avoidance, business, Coalition, council, Customs, economy, empty property, evasion, haven, hm, hmrc, income, limited liability partnership, Mike Sivier, mikesivier, national insurance, Revenue, road, small, tax, Treasury, unemployment, Vox Political, Workfare
It seems I have been challenged. Commenting on my post ‘Iain Duncan Smith – what went wrong?’, a correspondent calling himself ‘Brian’ suggested I should use “a little grey matter and suggest where to cut instead”.
This is a question that has exercised my intelligence for much of the last two years, ever since it dawned on me that the current Conservative/Liberal Democrat coalition was not going to do anything at all to help the UK economy in real terms.
In fact we have seen them try to make it worse – look at
Gideon George Osborne’s changes to tax laws, that make it easier for multinationals to put their profits into tax havens rather than pay the UK Treasury what it deserves; look at the way Workfare keeps unemployment artificially high; look at the proposals for a two-tier road tax system that will disproportionately affect small businesses.
In fairness, I haven’t updated my ideas over the 12 months since I have been writing the blog. What follows must stand as a document of what could have been done. I put together more than 20 ideas at the time. Some of them may be impractical now, due to the many and various incompetences of the current government. I will try to include the best.
This is looking like the first part of a series, as there is an amazing number of possibilities available. I’ll try to concentrate on just one issue at a time.
“What we need now is a deficit cutting policy aimed at increasing government income.
“There are three ways to achieve this. The first is for the government to stimulate a moribund economy by encouraging investment. This is the Keynesian solution that is proven to work. The second is to raise selective new taxes on those best able to pay them. This is possible. The third option is to tackle the tax gap.
“The tax gap has three parts. The first is tax avoidance. I estimate this to be about £25 billion a year. This arises from the exploitation of loopholes in UK tax law and between UK tax law and that of other states – especially tax havens. The second part is tax evasion – that is breaking the law. I estimate this to be £70 billion a year. H M Revenue & Customs claim it is much less, but their methodology for estimating anything but VAT evasion is very weak. Lastly, there is unpaid and late paid tax – currently according to H M Revenue & Customs at least £26 billion.
“Put these figures together and they come to more than £120 billion, or enough, at least in principle, to close the whole current government deficit.” – Richard Murphy, Director of Tax Research UK.
If we compare the estimate of the tax gap with the DWP estimate of benefit fraud, we can see that benefit fraud is less than 1 per cent of the total lost in the tax gap; tax is therefore far more important than welfare in the struggle to balance the UK budget book.
So the first measure must be to minimise personal and corporate tax avoidance by requiring tax havens to disclose information fully and changing the definition of ‘tax residence’; these two reforms are estimated minimally to yield £10 billion.
Introduce a 50 per cent Income Tax band for gross incomes above £100,000. This reform introduces a new 50 per cent band of Income Tax for taxable incomes above £94,000 per year (approximately £100,000 a year gross income). This would raise £4.7 billion compared with the 2009/10 tax system, or an extra £2.3 billion compared with introducing this band at £150,000 as proposed by the previous chancellor. (The Coalition has lowered the previously-existing 50 per cent band to 45 per cent, giving a £40,000 tax break to the richest in society when the UK economy needs the money far more than they do).
Introduce minimum tax rates. This reform introduces a lower limit to effective rates of Income Tax above certain levels of gross income. As gross income approaches each threshold, the personal allowance and other reliefs (for example, tax relief on pension contributions) are ‘clawed back’ at a high marginal rate until the average tax rate – as well as the marginal tax rate – on income above each threshold is equal to tax rates of 40 per cent and 50 per cent on incomes of above £100,000 and £150,000 respectively. Such a reform raises an additional £14.9 billion.
Introduce a special lower tax band of 10 per cent below the poverty line (below £13,500 per annum), while restoring the ‘basic rate’ to 22 per cent – in order not to hit the poorest hardest. This costs £11.5 billion, far less than the extra tax take outlined above.
Uncap National Insurance Contributions (NICs) so they are paid at 11 per cent all the way up the income scale (continuing to exempt pensioners). In 2009/10, employee NICs were payable at 11 per cent from £100 a week up to £884 per week – and at just 1 per cent above this level. Self-employed NICs have an equivalent structure based on annual profits, paid at 8 per cent up to profits of £43,875 and then at 1 per cent above this. Also, unearned income (for example, income from investments and savings) is not subject to NICs. This reform removes the upper threshold so that employee NICs are payable at 11 per cent on all earnings above £884 per week for employees and at 8 per cent on all profits above £5,715 per year for the self-employed. Additionally, all investment income above £110 per week (or the annualised equivalent) is made liable to NICs at 11 per cent. This results in further revenue of £9.1 billion; thus uncapping NICs would rake in a great deal of money. It would also turn NICs into a flat tax, making it ‘merely regressive’ rather than ‘über regressive’.
Increase the tax payable (higher multipliers) for houses in Council Tax bands E to H. This would raise a further £4.2 billion.
£5bn could be raised every year with an Empty Property Tax on vacant dwellings which exacerbate housing shortages and harm neighbourhoods.
Urge that all current small limited companies be re-registered as limited liability partnerships to simplify their administration and reduce opportunities for tax avoidance.
These measures alone are likely to bring at least £34 billion into the UK Treasury every year.
I wish you were the PM! I have to admit, until 2 years ago I worked 80 hours a week, 50 weeks a year, but it took its toll and my body just said “No more!”. Last year was really difficult, going from a hard earned salary, (min. wage), to ESA…. in fact it was so difficult I’m now in debt and my health has got worse. This year has been unbelievably bad, my health has gone even further downhill, but so has my will to fight the constant slamming, we, on ESA are getting from our own government! I used to voluntarily foster teens, now I can’t any more… and my spare room, (my daughter has just left home) will be subject to the new “bedroom tax”, which I cannot afford to pay! I am 54 years old and sit in my bedroom just crying…. because I don’t have the physical ability to work and drag myself back up. I wrote to DIS, with a few idea’s of how the government could help people like me get back into work…from home. In short, I laid out a complete business plan concerning people like myself who although not well enough to actually physically go out to work, to be enabled to work from home, in the same fashion as call centres, but from home. I even suggested that large companies like SKY, ASDA, etc, who make a killing profit in this country tax free, should back this plan… it would also be nice to speak to some one with command of the English language! (Sky uses India, and Asda uses South Africa….). I explained that the initial investment would be far lower than having to keep on paying ESA, and would give a large piece of dignity back to the person, (like myself), who dearly wants to be a part of the working society, but due to health problems could not work in a mainstream job! I received a short cold message by post, saying that he (DIS), was far too busy to get involved in my plans, and I should understand this!!!!!! NICE! My head was reeling from the pompous attitude shown to me, and for the total disregard for the effort I had made to put the plan together. I am sure that there are thousands of people just like myself who would love to work from home, and put something back into the states coffers, my friends all thought it a great idea! I am sickened to point of depression with the way this corrupt and non-elected government is openly destroying the weak and infirm of this country! Hitler wasn’t so subtle, but wanted to do the same thing! Why don’t others see this? We are blind to what is really happening, and it looks like our once great nation has thrown the towel in….. saddens me intensely! One more thing, we are expecting the coldest winter in over 100 years, and the death toll will rise dramatically, what does our government do?…. cut benefits! YAY!!! Hope you have a healthy, warm and love filled Christmas, in spite of the PM! (keep up the good work, we need people like you!) x
Dustin Muschett said:
Not what I was expecting but wonderful anyway! Good for you!