Tax

Rachel Reeves should launch a tax raid on wealthy people fleeing Britain as part of sweeping changes to capital gains rates, a leading think tank has said.

The Institute for Fiscal Studies (IFS) has called on Ms Reeves to impose an exit tax on investors moving their money out of the country, which it said would reduce incentives for them to flee.

The IFS proposals are odd, most odd. I don’t trust the two who have written them as far as the Vunipola brothers could throw them. I take their writing for the IFS as being a proof of Conquest’s Second Law.

There’s not a hope in hell of the overall proposals being accepted. Even though some of them are economically sensible.

But the effect of that overall set of changes. It would be to tax, and hugely heavily, successful entrepreneurs. And to not really tax anyone else very much. Which, – incentives, you know? – doesn’t really seem like quite the right thing to be doing.

Indeed, critics are suggesting that the VAT raid is not worth the hassle involved to raise the £1.5bn a year Labour says it will bring in.

Leading tax experts this week warned that the Government’s definition of a private school was so vague, it could cover universities, forcing them to also levy 20pc VAT on fees from January.

And try defining private education in a manner that doesn’t include universities…..

It makes me think I’m missing something because they can’t – really, they can’t – be as stupid as I think they’re being. Sadly, they’re using the usual trick of not having the report up so that people can cehck the contentions in hte press release.

Corporate tax breaks designed to encourage companies to buy new machinery and equipment are set to cost the taxpayer around three times as much as they generate, according to analysis of official forecasts.

The tax relief on new plant and machinery announced by Jeremy Hunt as chancellor in 2023 was billed as a major part of the solution to the problem of Britain’s low economic productivity. Labour supported the measure at the time and have now promised to make it permanent.

An analysis by the thinktanks Demos and Common Wealth has found that the measure, known as full expensing, will cost nearly £30bn in lost tax revenue and spur a maximum of £10.5bn in fresh investment. The Treasury says the move will generate £15bn in investment, still only half what it has cost the taxpayer.

Profits taxes are paid on profits. Profits are revenues minus costs. Investments are a cost, therefore they get taken off revenues before profit is calculated.

What changes with full expensing is *when* you can recognise that cost of the investing. You still get to take that cost off revenue to get to profit you just have to do it later if the more normal depreciation schedules are followed.

So, net revenue loss of full expensing is zero. Unless we want to start talking about the interest cost of govt borrowing they’ve got to do while waiting for the revenue.

I think – as above, I can’t check – that their trick here is to only run hte revenue collection out a few years instead of a couple of decades. That’s how they’re able to claim lower tax revenue. But to do that would be between lying and stupid. So, clearly, they can’t be doing that.

Full expensing changes when costs are recognised, not which costs are recognised.

Or am I missing something here? Is it me being ill-informed rather than they being lying bastards?

Small firms behind 80% of tax evasion

All that Spud stuff about miltinationals and offshore wsa complete crap. Obviously.

Some have already gone. The “impuesto de solidaridad a las grandes fortunas” raised just €632m in 2022, representing 0.1pc of all taxpayers in Spain.

Despite the relatively low yield, Labour’s union paymasters are already calling for the UK Government to follow suit. The Tax Justice Network claims as much as £24bn a year could be raised from the UK if it copied Spain’s model.

They’ve said they’ll copy Spain’s model but have calculated the income by not following Spain’s model. They’re to tax all the things that Spain doesn’t tax – family companies, close companies and so on.

Jus’ lyin’

But Mr Cleverly has said he would make it his ambition to go further, scrapping the “perverse” levy entirely for anyone purchasing a home, regardless of the value of the property or whether they have owned one before.

He argued this would remove blocks on older people downsizing and young families upsizing, allowing for more movement in the market.

Quite right too. Transactions taxes are a bad idea – all they do is gum up the market itself.

Abolish all stamp duty too….including the one on shares.

HMRC is understood to be checking whether all the transactions Robinson has received are donations rather than payments for services. By a quirk of tax law, donations are tax-free. If, however, he was being paid to make a video or a speech, that would count as income and be taxed.

More a feature.

Whadda Prat:

Biden has proposed a 25% tax on wealth of more than $100m, calculating that it would raise $500bn over 10 years to help fund benefits such as childcare and paid parental leave.

No, he hasn;t. a 25% tax on wealth is something that you’d get to do once and once only. His actual suggestion is that *increases* in wealth, even if uncrystalised, should be taxed like income.

That is, it taxes, very heavily, the successful entrepreneur while leaving the Scrooge McDuck piles of the already wealthy unscathed. Exactly, precisely and totally the opposite of what we’d want any tax system to do.

But then Joe is senile – whats’ everyone else’s excuse?

A 2% levy would affect about 100 billionaire families, says the country’s climate chief, but the $250bn raised could be transformative

Transformative? It’s 1% or less of global tax revenue. That $25 trillion and more they already piss up against the wall.

This is the very definition of marginal, not transformative.

Fiona Harvey Environment editor

Why’d they use the environment bint, not the economics one, to write this story?

Rachel Reeves will next week single out a spiralling hotel bill for asylum seekers that could cost up to £10 billion a year as she pins the blame for financial pressures on the Tories.

The Chancellor will use a speech to the House of Commons on Monday to reveal the details of her “audit” on hidden public spending realities commissioned after Labour took office.

So, let’s pretend at lesat that she’s being honest.

So, what to do? Load up the ferries and send ’em back to France? Or raise UK taxes by 1% (that is about right too) to pay this bill? A good test of longer term intentions, no?

While the schemes are legal, critics argue tax avoidance is immoral and deprives the public purse of hundreds of millions of pounds that could fund vital services.

Tax avoidance isn’t a thing, it’s an attempt. A Schroedinger’s Position. You can try to avoid tax, sure. Don’t buy cigarettes, do have a pension. On examination avoidance then collapses down to either tax evasion – the illegal – or tax complaince – the legal. Avpoidance as a state doesn’t exist, it’s that uncertainty before examination.

Households that pave over their gardens to build driveways should face extra charges because they contribute to urban flooding, a report commissioned by Sadiq Khan has suggested.

The London Climate Resilience Review has warned that paved gardens “pose a lethal risk to Londoners” by increasing surface water flooding.

It recommends that the Government consider introducing stormwater charges based on the amount of non-porous paved surface in a garden.

Mr Khan, the London Mayor, said he would work with the Labour Government to take forward the recommendations in the report.

Porous surfacing that allows rainwater to drain away has decreased by nearly 10 per cent across London since 2001, as more households choose to pave over their gardens to create driveways.

So, they’re charging you to park in hte street now. And also, more and more it’s necessary to have somewhere to charge the car. So, of course, they then want to tax the result of their own policies. Obviously.

Everything else is just an excuse.

An interesting question woulfd be, well, OK, so extra stormwater to deal with., The cost of that is? And so the tax should be? And then, finally, what will the cost of the tax assessment and collection system be?

Dressed in a sober black blazer and talking with trademark briskness, the prime minister urged Italy’s ruling elite to “put those who create wealth in the best conditions to produce it”.

“The more wealth that is produced, the more the state can use its share of that wealth to provide the solutions citizens are waiting for,” she said. “The purpose of a tax system is not to stifle society, but rather to help it prosper.”

Disagrees with Spud so obviously it must be wrong. Or, disagrees with Spud and is therefore highly likely to be sensible. Your call there.

Michael Jackson had accumulated more than half a billion dollars of debt when he died in 2009, new court documents reveal.

OK. Which leaves the impression that he was broke.

The IRS has argued that the estate “undervalued its assets” and owed about $700m more in taxes and penalties.

Estates are taxed upon net values. So, if there was tax due from the estate then the assets must – must – have been worth more than the debts. He wasn’t broke that is.

No, changes in the value of the estate after his death do not count – for the value at the moment of death is the value of the estate.

A “double death tax” under Labour would add tens of thousands to families’ inheritance tax bills, analysis has shown.

Chancellor Jeremy Hunt has warned that Labour could not only increase inheritance tax but also start to charge capital gains tax on assets passed on when people die

Both could mean up to 85% tax on at least parts of an estate. They want to change CGT to be taxed like income. So, up to 45%. Plus 40% IHT.

Seems, umm, excessive?

The Telegraph has revealed a £278m black hole in its finances as a result of loans extracted by the Barclay family which are unlikely ever to be repaid.

Rilly? The kiddies of ageing into senescence enmtrepreneurs don’t have the knack?

Blimey.

And isn’t that an argument against the need for inheritance tax?

Trump reportedly promised the CEOs he would cut corporate taxes even further and curtail business regulations if elected president.

Trump’s 2017 tax cuts reduced the rate of corporate income taxes from 35% to 21%. That has cost America $1.3tn.

Those tax cuts, along with the tax cuts put in place by George W Bush, are the primary reason that the national debt is rising as a percentage of the economy.

But it’s Bob Reich, so of course it’s nonsense.

The government, the Treasury, is not “America”. So, whatever the cost or the benefit has been to the Treasury’s tax collection is different from whatever the benefit or cost has beemn to America.

Also, corporate income tax is about $400 billion a year. A number that’s held remarkably steady since 2015 in fact. The lowering the rate while widening the base (those foreign proifits are now taxed even if they stay outside the US) hsa led to roughtly the same revenue – agreed, cash terms. But the Treaury really hasn’t lost three whole year’s worth of coproate income tax revenue in these few years.

Labour is signalling this weekend that it intends to clamp down on a loophole that allows thousands of investors in private equity deals to avoid paying income tax.

How do you do that without taxing sweat equity at income tax rates?

I’m sure it’s possible but who has confidence in politicians getting it right?

What is less recognised is that there is an important relationship between the levels of taxes and the structure of a country’s economy and society.

Partly because our tax rates have historically been lower, but also because of features such as our tradition of a solid rule of law; confidence that UK governments (regardless of their political hue) will not introduce arbitrary wealth confiscation; our welcoming attitude towards foreign immigrants and foreign investments; the UK tends to attract a disproportionate amount of the world’s most mobile capital and high-income labour.

Think of finance professionals, lawyers, high-skill management consultants, highly-educated design professionals and those in similar professions.

The UK creates and trains its citizens into these roles, disproportionately to our share of the global population, and we also attract foreign-born workers of this type.

We also draw in foreign investors and manage the assets of wealthy individuals and institutions.

The ability to entice this globally-mobile capital and high-value labour is what is called “competitiveness”. Other economies envy our ability to do it.

But one side-effect of our having high shares of such mobile factors is that if we tried to raise taxes on them they would tend to depart.

In any country the attempt to raise taxes beyond a certain point risks failing, because the attempt to raise taxes damages the economy enough that taxes actually fall rather than rising.

But in the UK, because such a high share of our economy involves highly-globally-mobile capital and labour, the issue is more acute than elsewhere.

Very fun indeed. Now, how overwhelmingly important it is is another matter. But it’s a very fun – and clearly true to some extent – point to make.

A former top civil servant who is advising Labour on tax has suggested the threshold for VAT registration should be halved in a move which would hit hundreds of thousands of small businesses.

Sir Edward Troup, a former head of HMRC, said that lowering the threshold would have “been a better way to remove a barrier to growth” than the Government’s recent decision to raise it.

Labour announced earlier this month that Sir Edward would be advising the party on “improving tax compliance” and “modernising” HMRC.

We both gave evidence in the same session to a Commons committee.

It would be fair to say that he knows little of the economics of taxation. Lots about HMRC, about tax, about bureaucracy and government, as you’d expect, but little about the economics of taxation.

However, the move was criticised at the time by Sir Edward. Responding to the news on X, formerly known as Twitter, he said: “Halving the threshold would have been a better way to remove a barrier to growth.”

Such a move would result in hundreds of thousands of additional small businesses having to charge VAT.

According to one set of costings seen by The Telegraph, lowering the threshold to £50,000 – a figure close to Sir Edward’s suggestion – would mean 351,000 more businesses having to register for the tax in 2025-26.

Sir Edward and others have argued for the threshold to be lowered on the basis that it is high by international standards, and because there is evidence that small businesses limit their annual turnover to avoid having to register.

None of that is a good economic reason to lower the VAT limit. A good economic reason to keep raising it is that VAT imposes bureaucracy costs. £90k is still in the region of one man bands – £50k definitely, even definitively, is. It is not desirable to load sole traders with that bureaucratic burden. Therefore we shouldn’t.