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Politics

As often alluded to, are the UK’s rich paying less tax nowadays?

31 replies

TheaSaurass · 22/07/2017 17:24

Generally speaking one of the quickest ways to reduce inequality, is a severe recession when the wealthiest in society with larger homes, and other assets such as collectables and stocks (in or out of a pension), fall more in value, and so significantly reducing their net worth.

But as we’ve found out, few of us are immune from the wider effects of a recession, so a perpetual recession might be some great 'leveller', but it would be most unwelcome by most of us.

How about those tricksy top 1% of the UK population, where if we could somehow tie them down, never mind ‘put them up against the wall’, we are led to think that confiscation will again settle all the wrongs in society and perpetually pay for everything the poorest in society need?

Well in the meantime, this nearly 300,000 citizens currently pay over 27% of all UK income tax raised – and in theory via VAT and other asset purchase e.g. 10% Property Tax on homes just below £1 million to £1.5 million - so they nowadays pay a lot of additional tax, on top of Income and National Insurance.

If more than one property is ‘wealth’, those buying properties to let, nowadays also pay an additional Property Tax surcharge – that may not just discourage new BTL investment, but get many who need capital growth should ever rents be fixed below future funding costs to sell up – but whether the UK is ready to lose a large amount of private sector rental housing supply at this moment, is another debate.

Companies that have been able to both move around, and hide taxable income from September this year, will find this dodgy practice a problem as the OECD measures to create ‘information exchanges’ a few years back to increase international transparency, go live, which is probably why many large corporations are moving/settling in low tax countries, as some big American corporations are doing here.

So there is pretty good evidence up to last year, that the rich are actually paying MORE tax,(with more to come via transparency) and at the other end of the scale, its more easily evident that the poorest workers are paying LESS tax._

“Nearly half of Britons pay no income tax as burden on rich increases”

“Almost half of Britons pay no income tax while the richest are now shouldering the biggest burden on record, a new analysis has found.”

“The Institute for Fiscal Studies said that the proportion of working-age adults who do not pay income tax has risen from 34.3 per cent to 43.8 per cent, equivalent to 30million people.”

So arguably while the rich might shoulder more taxes, isn’t there the age old problem of ‘diminishing returns’ as they are pushed into taking (legal) tax avoidance measures?

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TheaSaurass · 25/07/2017 12:52

As evidenced in France who under socialist President Hollande, in late 2012 fulfilled his election promise to put a supertax on THEIR 1% earning over 1 million a year, but then in 2014 cancelled this rather blunt policy trying to penalise the rich, and placed (or ‘trickled it down’?) more tax on businesses instead – no doubt compounding the problems they already faced.

The tax take from such penal levels the UK saw in the 1970’s, was only Euro 260 million in 2013, Euro 160 million in 2014 – as France’s annual government budget deficit soared to Euro 84.7 billion – showing once again, a government cannot tax an economy to growth. IMO

“France forced to drop 75%
supertax after meagre returns”

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cdtaylornats · 25/07/2017 00:01

The analogy works because top earners are those with mobile skills who if pushed can and will go and work elsewhere.

To a software developer for example it is fairly irrelevant whether his desk is in the UK, Spain or Sydney as long as they have an internet connection.

squishysquirmy · 24/07/2017 23:45

And btw, you would expect a widening wealth gap to increase the % of UK income tax paid by the 1%.
Put really simply: The number of people in the 1% would stay the same, but as income becomes increasingly polarised the amount earned by each would increase compared to other 99%. So, all else being equal, they would have more income to tax.
That's an oversimplification, but the general principle applies.

If the amount of tax paid by the 1% rises to 27%, or 30%, or 35% (without changes to the tax rules) this would be a sign that things were becoming more unequal, not less.

Plus, a lot of people are left out of your figures. It is quite hard to disentangle what the 1% highest earners actually earn: I can't work out from that link who those 1% are. Are they just the people who pay income tax via PAYE? Because that will exclude a lot of seriously wealthy people.

squishysquirmy · 24/07/2017 23:26

That 1% own about 21% of the wealth, though which does put the tax they pay into perspective. As for your comments about VAT etc - you are aware that poor people pay that too, right?
If you do count ALL taxes, then those on low wages can often spend a high proportion of their income on tax compared to higher earners.

Even those who pay no income tax pay other forms of taxes, and contribute to the economy in other ways:
Unpaid carers save the state a lot of money.
Many middle class and wealthy tax payers are able to work the hours they do thanks to cleaners, nursery workers and care workers.
Teachers and teaching assistants help ensure the next generation of tax payers has the skills needed to earn money for the country...
I could give more examples.

cd: Your analogy only works if those 10 men are all dependant on each other in other ways. eg, if the rich guy sold his products to 7th, 8th and 9th, if the 5th and 6th worked for him and if the first 4 men worked in the bar/brewed the beer, and depended on tips to do this. £100 for a weeks worth of drinking for 10 men is pretty bargainous, so I expect someone is being exploited somewhere.

cdtaylornats · 24/07/2017 07:42

There is a story that illustrates how our taxes work

It concerns 10 drinkers in a bar who decide to settle their £100 weekly beer bill roughly the same way we pay our taxes. So, the first four men (the poorest) paid nothing; the fifth paid £1; the sixth £3; the seventh £7; the eighth £12; the ninth £18; and the 10th man, the richest, paid £59.

Then the barman decided to give them a £20 discount for being good customers. The group wanted to continue to pay the new £80 bill the same way as before. While the first four men still drank for free, the other six divided up the £20 windfall by following the progressive principle of the tax system. So the fifth man, like the first four, now paid nothing, making a 100 per cent saving; the sixth man paid £2 instead of £3 (a 33 per cent saving); the seventh man paid £5 instead of £7 (a 28 per cent saving); the eighth £9 instead of £12 (a 25 per cent saving); and the ninth £14 instead of £18 (a 22 per cent saving). The 10th man paid £49 instead of £59 (a 16 per cent saving).

The men then began to compare their savings. “I only got £1 out of the £20,” declared the sixth man. He pointed to the 10th man, “but he got £10 – the wealthy get all the breaks!” “Wait a minute,” said the first four men, “we didn’t get anything at all. This new system exploits the poor.” So the other nine men surrounded the 10th and beat him up. The next week he didn’t show for drinks, so the nine sat down and had their beers without him. But when they came to pay, they discovered they didn’t have enough money between them to pay even half the bill.

TheaSaurass · 22/07/2017 18:40

Try this link
“Nearly half of Britons pay no income tax as burden on rich increases”

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