New pension allowances , autumn statement

zagfles

grey_gym_sock wrote: »

yes, but that's really an argument for proper anti-avoidance measures.

and there are plenty of avoidance schemes with 40% tax. 50% doesn't make much difference. at 98%, there'd be a lot more of it, but not at 50%.

Anti-avoidance measures sound far easier than they are. Tax is paid subject to rules and if there's enough incentive to find ways round the rules then someone will. Every budget I've read in the last 15 years or so has a section on anti-avoidance. It's a moving target, close one loophole and someone will find another.

insignificant. very few ppl would move abroad because of tax rates at any level. many of those who move abroad would do so regardless. there's virtually nobody who'd stay to pay 40% tax but move if it's 50%.

You really think? The very rich tend to have properties in other countries and spend a lot of time abroad anyway, and can basically pick and choose where to live, or where to reside for tax purposes.

a few cases have been publicized in a deliberate attempt to make the issue appear more significant than it is.

yes, the marginal rates are high enough there that there's some truth in the theory!

Marginal rates are just like shops setting prices. Set the price too high and you'll make no money because no-one will buy. Set them too low and you won't make any money because there's no margin. You need to find the optimum level. And that applies (though to a lesser extent) even when things are supposedly compulsory - like trying to get a job if unemployed, or paying tax if you earn a lot.

grey_gym_sock

zagfles wrote: »

Anti-avoidance measures sound far easier than they are. Tax is paid subject to rules and if there's enough incentive to find ways round the rules then someone will. Every budget I've read in the last 15 years or so has a section on anti-avoidance. It's a moving target, close one loophole and someone will find another.

they're doing it the wrong way. making over-complex rules more and more complex. they should make tax law massively simpler, and have a general principle that the purpose of transactions (rather than their form) determines how they are treated for tax purposes.

the problem here is the approach (of ever greater complexity) that HMRC are wedded to. governments of any party are just passing the legislation that HMRC asks for.

You really think? The very rich tend to have properties in other countries and spend a lot of time abroad anyway, and can basically pick and choose where to live, or where to reside for tax purposes.

yes, the very rich often have based themselves wherever tax is lowest. but they're not coming back to pay 40% tax. maybe for 10%, but that's wouldn't raise more revenue overall.

1 thing we could do to make them pay more tax is go to more effort to tax economic activity in the UK without letting the profits disappear into tax havens. because of course very little real economic activity happens in tax havens, and ppl have to invest in some form of real economic activity in order to make a decent return.

Marginal rates are just like shops setting prices.

yes, but if going to another shop involves moving house, getting a new job, rarely seeing most of your friends and family, and missing all the little (and bigt) things you've come to love about your own country ... most ppl won't do it.

gadgetmind

grey_gym_sock wrote: »

at a high enough marginal rate of tax, ppl won't bother to work as much, so tax revenues will actually fall?

Or find ways of avoiding or offsetting the tax, or relocate and/or start new ventures elsewhere.

And yes, 50% tax (plus NI plus VAT, etc.) is plenty enough to get you into the negative return part of the curve.

grey_gym_sock

as i've said, HMRC are approaching anti-avoidance the wrong way.

few ppl leave the UK because of tax. some of them are going to tax havens with very low rates, and they won't come back at any sensible tax rate we might set. other ppl go for a mixture of reasons, but like to complain about tax rates, even though it wasn't their whole motivation. the number who would stay or go because of the difference between 40% and 50% is minimal.

it's utterly implausible that 50% (or 52% for earned income, including NI - VAT is a separate issue) is high enough to reduce the tax take.

gadgetmind

grey_gym_sock wrote: »

it's utterly implausible that 50% (or 52% for earned income, including NI - VAT is a separate issue) is high enough to reduce the tax take.

Refutation by personal incredulity isn't something I've ever found to be particularly convincing.

I know a lot of people who have drastically changed their lifestyle, location, and income profile because of this knee-jerk tax hike and even HMRC accept that it's raised little meaningful income.

grey_gym_sock

part of HMRC's job is justifying government policy, and now government policy is to reduce the additional rate, and probably to eliminate it in a few years'. so their view doesn't hold much weight.

there was clearly an effect that people brought income forward before the 50% rate came in. and ppl will delay income until after the rate is going to be reduced. (and make larger pension contributions in years when rates are higher. etc.) but that tells us little about how much higher rates bring in except during the transition years.

personal incredulity is what's i'm left with after discussing various ways that revenue could leak and none of them are likely to be large enough effects. we are only talking about the difference between 40% (or 42%) and 50% (or 52%). all the leakages happen at 40%, too. they'll be slightly greater at 50%, but not that much.

gadgetmind

grey_gym_sock wrote: »

they'll be slightly greater at 50%, but not that much.

They are massively greater at 50% because of human nature. Look at the amount of time people spend discussing how to get an additional 20bps from their savings account to see why no-one would accept an extra 1000bps on tax on just being one of those things and not take aggressive steps to reduce their bill.