Even A Blind Squirrel Sometimes Finds A Nut

[discobob]

3 hours ago, JohnfromUK said:

In my view the real problem is rooted in the fiendishly complex and hopelessly inept tax system (UK and internationally) that is full oh loophole and impossible to interpret without constant, complex and highly expensive legal challenge - a path only open to the very rich.

A very good argument for a single rate tax that everybody pays - be it people, directors or corporations - forget about NI which is just another disguised tax. No loopholes or anything. No tax on Pensions though as the money would be taxed on the way into it.

People will complain that the rich should pay more tax. Just by the very nature at lets say a 30% tax rate (remember NI is bundled in) with a £10K tax allowance - somebody earning £20K will bay £3k tax, while somebody earning £100k will pay £27k

Just some flat figures

[Demonic69]

50 minutes ago, discobob said:

A very good argument for a single rate tax that everybody pays - be it people, directors or corporations - forget about NI which is just another disguised tax. No loopholes or anything. No tax on Pensions though as the money would be taxed on the way into it.

People will complain that the rich should pay more tax. Just by the very nature at lets say a 30% tax rate (remember NI is bundled in) with a £10K tax allowance - somebody earning £20K will bay £3k tax, while somebody earning £100k will pay £27k

Just some flat figures

There was an economist who crunched the numbers on what constitutes a fair living wage in regards to taxation, benefits etc. It was very middle-class oriented, but covered things like food, fuel, bills, mortgage on a nice house, 2 cars on finance, a holiday or 2, modern mobiles, small savings pot for emergencies etc. The number came out at something like £130k for a 2 parent, 2 child household. He surmised that, anything over and above that amount was pure luxury and should be taxed accordingly. Obviously it would vary geographically, but that could be worked out. His calculations worked out at several £billion extra for the economy, with an improved quality of life for the majority (based on material possessions and leisure activities) and only a small additional burden on those with more money than they know what to do with.

I read it a couple of years back but can't find it since, but was an interesting read.

[Mice!]

1 hour ago, discobob said:

People will complain that the rich should pay more tax. Just by the very nature at lets say a 30% tax rate (remember NI is bundled in) with a £10K tax allowance - somebody earning £20K will bay £3k tax, while somebody earning £100k will pay £27k

Just some flat figures

That's far to simple.

 

6 minutes ago, Demonic69 said:

The number came out at something like £130k for a 2 parent, 2 child household. He surmised that, anything over and above that amount was pure luxury and should be taxed accordingly.

I understand what your saying but I'd love to know where he got £130k from, I'd need another 3 or 4 jobs and more hours in the week. 

[JohnfromUK]

4 minutes ago, Mice! said:

I'd love to know where he got £130k from

£130K.  I was generally considered quite well paid before I retired, but never earned anything like that.  UK average wage is currently about £28.5K.

 

To get everyone to £130K including the 'rich' down to that level would (I guess) have a MASSIVE shortfall.

[Raja Clavata]

Middle class household income of £130k sounds about right to me and I doubt the figure would have changed much in that time.

[JohnfromUK]

3 minutes ago, Raja Clavata said:

Middle class household income of £130k sounds about right to me and I doubt the figure would have changed much in that time.

Well with 2 x UK average full time earners, you would be around the £55K mark, so less than half your target.  Something doesn't add up.

I cannot believe that most 'average' UK families have access to anything like that - I would guess that more like £50K per household is fair, possibly less as many have a one income household for a period when children are young, or a part time second earner.

[Demonic69]

28 minutes ago, Raja Clavata said:

Middle class household income of £130k sounds about right to me and I doubt the figure would have changed much in that time.

Yup, household. Probably not too hard to reach in London, even for upper working class. I'm working with guys on £60-70k living in Yorkshire, and they've still got a way to go in the business.

The number wasn't an average of earnings or anything like that. It was the number that would allow you to achieve what he classed as "the ideal" without earning an excess that you'd have to deliberately spend. he worded it much better than myself obviously.

IIRC the whole exercise was to look at tax bands more closely, showing that those on the higher rate of tax, but lower than his magic number, were the ones hit most hard (he was probably one of them. If the 40% rate lower limit was increased to £130k there'd be a massive boost to the economy from spending, then the rate could be upped by a few percentage for those who wouldn't miss it because they have everything already. You could probably extrapolate that down for normal folk who run cheaper cars, cheaper houses, holidays etc.

[old man]

2 hours ago, Demonic69 said:

There was an economist who crunched the numbers on what constitutes a fair living wage in regards to taxation, benefits etc. It was very middle-class oriented, but covered things like food, fuel, bills, mortgage on a nice house, 2 cars on finance, a holiday or 2, modern mobiles, small savings pot for emergencies etc. The number came out at something like £130k for a 2 parent, 2 child household. He surmised that, anything over and above that amount was pure luxury and should be taxed accordingly. Obviously it would vary geographically, but that could be worked out. His calculations worked out at several £billion extra for the economy, with an improved quality of life for the majority (based on material possessions and leisure activities) and only a small additional burden on those with more money than they know what to do with.

I read it a couple of years back but can't find it since, but was an interesting read.

Someone been sniffing the fairy dust IMHO!

Ah well back to dream of the blind squirrel having found the nut? Maybe a tad insulting to a lot of hardworking families?

[discobob]

My thoughts on this was

1 simple tax rate (30% for everyone as NI would be done away with)

1 simple tax free allowance per person. The only extra would be that if only one person was working 50% could be used from the non-working partner.

No tax breaks on pensions etc on monies going in - but then no tax on Dividends earned in the pot and payment out would be tax free (Like ISA's)

Dividend's, Corporation Tax, etc. would be @30% except when going into a pension fund.

No loopholes - no offshore. Any money paid offshore would be hit with 30% - no complex "licensing" between different branches of the same company as this would be 30% straight away.

Clean & simple.

Results.

More money would be collected into the coffers, maybe even enough to start reducing the overall tax rate.

The tax office could be slimmed down tremendously - because it is a simple system.

However, this would never happen because the ones that would be impacted are the ones that are sat at the top table rubbing shoulders with government, lobbying them, offering them jobs when the time comes for the great expenses gravy train to finish!!!

[grrclark]

16 minutes ago, discobob said:

My thoughts on this was

1 simple tax rate (30% for everyone as NI would be done away with)

1 simple tax free allowance per person. The only extra would be that if only one person was working 50% could be used from the non-working partner.

No tax breaks on pensions etc on monies going in - but then no tax on Dividends earned in the pot and payment out would be tax free (Like ISA's)

Dividend's, Corporation Tax, etc. would be @30% except when going into a pension fund.

No loopholes - no offshore. Any money paid offshore would be hit with 30% - no complex "licensing" between different branches of the same company as this would be 30% straight away.

Clean & simple.

Results.

More money would be collected into the coffers, maybe even enough to start reducing the overall tax rate.

The tax office could be slimmed down tremendously - because it is a simple system.

However, this would never happen because the ones that would be impacted are the ones that are sat at the top table rubbing shoulders with government, lobbying them, offering them jobs when the time comes for the great expenses gravy train to finish!!!

The folk that would be hit the most with a flat tax rate are the people at the bottom.

[AVB]

16 minutes ago, discobob said:

My thoughts on this was

1 simple tax rate (30% for everyone as NI would be done away with)

1 simple tax free allowance per person. The only extra would be that if only one person was working 50% could be used from the non-working partner.

No tax breaks on pensions etc on monies going in - but then no tax on Dividends earned in the pot and payment out would be tax free (Like ISA's)

Dividend's, Corporation Tax, etc. would be @30% except when going into a pension fund.

No loopholes - no offshore. Any money paid offshore would be hit with 30% - no complex "licensing" between different branches of the same company as this would be 30% straight away.

Clean & simple.

Results.

More money would be collected into the coffers, maybe even enough to start reducing the overall tax rate.

The tax office could be slimmed down tremendously - because it is a simple system.

However, this would never happen because the ones that would be impacted are the ones that are sat at the top table rubbing shoulders with government, lobbying them, offering them jobs when the time comes for the great expenses gravy train to finish!!!

I support a flat tax rate but not all of your proposals above. 

For example Corporation tax at 30% would drive many companies to register in lower tax jurisdictions. I would argue for zero corporation tax as why tax profits at all  if profits are reinvested in the company (which they are unless paid out as dividends). Dividends are paid after corporation tax so in your example a company’s would pay 30% corporation tax and then shareholders would pay 30% on dividends so the government are receiving 60%. Why bother running a company and making a profit in that case? 

[discobob]

3 minutes ago, grrclark said:

The folk that would be hit the most with a flat tax rate are the people at the bottom.

The figure of the Tax free allowance is just a simple £10k - makes the figures easier - it could be £15k etc...

3 minutes ago, AVB said:

I support a flat tax rate but not all of your proposals above. 

For example Corporation tax at 30% would drive many companies to register in lower tax jurisdictions. I would argue for zero corporation tax as why tax profits at all  if profits are reinvested in the company (which they are unless paid out as dividends). Dividends are paid after corporation tax so in your example a company’s would pay 30% corporation tax and then shareholders would pay 30% on dividends so the government are receiving 60%. Why bother running a company and making a profit in that case? 

Its  not polished and I am sure the are finer points that would need to be addressed, however,  currently a Company pays 19% CT, and for each employee on payroll another 13%(ish) Employers NI.

Currently Dividends attract a 7% tax as it is - if somebody is taking money from the company as only dividends then that is what they are paying (until they get to some figure I can't remember). A lot of investors in share's are the pension funds anyway so won't attract the 30%

 

[AVB]

53 minutes ago, discobob said:

The figure of the Tax free allowance is just a simple £10k - makes the figures easier - it could be £15k etc...

Its  not polished and I am sure the are finer points that would need to be addressed, however,  currently a Company pays 19% CT, and for each employee on payroll another 13%(ish) Employers NI.

Currently Dividends attract a 7% tax as it is - if somebody is taking money from the company as only dividends then that is what they are paying (until they get to some figure I can't remember). A lot of investors in share's are the pension funds anyway so won't attract the 30%

 

Employment costs (and other expenses) are taken out of pretax profits so a company wouldn’t pay salary and NI plus corporation tax. Corporation tax is payable on any profit left over after expenses (salaries etc) but before dividends.  So simply if a company has income of £200k and pays salary and NI of £100K the company will have pretax profit of £100K of which it will pay 19% CT leaving it with £81K of post tax profit which it could pay as dividends to shareholders or reinvest in the business or leave as cash in the bank. 

[Raja Clavata]

7 hours ago, JohnfromUK said:

Well with 2 x UK average full time earners, you would be around the £55K mark, so less than half your target.  Something doesn't add up.

I cannot believe that most 'average' UK families have access to anything like that - I would guess that more like £50K per household is fair, possibly less as many have a one income household for a period when children are young, or a part time second earner.

John, I didn't take middle class to necessarily equate to average although I think it highlights that there is a range of figures for "average".

6 hours ago, Demonic69 said:

Yup, household. Probably not too hard to reach in London, even for upper working class. I'm working with guys on £60-70k living in Yorkshire, and they've still got a way to go in the business.

I agree.

5 hours ago, old man said:

Maybe a tad insulting to a lot of hardworking families?

Why is it insulting. Are you insinuating that people who earn above the average wage are not hardworking? I hope not because that certainly could be seen as insulting.

4 hours ago, grrclark said:

The folk that would be hit the most with a flat tax rate are the people at the bottom.

Yep. 

[old man]

9 hours ago, Raja Clavata said:

John, I didn't take middle class to necessarily equate to average although I think it highlights that there is a range of figures for "average".

I agree.

Why is it insulting. Are you insinuating that people who earn above the average wage are not hardworking? I hope not because that certainly could be seen as insulting.

Yep. 

No insinuation on my part, just an alternative point of view.

Equally, just because pay is above average this is not a benchmark of hard work?

It's possible, maybe, that the definition of hardworking is broad on a personal point of view, from a measure of contribution made to society or the vigour of snout burying in the trough? 😀

[discobob]

14 hours ago, AVB said:

Employment costs (and other expenses) are taken out of pretax profits so a company wouldn’t pay salary and NI plus corporation tax. Corporation tax is payable on any profit left over after expenses (salaries etc) but before dividends.  So simply if a company has income of £200k and pays salary and NI of £100K the company will have pretax profit of £100K of which it will pay 19% CT leaving it with £81K of post tax profit which it could pay as dividends to shareholders or reinvest in the business or leave as cash in the bank. 

ahh - but your explaining how it is now - not how it would be in my utopian proposal 😁. 13% NI off the £100K - so that would be £117k profit would generate a tax of £35K (whereas previously it would have been £19K plus £13k) which is only an increase of £3k. Salary would still be allowed to be deducted before any tax. As would standard business costs. VAT would also still exist in utopia

 

Edited April 24, 2020 by discobob

[JohnfromUK]

8 minutes ago, discobob said:

not how it would be in my utopian proposal ....... VAT would also still exist in utopia

My own preference in very broad principle for increasing the fairness would be to move the balance of taxation from 'what you earn/receive' to 'what you spend'.

The idea is that you have maybe two or three tax rates (as we do now) on spend events, and overall lower taxation on income.

• Zero tax - covers essentials such as foods (as in much of what you find in the supermarket) and compulsory services like local taxation/services, post, etc.  Notably things like saving, pensions (savings), investments can be made free of tax.
• Standard rate - covering most items, low and middle range cars, most electrical goods, building materials and most 'labour' such as garages, builders, plumbers etc.
• Higher rate - luxury and discretionary items, those with high environmental impact, second homes, holidays, alcohol and tobacco, gambling, entertainment, restaurants

I can't see it ever working as it is so complex to do (just what we want to avoid!) - or even being popular (because it taxes 'enjoyment' more highly), but the idea is to encourage less well off people to use their incomes wisely, but the idea is to;

• Provide a better stream of money for investment in (hopefully British) business
• Encourage people to save
• Provide for less taxation on those (the less well off) who can mainly afford only 'basic goods' and spend little on 'luxury items' and ease their taxation by spending wisely
• Have an increased tax burden on those who can (and choose to) to spend their money on non essentials and luxuries, and those items which harm the environment for us all.

One of the major issues is that most developed countries have broadly similar tax systems - and to radically depart from that would be very hard on organisation/implementation especially regarding imported items.

[12gauge82]

2 hours ago, JohnfromUK said:

My own preference in very broad principle for increasing the fairness would be to move the balance of taxation from 'what you earn/receive' to 'what you spend'.

The idea is that you have maybe two or three tax rates (as we do now) on spend events, and overall lower taxation on income.

• Zero tax - covers essentials such as foods (as in much of what you find in the supermarket) and compulsory services like local taxation/services, post, etc.  Notably things like saving, pensions (savings), investments can be made free of tax.
• Standard rate - covering most items, low and middle range cars, most electrical goods, building materials and most 'labour' such as garages, builders, plumbers etc.
• Higher rate - luxury and discretionary items, those with high environmental impact, second homes, holidays, alcohol and tobacco, gambling, entertainment, restaurants

I can't see it ever working as it is so complex to do (just what we want to avoid!) - or even being popular (because it taxes 'enjoyment' more highly), but the idea is to encourage less well off people to use their incomes wisely, but the idea is to;

• Provide a better stream of money for investment in (hopefully British) business
• Encourage people to save
• Provide for less taxation on those (the less well off) who can mainly afford only 'basic goods' and spend little on 'luxury items' and ease their taxation by spending wisely
• Have an increased tax burden on those who can (and choose to) to spend their money on non essentials and luxuries, and those items which harm the environment for us all.

One of the major issues is that most developed countries have broadly similar tax systems - and to radically depart from that would be very hard on organisation/implementation especially regarding imported items.

It would certainly be a fairer system for all, with the less fortunate better able to support themselves and the more privileged forced to give back to the people that enable their lifestyle.

[panoma1]

Without the current system of tax on top of tax, on top of tax..........How would the government disguise the real amount of tax people are paying out of their income?
I think a clearer, simpler and fairer tax system is a pipe dream.....on one hand pensioners who have made financial provision for their retirement, and PAYE employees will still have the required amount stopped out of their pensions, whilst the likes of Branson will still pay nowt!

And don’t even start me on compulsorily “contracted out” employees, receiving reduced pension to those not contracted out!😤

[grrclark]

5 hours ago, JohnfromUK said:

My own preference in very broad principle for increasing the fairness would be to move the balance of taxation from 'what you earn/receive' to 'what you spend'.

The idea is that you have maybe two or three tax rates (as we do now) on spend events, and overall lower taxation on income.

• Zero tax - covers essentials such as foods (as in much of what you find in the supermarket) and compulsory services like local taxation/services, post, etc.  Notably things like saving, pensions (savings), investments can be made free of tax.
• Standard rate - covering most items, low and middle range cars, most electrical goods, building materials and most 'labour' such as garages, builders, plumbers etc.
• Higher rate - luxury and discretionary items, those with high environmental impact, second homes, holidays, alcohol and tobacco, gambling, entertainment, restaurants

I can't see it ever working as it is so complex to do (just what we want to avoid!) - or even being popular (because it taxes 'enjoyment' more highly), but the idea is to encourage less well off people to use their incomes wisely, but the idea is to;

• Provide a better stream of money for investment in (hopefully British) business
• Encourage people to save
• Provide for less taxation on those (the less well off) who can mainly afford only 'basic goods' and spend little on 'luxury items' and ease their taxation by spending wisely
• Have an increased tax burden on those who can (and choose to) to spend their money on non essentials and luxuries, and those items which harm the environment for us all.

One of the major issues is that most developed countries have broadly similar tax systems - and to radically depart from that would be very hard on organisation/implementation especially regarding imported items.

Just on that one point highlighted in bold, let's all assume that the low, middle and high income earners all like to go out for a meal once or twice a month, they enjoy a few pints during the week, take in a show or gig a few times a year and enjoy two weeks in the sunshine.

Who is most penalised by your tax regime if those are high tariff tax items?  My low, middle and high earners all spend exactly the same on exactly the same things, so for who is the tax tariff the greatest percentile of their earnings?

The low earner is getting relatively clobberd by your value system of what you deam to be important.  The low earners always will be the greater percentage of our populace and seeing as how your tax measures have a disproportionate impact on them, they stop having a meal,  they stop having a few pints, dont go to shows, etc and all the industries servicing those areas are impacted by the massive narrowing of their customer base.

[JohnfromUK]

9 minutes ago, grrclark said:

Just on that one point highlighted in bold, let's all assume that the low, middle and high income earners all like to go out for a meal once or twice a month, they enjoy a few pints during the week, take in a show or gig a few times a year and enjoy two weeks in the sunshine.

My thinking (and it is true of people I know) is that the better off go out A LOT more and spend a lot more when out, and typically have not one - but several holidays a year

11 minutes ago, grrclark said:

My low, middle and high earners all spend exactly the same on exactly the same things, so for who is the tax tariff the greatest percentile of their earnings?

I don't believe that is the case because as stated above the higher earners spend more often - agreed the cost per item may be the same but in general the  high earners I would suggest would spend more per meal/holiday/event.

I'm not suggesting ALL tax happens that way, but that the balance might shift from earnings to expenditure - principally discretionary expenditure.  That gives the taxpayer more 'choice' in how much tax he pays

16 minutes ago, grrclark said:

The low earner is getting relatively clobbered by your value system of what you deem to be important.

The low (and high) earner would have more choice over their money ......... live 'basically' with low tax ......... or accept that in choosing to spend on luxuries, you are choosing to pay more tax.

I don't think it is either perfect (it would be far to complex and full of loopholes for a start), or will ever happen to any degree (we have some now in that expensive cars have higher tax), but I do think it can give a 'fairer' system.

[grrclark]

John, I do appreciate that in your reasoning that those on greater incomes spend more often and spend higher, hence a greater tax percentile, but that not withstanding what i suggest above that if all spend the same then the low earner is getting pumped does hold true.

As for the choice over spend, i.e. the tax system should encourage someone to spend wisely, you are imposing a control of choice based on a value system that is arbitrary.

The low earners are basically told by the state that because we consider a few pints to be a bad spend we are going to punish you for spending it.  Should the tax system be penal?

There are of course plenty areas right now where it is and bizarrely more and more are asking for more penal measures too, but in the main the tax 'penalty' elements currently are based on health outcome, so tobacco, alcohol and sugar.

If tax equality is based on a relative income, which is what you are prosing then do away with all indirect taxes and impose it 100% on direct tax income, i.e. the more you earn the more you pay, whether it be salary, dividend, investment return, etc?  That argument is full of flaws too when subject to scrutiny.

I absolutely and fundamentally believe in progressive taxation, the more you earn the greater the amount of tax that you pay, but that cannot be flat rate as it disproportionately penalises those in the lowe and middle segments, equally it cannot be so heavily weighted to the upper earners either as they are more mobile and would simply move elsewhere.

Is there an ideal tax model anywhere in the world?  I genuinely don't know.

Perhaps what we should have is a harmonisation of all states under a common fiscal framework where we could remove the ability for individual countries to do something different and give the ultra wealthy a lifeboat???  Hands up for the EU++ anybody

Edited April 24, 2020 by grrclark

[oldypigeonpopper]

hello, as i said before it will only be the high earners and those who are fortunate to have enough savings as a back up but for many millions it is going to be a difficult time, not heard of any self employed yet getting money and many many employed the companies they work can only go on for so long until their capital is down to zero with no money coming in, the money offered by the government are only loans, wait till after the 3 month holiday on mortgages and bank loans will see a different picture

[AVB]

18 minutes ago, grrclark said:

.

Is there an ideal tax model anywhere in the world?  I genuinely don't know.

 

I always found the tax regime in Singapore to be fair. Although that was in early 00’s don’t know what it is like now  

low VAT (I think it was 3%)

heavily stepped tax bands starting at 2% with a max of 20%. Tax bands went up in 2% increments  

So everybody pays something (which I think is important) the higher earners pay a lot more but not punitive (which is also important). 

 

[grrclark]

11 minutes ago, AVB said:

I always found the tax regime in Singapore to be fair. Although that was in early 00’s don’t know what it is like now  

low VAT (I think it was 3%)

heavily stepped tax bands starting at 2% with a max of 20%. Tax bands went up in 2% increments  

So everybody pays something (which I think is important) the higher earners pay a lot more but not punitive (which is also important). 

 

I shall ask some of my Singapore colleagues what it is like now.  Given Singapore is basically just a city I don't know if it would be a good analogue for a full fat country anywhere else, but if you could isolate say London and apply the regime to there I reckon it would probably work very well indeed.