Treasury officials argued the revelation underlined the need for action to prevent the super-rich exploiting loopholes to reduce their tax bill below that of low-paid workers.
The figures, released by the Government, show 6 per cent of £10 million-plus earners pay less than 10 per cent in tax and another three per cent pay below the basic 20 per cent rate. Fewer than three quarters pay more than 40 per cent.
Anyone reading that is going to think that people are somehow able to tick the box \”I\’m rich, don\’t tax me\” and that\’s just not what is happening. Everyone is subject to the same income tax rates on their income, no exceptions.
The changes come in what is defined as income subject to income tax. For example, if you make capital gains you pay capital gains tax: 18% in previous years, with hte entrepreneur\’s exemption at 10%.
So, one of those mega millionaires with a below 20% tax rate could simply have been someone who had spent years building up a business and then selling it.
Or one that was mentioned by Osborne, people deducting the interest paid on business mortgages (could be commercial or residential). The interest is a cost of business so it\’s not even true that the people have high incomes. They have high gross incomes and high expenses so that their net incomes, the part which is actually taxed, are low. To say that this is tax dodging, even to compare their tax rate with their gross income, is absurd: it\’s like taxing a company on turnover not profits.
And running around telling everyone that there should be some sort of Buffett Rule is simply absurd. People already will be paying 30% tax on their incomes. Because income is defined as that money which is subject to income tax which is, for high earners, above 30%. It\’s all in the definitions of what is income, so demanding a specific tax rate on income is near irrelevant.
What in buggery is Osborne doing? Is this all bait and switch? He knows all this and is playing with the public? I\’ll clamp down knowing that he\’ll not end up changing much?
It’s all about getting the proletariat whipped up into a frenzy about ‘those rich bastards’ (to quote Ken Livingston) getting away with not paying their fair share.
Ultimately, there is no benefit in the Chancellor of the Exchequer attempting to tax ‘those rich bastards’ because as has been pointed out repeatedly:
1. They pay the largest proportion of income tax per demographic.
2. Generally they have optionality allowing them to defer or reclassify their income into capital gains, which is taxed at a different rate for good reasons.
3. They are able to move offshore with relative ease (even if only to the Isle of Man) and massively reduce their tax bills.
Ultimately, the only way that the Chancellor can substantially increase taxes is by hitting those stuck in PAYE, preferably above to 40% tax bracket.
By whipping up a political furore he might be able to disguise a hit on the PAYE classes as hitting ‘those rich bastards’ and thereby collect the winnings from a group that can’t easily change behaviours or leave the country to avoid the tax.
This is not about rich or poor, squeezing every last ounce of tax from those that are unable to avoid it.
Not sure what will happen at the next election though – just bloody glad I left the UK in 2009.
All people in England should be made to read –
http://www.cityam.com/latest-news/allister-heath/why-capital-gains-tax-isn-t-too-low
before commenting on CGT.
This blog and that article is absolutely correct. Income tax is always charged on income. CGT is a different type of tax and is always second and sometimes third taxed.
The question is not the tax raised. It is where the tax liability falls…duh.
Is this our final chippy descent into socialist hell?
Wow, the Guardian commenters are seriously angry about this today. Using percentage comparisons is nonsense simply because of reliefs and offsets that are available to everyone. Three that I can think of off the top of my head are:
1. VCTs – potential to knock £60k off your tax bill per year and no CGT.
2. Capital gains at 28%.
3. Dividends at 36.1% maximum.
All of the above require capital to be put at risk and hence the tax rates reflect that. I can understand that the Guardian are just pandering to the prejudice of its readers, but if Osborne genuinely doesn’t get it then he’s a fucking idiot.
And this:
Treasury officials argued the revelation underlined the need for action to prevent the super-rich exploiting loopholes to reduce their tax bill below that of low-paid workers.
I find hard to believe. Perhaps the super-rich are reducing their tax rate below that of low-paid workers, but their bill will be an awful lot more.