Published on March 23rd, 2012 |
by Annie Tippell
Image ©
No, there isn't any cake. Or lemonade. And I tried to put an otter in the mail, but it didn’t work. By now, I imagine that there are a fair few of us who are sick of hearing people drone on about the Budget, so I’ll try and make this as painless as possible and throw in a bit of Schopenhauer for all you sports fans.
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Goodbye 50p Tax Rate
Higher earners can bid a fond farewell to the top band of income tax next year, and say hello to paying 45 pence in the pound on earnings above £150k. Gordon Brown and Alistair Darling introduced the 50p rate in April 2009. According to the Telegraph, this move failed to generate more than a third of the estimated £3bn that the Labour government claimed it would.
What the 50p tax rate did manage to do was inspire a cartload of wealthy people to go to extraordinary attempts to legally avoid tax (looking at you, Philip Green). So along comes George ‘Posh Boy Gideon’ Osborne, wielding his red pen and slashing a whole five pence off the highest rate in order to stimulate growth and enterprise.
The 50p rate, he said, is ‘harming the British economy’. In this video from the BBC, Osborne also claims that:
The Merry Men
According to ActionAid, 25% of FTSE 100 companies located subsidiaries in tax havens, and, if they can afford it, businesses and private individuals can always defer their income until 2013 in order to take advantage of the new rate and pay nothing this year, all above board.
That said, some tax loopholes might be plugged. There might even be changes to stamp duty that could raise £500m in revenue, alongside a new general tax avoidance rule.
Stamp duties such as FTTs (financial transaction taxes) might prevail. These are payments on the transfer of ownership between businesses and individuals that aren’t based on tax residence for a change. FTTs effect short term security holders – high-frequency traders, hedge funds and proprietary trading desks will all end up footing the bill. Pension funds, life-insurance companies and private equity firms, on the other hand, will not be affected.
Future crises and sudden market crashes might even be abated due to a decrease in short term trading, but FTTs are yet to become the flavour of the month. This is the position largely advocated by the Robin Hood Tax campaigners, for whom income tax, as it stands, is still failing to generate anywhere near as much as a simple blanket tax on the banks. As the great man said, ‘all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident’. Food for thought.
FREE CAKE! OTTERS! LEMONADE!
No, there isn’t any cake. Or lemonade. And I tried to put an otter in the mail, but it didn’t work. By now, I imagine that there are a fair few of us who are sick of hearing people drone on about the Budget, so I’ll try and make this as painless as possible and throw in a bit of Schopenhauer for all you sports fans.
© Oxfam International
Goodbye 50p Tax Rate
Higher earners can bid a fond farewell to the top band of income tax next year, and say hello to paying 45 pence in the pound on earnings above £150k. Gordon Brown and Alistair Darling introduced the 50p rate in April 2009. According to the Telegraph, this move failed to generate more than a third of the estimated £3bn that the Labour government claimed it would.
What the 50p tax rate did manage to do was inspire a cartload of wealthy people to go to extraordinary attempts to legally avoid tax (looking at you, Philip Green). So along comes George ‘Posh Boy Gideon’ Osborne, wielding his red pen and slashing a whole five pence off the highest rate in order to stimulate growth and enterprise.
The 50p rate, he said, is ‘harming the British economy’. In this video from the BBC, Osborne also claims that:
Really, he doesn’t mean to say that Osborne’s gambling; the word he’s looking for is ‘deluded’. What sort of flannel wouldn’t want to legally mitigate their tax? Who’s going to stand up and say ‘Pick me! Take more from meee!’? Not going to happen.
Polly Curtis doing a bit of digging for the Guardian to see if Osborne is going to be personally effected by the new tax rate, despite his claims to the contrary.
While she suspects that he’s hiding some undeclared rental income, even she has to admit that Osborne isn’t technically doing anything wrong even if he can be proved to be circumventing the system with some clever accountancy.
The Merry Men
According to ActionAid, 25% of FTSE 100 companies located subsidiaries in tax havens, and, if they can afford it, businesses and private individuals can always defer their income until 2013 in order to take advantage of the new rate and pay nothing this year, all above board.
That said, some tax loopholes might be plugged. There might even be changes to stamp duty that could raise £500m in revenue, alongside a new general tax avoidance rule.
Stamp duties such as FTTs (financial transaction taxes) might prevail. These are payments on the transfer of ownership between businesses and individuals that aren’t based on tax residence for a change. FTTs effect short term security holders – high-frequency traders, hedge funds and proprietary trading desks will all end up footing the bill. Pension funds, life-insurance companies and private equity firms, on the other hand, will not be affected.
Future crises and sudden market crashes might even be abated due to a decrease in short term trading, but FTTs are yet to become the flavour of the month. This is the position largely advocated by the Robin Hood Tax campaigners, for whom income tax, as it stands, is still failing to generate anywhere near as much as a simple blanket tax on the banks. As the great man said, ‘all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident’. Food for thought.
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I don't know where I stand on this. On one hand, I think Brown probably introduced the 50p rate out of spite because he knew he wouldn't have to deal with its long term consequences, but at the same time, I really don't see how it's as 'damaging' as Osborne says it is. Slashing it to 45p seems to ignore the other more pragmatic ideas like the stamp duties you've mentioned. Thanks for the link about Polly Curtis, I don't like her much, but it would be interesting to see if Osborne is helping himself or his friends. Like you say though, even she admits it's not illegal.
Hi Joe, sorry for a bit of a late reply, but thanks for commenting! You've made me think of Liam Byrne's note to David Laws a couple of years ago, after the former left the Treasury – 'Dear Chief Secretary, I'm afraid there is no money. Good luck'! I think that far more damage has been done by tax avoidance, and how the law stands at the moment on tax mitigation. Check out some of the other posts about the budget as well, I'm sure they have lots of useful & depressing stats.
Just also want to say that I also want to nick your 'lolitics' tag, although your lolitics is better than some people's politics! Haha!
Jess
Another great article Annie! I'd like to talk to you about reblogging this – I'll leave a message on your site if that's ok.
Couldn't agree more with your intro. Every Tom, Dick and Harry seems to know eeeverything about the budget after reading a bit of The Guardian. Otters and lemonade are much better
Interesting that you mention the FTTs as well – they seem to work in dozens of other countries that, surprise surprise, were hardly hit by recession. Clegg might be in a bit of trouble over this one.
Jess
Yeah just chuck me an email Jess, won't be a problem I'm sure. Might need to have a chat about your platform etc. but I could always write you another one. Bugger, you've reminded me that I was supposed to write something about Cleggers, but I forgot…because, you know, the Budget is so interesting…
I was going to send you this, but I'll put the link here because it might interest/help other people: http://www.guardian.co.uk/commentisfree/2012/mar/…
I chuckled rather a lot at the phrase "What sort of flannel wouldn’t want to legally mitigate their tax?".
Kari! You commented! I am pleased
FLANNEL.