Tax

Tax

We don’t raise enough tax in this country. Too few people pay any income tax. Too many people dodge paying the correct tax – the gap between what HMRC think is due and what they actually collect is well over £30b. And of course those with assets can hide them in tax havens.

The tax burden is not evenly spread. Moreover, we have created a situation in which those who make the biggest demands on public services and benefits have made a very small if any contribution. Imo, this is an issue that needs to be addressed.

I noticed that CPAG have recently published a book arguing that we need to raise more tax. I have not read the book, but I think it is quite significant. CPAG as part of the poverty lobby are all favour of people being able to claim the benefits that they are entitled to. But quite often, they don’t make any connection between the benefits being paid out and the tax system that funds it.

Only 57% of people pay income tax; 43% of people don’t pay any income tax. That is 2 fifths of the population. I think that is quite a high number – too high to be sustainable. I think we have created what might be called a something for nothing culture. I agree that paying taxes should be seen as one’s duty as a citizen. I think that the big increase in people not paying any tax is linked to a decline in citizenship and general political participation. Another reason why I am opposed to migration at too high a level, as it has been the past decade and more.

12m people earn below the £12,500 income tax threshold. As I have maintained for some time – wages are too low. People on that level of income have their wages topped up by tax credits. The state is subsidising low pay. The subsidy for low pay costs 6 times as much as the cost of benefits for people who are not working at all. Madness.

People in the middle are entitled to feel dismayed at the number of people who pay nothing and the super-rich who are relatively under-taxed.

The result of this unbalanced tax system is that there is an over-reliance on the top 1% of taxpayers, some 300,000. They now pay 27% of all income tax.

Labour needs more tax to funds its various policy pledges. They plan to increase income tax but they also want to impose some new wealth taxes as well.

A sensible and fair tax system is the glue that holds society together. I cannot remember off hand when the 10p rate was abolished. As far as I recall it was George Osborne who did that.  In the 9 years since the Conservatives have been in power either alone or in coalition, the tax system has got more and more unbalanced. To be fair it was the Lib Dems who encouraged the raising of the tax threshold. That was one of their less useful ideas.

I agree that wealth rather than income is under-taxed. The rich can leave more easily than people on lower incomes Apparently 12,000 non domiciled super rich have left the UK in the past year. That said, I think the whole concept of non-domiciled is problematic.  However tax revenues have fallen by £2B as a result of these non-doms leaving.  It seems to me obvious that if we are going to add new taxes to the rich, and I think we should, that it needs to be done with moderation.

 

Boris Johnson’s plans to quite radically reduce the tax on higher earners imho, is wrong. I would support the higher rate being moved to £60k or £70K but certainly not to £80K.

Dominic Sandbrook[i] links the something for nothing culture at the bottom of the income scale with the massive tax avoidance by big companies such as Facebook and Amazon. Amazon as we know is generally a a very low wage employer for those on the shop floor.

He and I seem to agree that we need to see a return to a situation in which the broad base of people pay some income tax even if it is not very much. And we need to see politicians get tough with the tech giants.

I say again, that tax credits are in effect the government paying people to take low paid jobs with Amazon, Starbucks, Sports Direct and other companies whose business models relies on a large pool of low paid workers.

Politicians who just want to be liked, are the cause of many of these problems.

The tax system needs reform at the top and bottom of the income scale. That needs to be linked to making employers pay higher wages.

 

[i] Dominic Sandbrook, The new tax bombshell, Daily Mail, 8 August 2019.

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