The maid tax credit: a tax rise not a tax cut

So The Boy Dave is being shouted at because he\’s suggested offering a tax credit for employing a maid. You know, like exists in the icy social democracies of the Nordics?

And the people shouting at him are of course those who would like Britain to be more like the icy social democracies of the Nordics. Ho hum.

But, how does this tax credit actually work?

The model works in such a way that service providers subtract the deduction from every bill before reclaiming the shortfall from the tax office, thereby removing the burden of paperwork from the end consumer.

Hmm, so it makes sure that every service provider is in fact registered with the taxman. No registration, no filing of income tax records, no tax credit.

Although there have not yet been any major independent studies on its effects, experts at the National Institute of Economic Research believe the reform to be cost-neutral, since it is likely to create enough tax revenue to compensate for the state\’s outlay. Finally, with household services now more affordable, people are less inclined to scour the thriving black market for help in the home.

Hmm, I wouldn\’t call it the black market, it\’s the grey market. But oit moves what we all agree is an undertaxed area of the economy into being a taxed area. Ritchie will be pleased, won\’t he, it\’s a reduction in tax evasion, tax abuse.

And this is in part how it was sold:

The governmental bill, the parliamentary debate that followed it and a referral statement is analyzed in this
article. In the governmental bill and in the debate it was argued that the tax reform would lower the taxations
on domestic work which would provide an opportunity for households to buy domestic services (governmental
bill 2006/07:94, Parliamentary debate records 2006/07:116, 30th of May 2007). The reform would in that sense
create a new labour market were unpaid work would be replace with paid work. Another central argument in
the debate was that the tax credit on domestic services would provide a chance for legal companies in the
domestic service sector to gain market from the of-the-books work that is performed within this sector,
replacing unregulated work with regulated work. The reform would in that sense improve the work conditions
within the sector, entitling domestic workers working rights and insurances. Another argument was that the tax
reform would create job opportunities for low educated persons and the domestic service sector would
provide a possibility to enter the labour market for unemployed and especially groups with low employment
opportunities.

Well quite. By dangling the carrot of tax incentives the government can move a goodly chunk of the sector from being off the books to being on them. With all the benefits to tax revenues and working conditions this will bring.

Sounds reasonable enough actually. And it becomes something of a little litmus test doesn\’t it?

We might be able to identify those who are at least trying to contribute to public policy and discourse, those who note such things. Even if only to reject them for some other, greater values. And we\’ll be able to note those who just scream \”tax breaks for servants the Tory Bastard\” and are thus not interested in contributing to a serious debate upon public policy but are simply being tribal little shits.

Place your bets as to how The Guardian comment pages go……

12 comments on “The maid tax credit: a tax rise not a tax cut

  1. Well actually, it’s a pretty clear case of tax breaks for servants the Tory bastard. Except it’s nothing to do with being Tory per se, it’s bribing the Euphemised Middle Class, particularly the vital Euphemised Middle Female. Very Feminist, those Swedes.

  2. Well, I know Michael Moore “pays” his interns with signed book copies. So maybe you get a free subscription to the Guardian if you sweep up Polly’s droppings, or something.

  3. Can I reject the word: ‘servant’?

    I have had domestic employees (never servants) in Spain for many years. Even ‘live-in’ when the kids were young.

    The have been a vital contribution to a stable family life/home when both partners work hard at their job.

    Cleaning a house and doing other similar stuff does not make a servant (or slave). ‘Servants’ are a mental problem of the employer. I recognise that there are special factors and it does require a level of complicity and liking one another not necessary in a corporate environment. I also recognise abuse (tell me where it doesn’t exist. The corporate market has its own examples).

    Whether it is a good job or not depends, like all others, on the employer not the job content.

  4. Having some experience with this system in Finland, I am slightly astonished that you don’t have it in Britain. It is an excellent way for making an incentive to bring grey market transactions to legal status.

    This, in turn, is essential, if you want to achieve something similar to the Nordic welfare states: high trust in government authorities, high level of redistribution. Polly Toynbee and Sunny Hundal should be enthusiastic. The social democratic parties in the Nordics have accepted that this makes sense; why shouldn’t their British sisters and brothers?

  5. The Guardian will go for the “Tory bastard” line. They can’t help it, it’s Liberal Tourette’s syndrome.

  6. There’s nothing “Liberal” about the Guardian. Even less than there is within the “Liberal Democrats”.

  7. billaboy, you say, “Can I reject the word: ‘servant’?”

    I agree with your general point, but would suggest that the way to go is not to reject the word itself but reject the idea that to be a servant is shameful.

    Back in the days when I could afford a cleaner once a week I was over-apologetic about it. She very sensibly told me to get over it; she didn’t think my employing her was anything to apologise for, nor that her doing the job she was employed to do reduced her status.

  8. Frances Coppola // Feb 10, 2012 at 9:07 am

    Wonder what Polly pays her cleaner?

    The “living wage”, what else?

  9. Yasmin Alibi Brown was on Radio 2 at lunch time and she was big on the ‘tax breaks for rich people to have servants’ and non existent on the regulating a grey economy, not to mention jobs for unskilled people, so I think we can confirm where she is.

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