Taxation. Would it make sense to...

JimmyTheWig

danothy wrote: »

It's the difference between expressing an opinion as an opinion and expressing an opinion and not labelling it as such.

In my OP I said "I think that most people agree that...".
Surely the word "agree" and the fact that it is only "most people" imply that it is an opinion?

I didn't go into reasons as to why I, and most people, hold this opinion. I didn't think it was necessary, given that most people hold the opinion and so know their own reasons. The thread wasn't intended as a discussion about whether they should or not. It was intended as a discussion about how to ensure that they do.

lovinituk

JimmyTheWig wrote: »

My point is that if the rules mean that higher paid people are paying less tax than lower paid people then (I believe that) the rules should be changed.

We have just incorporated our business so that we can take advantage of dividends. OK our personal tax liabilities will have decreased but we are still contributing a hell of a lot more to the state via corporation tax and VAT.

Gracchus_Babeuf

JimmyTheWig wrote: »

I think that most people agree that those who can afford to pay more tax than others should do so.

I think that it is accepted that there is a flaw in income tax in that the wealthy can "massage" their accounts to show small profits, and thus pay low tax.

Would it make sense, then, to have something like an "expenses tax"? E.g. ...
Person 1 earns £30k PAYE.
Person 2 runs a business that brings in £90k and claims £60k of this as business expenses. So Person 2 makes £30k profit and currently pays the same tax as Person 1.
I think that it is probably fair to say that Person 2 actually brings home more money than Person 1, but the difference is accounted for in his books. So what if we taxed the £60k allowable expenses at, say, 2%? So Person 2 would be paying the same tax as Person 3, who earns £36k PAYE.


Does that make sense?
Does it sound fair to people?
Are there businesses / industries that couldn't survive such a change?


Would a similar situation be acheived by preventing businesses from claiming VAT back on their purchases? I sort of think it would but can't quite get my head around it.

Madness. Why should legitimate expenses be taxed when these are necessary to run the business? Idiotic in the extreme. There is already a tax on business - corporation tax, which is charged on the profits of the business. Why have another pointless tax?

Gracchus_Babeuf

The_White_Horse wrote: »

i have a lot of friends who run their own businesses. they all magically get paid a salary in the basic rate. Yet get very large dividends which is not taxed as highly as the higer rate of income tax.

i think this is what needs to be looked at severely. also, hiring wives and family members to reduce your salary. why pay yourself £60k when you can pay yourself £30k and your wife £30k and both pay basic rate tax.

Its a massive fiddle.

I don't agree. You take the risk of running your own business, so why should you not be able to maximise your earnings? I agree that the payment through dividends issue should be looked at and the law changed, but I wouldn't go overboard.

ILW

I can see an advantage in combining tax and NI into a single figure. This would iron out a lot of the arguments a dodges.

Just appears that no politiocian wants to announce a basic tax rate of 33%.

Gracchus_Babeuf

ILW wrote: »

I can see an advantage in combining tax and NI into a single figure. This would iron out a lot of the arguments a dodges.

Just appears that no politiocian wants to announce a basic tax rate of 33%.

Not really. What about those who are currently exempt from NI? Pensioners don't pay NI, and a combined tax would force them to pay a lot more - not a happy thought when you are on a limited income.

What I would prefer is a flat rate income tax and a supertax on the rich (income above £200k). However, this would be accompanied by a graduated VAT rates, with much higher rates on luxury items, and a supplementary local income tax to be added to council tax for the higher earners.

ILW

Gracchus_Babeuf wrote: »

Not really. What about those who are currently exempt from NI? Pensioners don't pay NI, and a combined tax would force them to pay a lot more - not a happy thought when you are on a limited income.

What I would prefer is a flat rate income tax and a supertax on the rich (income above £200k). However, this would be accompanied by a graduated VAT rates, with much higher rates on luxury items, and a supplementary local income tax to be added to council tax for the higher earners.

Why should pensioners not pay the same amount of tax as anyone else with the same level of income?

JimmyTheWig

Gracchus_Babeuf wrote: »

Not really. What about those who are currently exempt from NI? Pensioners don't pay NI, and a combined tax would force them to pay a lot more - not a happy thought when you are on a limited income.

They could always increase the amount of pensions to compensate. They could do this at a level to make the move cash-neutral for pensioners but still increase what they bring in from others who earn without working.

ILW

Or just adjust tax codings.

Gracchus_Babeuf

ILW wrote: »

Why should pensioners not pay the same amount of tax as anyone else with the same level of income?

Because there is a difference between earned income and pension or investment income. Full time workers earn far more than they would when they retire, for obvious reasons, and in future this will get a lot worse given the abolition of final salary schemes. The average retiree with a continuous working life will in future have not around 60-65% of final salary to live on, but closer to 35-40%.