The Gig Economy

BobQ

Is the Gig Economy going to be the next problem to worry about. It seems that Philip Hammond is determined to address it.

The problems of relatively wealthy people using "incorporation" to avoid income tax will surely increase and deprive the Treasury of taxation revenue to fund public services.

The trend of more self employment will have a similar effect. Also many employers are forcing people into artificial self employment
http://www.bbc.co.uk/news/business-38082535

It is also a global problem

https://www.theguardian.com/society/2015/nov/29/life-inside-the-new-gig-economy-workers-stories

So is it a real problem that more and more people are being forced to subsist in such an uncertain world?

Clearly some people do it through choice and make a good income from it, but does it matter that it is heading towards reducing tax take by £3.5bn?

PasturesNew

It's a multi-faceted potential problem.

For some it's a benefits top up dodge. Sit in your uber car not getting many clients .... make a loss, get a huge top up of benefits if you've got kids. Heck, you don't even have to be sitting in your car to not get the clients, but sitting on your sofa logged in at "low needs times".

Thrugelmir

BobQ wrote: »

The problems of relatively wealthy people using "incorporation" to avoid income tax will surely increase and deprive the Treasury of taxation revenue to fund public services.

Not sure wealth has anything to do with it. Nor is it anything new. Self employment as a contractor has been around for many years.

Like any avoidance schemes. The HMRC will no doubt come up with ideas as to how to close the loop hole with the remainder in dividends.

The increase in the minimum wage reduces the ability to pay oneself a low wage.

BobQ

Thrugelmir wrote: »

Not sure wealth has anything to do with it. Nor is it anything new. Self employment as a contractor has been around for many years.

Like any avoidance schemes. The HMRC will no doubt come up with ideas as to how to close the loop hole with the remainder in dividends.

The increase in the minimum wage reduces the ability to pay oneself a low wage.

I agree self employment is nothing new but the impact seems to be increasing such that it now significantly impacts tax revenue. I certainly never thought I would hear a Conservative Chancellor talk about addressing such problems. Of course it may just be talk but the Autumn Statements plans seem to be tackling many aspects of the gig economy.

And tax receipts have been lower than expected this year, causing the OBR to revise down projected revenues in future.
Added to this is a structural effect of rapidly rising incorporation and self-employment, which further erodes revenues

antrobus

BobQ wrote: »

Is the Gig Economy going to be the next problem to worry about. It seems that Philip Hammond is determined to address it....

He's only worried about it, because the 'self-employed' generally pay less tax than the 'employed'. I suppose it's a problem if you compare the tax take from the two, but isn't a problem if you compare the tax take from a gig economy worker with someone on jobseekers.

BobQ wrote: »

...The trend of more self employment will have a similar effect. Also many employers are forcing people into artificial self employment
http://www.bbc.co.uk/news/business-38082535

It is also a global problem

https://www.theguardian.com/society/2015/nov/29/life-inside-the-new-gig-economy-workers-stories

Well, it's certainly a 'Guardian' problem. Private Eye consistently reports on the rank hypocrisy of the Guardian; it waffles on about the evils of zero-hours contracts and the like, but happily uses them for its own staff.

Thrugelmir

BobQ wrote: »

I agree self employment is nothing new but the impact seems to be increasing such that it now significantly impacts tax revenue. I certainly never thought I would hear a Conservative Chancellor talk about addressing such problems. Of course it may just be talk but the Autumn Statements plans seem to be tackling many aspects of the gig economy.

There's a black hole in the budget that needs to be filled. Has to be found from somewhere. From this tax year public sector workers now pay full employees national insurance contributions. Reasonable for others to contribute as well. Targeting this area seems an area worth mining. National Insurance changes are already in place for the self employed in 2018. This starts addressing the issue of incorporation for the self employed to avoid taxes.

GreatApe

Thrugelmir wrote: »

This starts addressing the issue of incorporation for the self employed to avoid taxes.

The issue is that taxes are too high for people on modest incomes
For a real 'income' of £35k the effective tax rate is close to 29.3% of your wage and of course you are taxed on the remaining 70% of your income many more times like with VAT Fuel duty Council tax etc

As just a thought in my mind (ie dont take it too seriously until discussed a lot more) but what would happen if employers NI was a flat rate per person rather than dependent on wages. The state pension is flat so why should companies pay virtually nothing in Employers NI for someone earning £10k a year but must pay £12.7k for someone earning £100k a year? What if it was just a flat £3k per employee per year irrespective of their wage? (or £250 per month per employee for those below the retirement age). This would be an incentive to give people full time work and instead of part time work and give people more hours. companies could then also be charged this £3k on their director. So be you in a ltd company or employed directly you would pay the NI

Herzlos

It's going to result in a lot of folk losing job security and will hurt the economy. No security = no rash spending.

CLAPTON

GreatApe wrote: »

The issue is that taxes are too high for people on modest incomes
For a real 'income' of £35k the effective tax rate is close to 29.3% of your wage and of course you are taxed on the remaining 70% of your income many more times like with VAT Fuel duty Council tax etc

As just a thought in my mind (ie dont take it too seriously until discussed a lot more) but what would happen if employers NI was a flat rate per person rather than dependent on wages. The state pension is flat so why should companies pay virtually nothing in Employers NI for someone earning £10k a year but must pay £12.7k for someone earning £100k a year? What if it was just a flat £3k per employee per year irrespective of their wage? (or £250 per month per employee for those below the retirement age). This would be an incentive to give people full time work and instead of part time work and give people more hours. companies could then also be charged this £3k on their director. So be you in a ltd company or employed directly you would pay the NI

part-time employees would all be sacked and live on benefits.
it would encourage the reduction of employment generally especially the lower paid. It would make low value marginal work uneconomic so care workers, cleaners, bar & restaurant staff would all face redundancy
or of course it would encourage the black economy where people don't pay tax or NI

GreatApe

CLAPTON wrote: »

part-time employees would all be sacked and live on benefits.

yes I can imagine a company which employs say 300 part time workers moving to 150 full time workers. But is that a bad thing? What if it was 300 part time workers on state support going to 150 full time workers not needing state support and 150 needing to find a new job.
Currently a lot of people stay as part time workers as they dont attempt to look for better pay. If its a huge problem having it as one fixed amount then maybe there can be a part time or hourly element so instead of £250 per month

it would encourage the reduction of employment generally especially the lower paid.

I dont think so, at the very lowest end it adds some 15% to employ someone in the min wage full time. There aret that many people on the very lowest min wage the vast majority earn more and mostly min wage jobs are necessary if tesco needs shelf stackers on min wage the additional cost of this £250pm would add some 2% to the price of their goods in their stores tesco is not going to go out of business due to this

It would make low value marginal work uneconomic so care workers, cleaners, bar & restaurant staff would all face redundancy

I dont agree one bit if a job is needed then it will continue the employer will just have to increase its prices to cover it. Going back to the tesco example what is more likely that tesco increases prices by 2% or fires its 400,000 staff and closes its business?

or of course it would encourage the black economy where people don't pay tax or NI

the idea is not an overall increase in employers NI its to make it a flat fee per employee for each company that needs to pay more there will be a similar paying less. If paying more taxes is going to encourage more black economy then those paying less is going to encourage less black economy

Thrugelmir

GreatApe wrote: »

The issue is that taxes are too high for people on modest incomes

Lower than used to be. Basic rate tax was 33% when I started work. We all want state pensions, the NHS. So we need to contribute fully.