know a lot of people who work in financial services, they are now taking up opportunities in Frankfurt rather than London.

 

[Herr Tubthumper]

As for detrimental effect, I know a lot of people who work in financial services, they are now taking up opportunities in Frankfurt rather than London.

This is only your anecdotal evidence though. There are also cases where finance companies have cemented their position in the UK. I cannot remember which foreign bank it is but one major took a long lease or bought into One Canada Tower recently and stated that they want to attract the best staff and need to have offices in the best locations to do this. The issue of tax was raised and the spokesperson reiterated his statement about best staff and the best locations i.e. the tax was not a consideration....attracting the best staff is.

I am also sceptical about people stopping working when they reach the next tax limit. It does not seem to deter people at the 40% level.

 

[ManxSeagull]

I prefer our rates on the Isle of Man:

Single Person £9,300
Married Couple (combined) £18,600
Additional Personal Allowance £6,400
Blind Person £2,900
Disabled Person £2,900
Non-Resident £0.00
Age Allowance £2,020

INCOME TAX RATES

Standard Rate 10%
Higher Rate 20%
Non-Resident Rate 20%

Mortgage Relief 100%

The 2006 Budget introduced a cap on personal income tax at a maximum level of GBP100,000 per annum (raised to GBP115,000 as of April 6, 2010), irrespective of earnings. It was foreseen that this will attract high-net-worth individuals and active entrepreneurs to the Island with the drive to further stimulate the Isle of Man’s burgeoning economy.

 

[Herr Tubthumper]

I can only speak from personal experience. Once I get close to £150k I stop working. As for detrimental effect, I know a lot of people who work in financial services, they are now taking up opportunities in Frankfurt rather than London.

German higher tax rate is 45%. Are these people you know who are moving to Frankfurt the same people who obviously flooded here when our higher tax rate was only 40%?

 

[MJsGhost]

If you're going to spend time and money avoiding tax - then the tax rate is irrelevant. You're going to do it anyway.

Not true - 'tax solutions' peddled by the likes of Probiz are not cheap, so the tax rate is massively relevant.

If you're trying to decide whether to just pay the tax, or use a scheme to reduce your tax liability, it comes down to a comparison which is simple on one side (cost of paying the tax) and more complex on the other (time spent with accountants, the fees involved, moral worries, attention from HMRC etc).

From a simplistic cost point of view, if the cost of the solution is anywhere near the cost of tax, 95% will just pay the tax. A 25% increase in tax liability at the top end (40% up to 50%) has a massive bearing on that decision.