To answer Ritchie’s question

According to The Telegraph, a Taxpayers’ Alliance campaign to have national insurance renamed Eranings Tax is likely to be successful.

A number if, inevitable thoughts follow on. The first is that this is, despite all the claims, not a tax. There is still a contributory principle in national insurance, for example, in pension rights. Given how keen the government is on that idea I wonder how this renaming helps them.

Second, if this is to be called an Earnings Tax the obvious question to ask us why then only earnings are taxed. Why should unearned income such as rents, dividends and interest not be taxed?

Because an earnings tax won’t be charged upon things that aren’t earnings. Like, say, “unearned” income.

And third, the question as to why such large scale avoidance of the tax is permitted in the case of small limited companies.

Because that’s the way the law is: as a retired accountant from Wandsworth pointed out to us some years ago. And used the technique in managing his own tax affairs as well.

8 thoughts on “To answer Ritchie’s question”

  1. I’m not sure about this. It implies that the worker is paying the tax.

    A more neutral term would be “employment tax” because it is just that; a tax on employment. The question of who pays it-employer or employee- is literally meaningless, since the money is swiped in the middle of the transaction. (See also, “sales tax” vs. “purchase tax”).

  2. “Second, if this is to be called an Earnings Tax the obvious question to ask us why then only earnings are taxed” – The existence of an Earnings Tax doesn’t preclude the existence of other Income taxes, so the question doesn’t stand on a simple point of logic.

    “And third, the question as to why such large scale avoidance of the tax is permitted in the case of small limited companies.” – the question is why a simple name change would negate any of the current compliance rules.

    Dear God, the man hasn’t got a logical bone in his body. I’m no economist and I’m sure he could bamboozle me face-to-face but he just isn’t a thinker at all.

  3. One of the reasons is the continued exemption of those over State Pension Age despite the abolition of a normal retirement age so you get a boost to take home pay the day after your 65th (or whichever will be relevant) birthday.
    Second is that Murphy’s favourite politician, Gordon Bennet, destroyed the last bit of the insurance principle.

  4. How wonderful.

    I still remember watching the Beeb live report on the Budget a hundred years ago.

    The top rates of tax moved up by 5% except for the highest rate, which only went up to 83%.

    The trade union representative railed against the pandering to the filthy rich. This continued unabated until a real accountant gently pointed out that, with Investment Income surcharge at 15%, raising the 80% band to 85% would be a tad harsh.

    Nowadays, of course, we treat investment income rather differently because either corporation tax, or income tax and NI, or CGT have been levied on the monies being used as capital required to generate the interest.

    But we can’t assume that the Big Dick, that well known economist from The Biggest House In The Area, would understand that.

    As an aside, there is already far too much taxing of post tax income. VAT, rates, stamp duty, insurance tax, energy tax, etc etc, all tax post tax income.

    I once did an interesting spreadsheet that showed the fate of a pound spent on buying a house. It was post tax at 40%, then taxed at 3% stamp duty, then taxed at 40% IHT.

    If I didn’t think I’d top myself, I’d re-create it.

  5. While we’re at it, can we have NIC applied at employment rates (both employee and employer contributions) to the earnings of self-righteous greasy fat fvck partners in LLPs who might have set themselves up as an LLP and not a company so they don’t suffer the higher NIC rates on salaries?

  6. BraveFart: yes please, I’ve been saying that for years. Ditch Class 2 altogether, and align Class 4 and primary Class 1, and make sure everyone gets the same benefits. Oh, and align income tax and NI thresholds and definitions. Would make life so much easier and fairer.

  7. Great summation, John Miller!

    I am guessing from Murphy’s choice of language, though, that he is attempting to lead his progressive readers by the nose into thinking that dividends are *not* already taxed; and therefore that business owners are getting something everyone else can’t. The usual hate-mongering stuff.

  8. Still harping on about NI “contributions” is he.

    We ‘ll see what people’s pension “rights” are worth when western gubments hit the buffers and can’t even pay their drink and whore bills never mind pensions.

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