Does the 50p tax rate actually increase total revenues?
The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.
Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.
The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.
We don\’t quite know yet, not all returns are in and accounted for. But we might well be looking at real, live, evidence of the Laffer Curve in the wild.
It wouldn\’t be a terrible surprise if we did in fact see it either. The various calculations that have been done looking at where that Laffer Peak is (Peter Diamond and Saetz for example) seem to indicate that what with the way the NI system works etc, the peak for income tax is in the 40 – 50 p range. Quite possibly a little lower in fact, given that they were calculating for the US, where tax is levied on a passport basis and here we levy on a residence basis.
Which is one are where Ritchie is in fact correct. If we were to move to a passport basis for taxation then we would in theory move the Laffer Curve peak upwards. Something which I regard as a good enough reason not to move to a passport basis. The residence based taxation system places a limit on the amount that government can squeeze out of us. Something which I regard as desirable: something that he does not. For I tend to think that we are not helots to one state or another purely based upon the accident of birth whereas he seems to think that we are.
Tehre is one further amusement in this. We know that Ritchie has an Irish passport because he\’s told us so. We don\’t know whether he\’s a UK one as well: I would assume so but don\’t know. But wouldn\’t it be amusing if he didn\’t and thus the passport based system which he is urging upon all would not actually apply to him?