Tax on front-loaded PAYE bonuses

CKhalvashi

CLAPTON wrote: »

It would seem inconceivable that, when Brown announced the 50% tax band six months in advance, that bonuses etc. weren't paid in the March to avoid the 50% tax in April

and it would seem inconceivable that when Osbourne announced the reduction nicely in advance that bonuses haven't been delayed until April this year.

I'm not expecting many HMRC prosecutions but I am expecting lots of politicians explaining how this proves Laffer's conjecture.

Spot on!

My bookkeeping shows a £19k PAYE income + £86k dividend + £40k property profits last year, and my total income is already showing at somewhere IRO £400k (with directors loan paid) for 2013/14, specifically to reduce a tax liability, and I know that most directors of similarly sized companies have done the same this year.

It's basic accounting, and somewhere along the line it will even itself out. My accountant/auditor (and your boss's accountants) have the job of reducing a tax liability as much as possible, so unfortunately for employees, things like this occasionally happen.

CK

John_Pierpoint

For those of you with only accountancy qualifications, a professor explains in the words of Ronald Reagan, how the "Laffer curve" works.

Basically when we discover that over half of all our efforts disappear into a bottomless pit called "government spending", we stop trying so hard.

As the people, so effected, tend to be the hard workers chasing big payouts, are we surprised that this "everlasting" funny recession features rising employment but falling output?

Do you know anyone away from home 12 - 16 hours per day working in the financial industry?

Their activity may be parasitic, but the money they earn for Britain and pay in UK taxes is very real.

http://gregmankiw.blogspot.co.uk/2006/12/supply-side-economics.html

[There was me; after fooling about with R185's (certificate of tax paid to the beneficiary of a trust) back dated to the tax year of the income arising; thinking the date of the payout was the date that counted in this day and age? ]

CLAPTON

John_Pierpoint wrote: »

For those of you with only accountancy qualifications, a professor explains in the words of Ronald Reagan, how the "Laffer curve" works.

Basically when we discover that over half of all our efforts disappear into a bottomless pit called "government spending", we stop trying so hard.

As the people, so effected, tend to be the hard workers chasing big payouts, are we surprised that this "everlasting" funny recession features rising employment but falling output?

Do you know anyone away from home 12 - 16 hours per day working in the financial industry?

Their activity may be parasitic, but the money they earn for Britain and pay in UK taxes is very real.

http://gregmankiw.blogspot.co.uk/2006/12/supply-side-economics.html

[There was me; after fooling about with R185's (certificate of tax paid to the beneficiary of a trust) back dated to the tax year of the income arising; thinking the date of the payout was the date that counted in this day and age? ]

No, Laffer didnot say that.

The general shape of the Laffer curve is obvious and hardly worthy of discussion.

The issue that Laffer had no theoretical value for, was at what point does the curve turn down.

My own point was that the experience of 50% tax rate for the last year will show nothing about Laffer's curve as the bonuses could so easily be moved fron one tax year to the other.

John_Pierpoint

CLAPTON wrote: »

No, Laffer didnot say that.

The general shape of the Laffer curve is obvious and hardly worthy of discussion.

The issue that Laffer had no theoretical value for, was at what point does the curve turn down.

My own point was that the experience of 50% tax rate for the last year will show nothing about Laffer's curve as the bonuses could so easily be moved from one tax year to the other.

I 100% agree with you final paragraph.

You point out yourself that if tax was 100% the governments revenue would self evidently be less than if the tax was say 50% assuming we live in a free society and are not slaves.

So my simplification of 50% being the optimal rate for tax,
when a nation state is intent in raising the maximum amount from its citizens, is probably not accurate.

Ronald Reagan stated he was not prepared to pay 90% tax, even under war time laws.

Similarly the 1960's/70's are littered with examples of UK tax exiles. The Rolling Stones & Charlie Clore come immediately to mind.

What figure would you suggest, to avoid the communist trap of "we pretend to work and you pretend to pay us"?.

The choice is simple, you can force poor people to graft under the threat of "starvation" by increasing tax, until they riot and wreck the country; getting rich/clever people to work harder, longer and more creatively, to generate a much larger valued added per person, is not helped by more taxes at higher rates.

CLAPTON

Laffer's curve is obvious.

The only issue is to understand where the turning points are for different groups and circumstances.

I've no idea where the turning point is but I'm sure that the recent experiment does not help us to understand it but I'm equally sure politician and businessmen will claims it does.