You what?

The economic logic of this proposal is very simple.  Maximum pay should either be 10 times median pay in the UK or 20 times the  anticipated minimum wage.  The number happens to come out at about £250,000 in either case. it is very obvious to anyone that no one need earn more than this figure to live a very good life of  more than adequate material sufficiency in the UK. Therefore, any distribution to a person over about this sum must be  of profit, and not pay  as far as the company making payment is concerned.

Eh?

If you actually wanted to have a maximum pay level, you\’d just set income tax at 100% above it wouldn\’t you?

And, erm, where\’s the logical link between whatever the maximum pay \”should\” be and whether it\’s a payment of salary or a profit distribution?

10 comments on “You what?

  1. Ritchie Boy has just argued to abolish IR35: I’ll take distributed profits (dividends) over pay and save all that National Insurance.

    Thanks Ritchie, you WGCE!

  2. Obviously, the idea of ‘maximum pay’ and ‘100% income tax’ and any argument resting on ‘should’ are complete rubbish, but nonetheless…

    There is a subtle distinction between real salary and ‘profit share’.

    As it happens, what is nominally described as ‘salary’ is highest in those businesses with a large element of monopoly income (i.e. banks, landowning, Russian oligarchs, Chinese slaver owners, African despots, music and film industries, for example).

    Another distinction would be that these super-bonuses that some directors pay themselves are taken out of profits which would otherwise go to shareholders, they are not payment for work done in the narrow sense (unlike the wages of productive staff, who aren’t really a cost at all – if those wages weren’t paid then the shareholders would earn less money and not more).

  3. If any payment over £250K was considered t0 be a distribution of profit, not pay, does that not mean that the company save 13% employers NIC on the excess over £250K?

    Lets say you want to pay someone £1m/pa. £250K is salary so deductible from taxable income. £750K not deductible so 28% corporation tax is payable – £210K. Employee/shareholder gets £540K in his pocket and a tax credit for the £210 already paid. He pays the balance between 28% and 50% (another 165K) and has £375K to spend, just as he would have before. But company didn’t have to pay 13% NIC.

    Great tax dodge, if I read it right!!!

  4. Nearly got me there, Tim

    Just managed to stop myself clicking on his blog again.

    Does he have anybody working for him or does he come up with all these fantastic ideas on his own?

  5. “Does he have anybody working for him”

    He’s probably got an unpaid intern. Yet also being a signed up member of Labour’s “pay for interns” campaign.

  6. Now let me see: if Saudi Aramco sends over here one of its top experts to monitor the market in trades in Brent Blend (North Sea Oil) so that they can be sure they’re not being ripped off when buyers are using it as a price benchmark and he brings his four wives and eight children (treating all four wives perfectly equally means they get two children, one boy and one girl, each), just how does Ritchie think he will live “a very good life” on less per head than the median wage?
    Alternative question – does Ritchie think?

  7. If it were truly profit distribution, then surely those same people would be contractually liable to loss absorption, no?

    You know, like, er, shareholders?

    Companies selling goods for lower prices than their competitors? Are they also distributing “profits” to their customers?

    The man twists and turns to bend the world into his way of thinking. Keep hammering, that peg will fit into that hole someday!

  8. “to live a very good life of more than adequate material sufficiency ”
    Was not that the way good communists was told they actually lived.

  9. Roger raises an interesting point. I know a professional gambler and the inland revenue hate him because he doesn’t pay income tax. Why? Because if he did then the average man who loses a fortune on the gee gees could claim it against income tax and that would be a real loser.

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