Forcing Savers to spend!

stv1x

Anyone else see this in the Times?

"The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump."

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article5469589.ece

Wheelbarrow anyone?

RayWolfe

Why don't newspapers stick to reporting news instead of paying prats to make asinine suggestions?

m_c_s

The problem is that this government would maintain the tax on our savings even after the recovery!

nicko33

add back in the paragraph preious to that already quoted, and it starts to make even less sense...

"Assuming interest rates are reduced to about 1 per cent today, it will make little difference to savers if they fall all the way to zero. To all intents and purposes, income from bank accounts will be reduced to nil."

if "to all intents and purposes, income from bank accounts will be reduced to nil" , it then makes little difference if you tax that "nil" income at 10% or 90%.

the writer also thinks that more government borrowing and spending is the way forward, but where is all this borrowed money going to come from if there isn't going to be any incentive.

and if we do all take our money out of the banks and spend it, then the banks are going to need to be re-financed, again


...
"encouraging savers to invest in property"
ha. ha. ha.

these will be the same savers that have been trying for years to save up for a deposit to get onto the property ladder, will they?
And now that house prices are finally falling, what happens, then banks want an even bigger deposit.
So we'll have to carry on saving for that deposit won't we.

john_s_2

nicko33 wrote: »

add back in the paragraph preious to that already quoted, and it starts to make even less sense...

"Assuming interest rates are reduced to about 1 per cent today, it will make little difference to savers if they fall all the way to zero. To all intents and purposes, income from bank accounts will be reduced to nil."

if "to all intents and purposes, income from bank accounts will be reduced to nil" , it then makes little difference if you tax that "nil" income at 10% or 90%.

I think what the author is suggesting is it's the deposit that should be taxed, not the interest on the deposit.

So if you have a grand in the bank, and the tax is (say) 1%, then you would pay £10 a year tax on it.

And I'm sure if this did come in, they'd still tax the interest as well! Or maybe they wouldn't tax the interest, and announce it like they're cutting taxes or something ;-)

Scary...

EDIT: Actually this makes a horrible amount of sense. The Government is losing revenue on taxed savings interest, as we ain't getting as much interest on our savings. This way the tax on savings would remain constant regardless of the rate of interest paid. If deposits were taxed at 1% then your real return would be the interest rate received, less 1 %age point. Eg, you receive 5%, but pay 1% tax (on the deposit, not the interest), you get a real return of 4%. Which is the same as now (20% of 5% is 1%). I shouldn't be typing this - it's tempting fate!

Milarky

I'm surprised any of this might be legal under EU rules. (e.g. it is illegal to charge different amounts for use of an ATM to make a withdrawal - regardless of which currency - anywhere in the EU)

nicko33

john_s wrote: »

I think what the author is suggesting is it's the deposit that should be taxed, not the interest on the deposit.!

Ah,
Well, that would encourage me to take my savings out of the bank,
but not necessarily in order to get it taxed in some other way (stamp duty, VAT, whatever).

people using there cash for income, would just end up removing their funds from the bank and spending the capital, but spending no more than they would have anyway (probably less)

people with debts (e.g. mortgage) and cash would probably just use the cash to reduce their debts.

anybody left over may give a boost to safe-makers, burglars, off-shore schemes, tax specialists, and emigration...

hoggums

If that happened and I was earning a negative return I would simply take the cash out of the bank and store it in a safe location. I certainly wouldn't be going out to spend it - because the run on the banks would probably mean a total financial collapse that even the government wouldn't be able to rescue.

Theres nothing "logical" about that step at all. It's just barking.

ffacoffipawb

hoggums wrote: »

It's just barking.

It's got Labour written all over it then.

danny69

The sad thing is that I bet there a few people who are moaning about this who vote Labour. Vote with your feet guys and gals, otherwise things will get worse. As for house prices, I want them to fall, the recession is only a good thing for me and my family. My parents' house might lose a lot of its value, but so what? We have no intentions of moving, I want to get on the ladder so this is great for me!

cos69

john_s wrote: »

..... EDIT: Actually this makes a horrible amount of sense. The Government is losing revenue on taxed savings interest, as we ain't getting as much interest on our savings. This way the tax on savings would remain constant regardless of the rate of interest paid. If deposits were taxed at 1% then your real return would be the interest rate received, less 1 %age point. Eg, you receive 5%, but pay 1% tax (on the deposit, not the interest), you get a real return of 4%. Which is the same as now (20% of 5% is 1%). I shouldn't be typing this - it's tempting fate!

That's called a wealth tax is it not, and could be applied to all assets not just your savings. Think they have something like that in France