to wonder why many people assume that rich people don't pay tax

[Redpipe]

when the figures today show that the top 0.5% of earner actually pay a third of all tax collected.

I have seen many posters here immediate jump to the assumption that the rich don't actually pay tax in debates about taxation or about government cuts.

AIBU to think that people who claim the rich don't pay enough or that many of them evade tax are actually talking about a tiny percentage of top earners and that the vast vast majority of top earner pay their share.

sorry that's 1% not 0.5%

I suspect this will probably derail quite quickly, but here goes...

I think most people draw a distinction between those in paid employment and those who take payment in shares and bonuses, etc. When people talk about the rich not paying tax, they are often in mind of big corporations rather than salaried individuals, and the shareholders of the former have found many perfectly legal but arguably immoral ways around paying tax on some of their income.

Sometimes, this means that the person earning 150,000 a year (nearly 6x more than the average salary in the UK and 7x more than a typical salary) is unfairly lumped in with the likes of Amazon, Google and Vodafone in the eyes of some people. Not fair, I agree.

However, when you look at indirect taxes (e.g. VAT) and add those to people's tax spend as a proportion of salary, the picture is very different and the poorer of society actually lose more of their income in tax than the richer.

It's a complicated picture, with some people at either end of the spectrum suffering from unfair prejudices. Ultimately, it comes down to your own personal feelings on the merits of wealth redistribution.

Personally, while I think hard work and talent should be rewarded, it's a myth to think we live in a proper meritocracy. It remains the case that your socio-economic group is the biggest influence on your future earning potential. Networking counts. Some people break out of those confines and good for them, but they are very much a minority. Also, not everything of monetary value is 'good', whereas lots of 'good' things have little or no monetary value (e.g. caring for the elderly). I find it reprehensible that some can have huge bonuses for selling stuff while people are queuing for food from foodbanks simply because they have a partner who needs a level of care that prevents them from working. With that in mind, why is it wrong that those who have most contribute most?

I agree with some of what you say there Dahlen.

OP, I hear you. The papers skewed a lot of facts during the start of the economic downturn and now anyone who earns anything working for a bank must be a tax dodging millionaire. Sod the true facts that the majority of high earners are PAYE.

You're more likely to dodge tax if you have your own business in reality!

I've been here for years and years and I don't think I have ever seen anyone suggesting that the rich don't pay tax. Funny op.

I'd love to see a graph of one vs two earner house holds with and with out DCs against total tax paid and services received.

We win on education and free school transport (shit though it is), but lose on having only on income and DH commuting, so higher rate tax, no CB and vast amounts of petrol duty to the lovely exchequer (no public transport, running two cars is a given). largish morgage so we don't have spare for tax efficient savings and investments and that I think is the point.

I think everyone upto the middle income point that can seriously think of saving think we pay too much tax and people with ISAs and second homes pay too little.

Some where in the middle are those with nice houses, nice cars and DCs at private schools, some of whom I know budget to the last 1/2p and others who I'm sure could pay more tax.

I think any form of taxation is going to be fundamentally unfair, because income is not the same as disposable income.

Yes, to some extent people make choices - don't moan about the lack of cash if you have a mortgage on a 7-bed house in Richmond for example , but some costs incurred by people on good incomes are unavoidable. If you work in London, for example, any savings you make by living further away will be swallowed up in increased commuting costs and it may not be possible to do your job anywhere else.

It's hard for someone on £150 a week to empathise with someone on £1500 a week, but both families can be faced with a choice between heating or food. It remains the case though that you are far more likely to be facing that choice if you earn less.

I think the super rich (a much smaller group than the 1%) can often arrange their financial affairs so they end up paying very little in tax.

But most people in the 1% will just be normal folks paying a lot of income tax and not getting (or expecting) much of anything in return.

HMRC makes a similar assumption though. If you earn over £100k, you have to fill out a tax return every year. Even if you pay tax via PAYE and have no other reason to fill out a tax return. They seem to assume you must be squirrelling away piles of cash (rather than living in a 3 bed semi in a somewhat edgy area of South London, and being comfortable). I'm not saying £100k is not a lot of money, but most people earning such a sum are paying their taxes like everyone else, so I'm not sure why HMRC singles them out.

My dad has a friend who is a high court barrister and his tax bill for 1 year was £90k!

My ex was a contractor and he legally avoided paying as much tax as someone employed by a company by setting up a limited company and being paid a very low salary and taking a large amount in dividends. I don't know if people can still do this or not. He and many of his fellow contractors were certainly not paying the level of tax they would usually. I wouldn't apply this to all the rich, but some people can legally avoid paying the same taxes as a saleried employee.

Yes very often people do run their contracts through a limited company take their earnings out as dividends and not salary.

A huge number of them aren't rich though. All sorts of people are contractors. It is a legitimate means of tax planning. Also a lot of those companies who employ contractors prefer to deal with a limited company or a LLP and won't employ a contractor who isn't set up that way. If they don't do it they don't get the contract.

And in response to the OP yes I do think most people pay the tax. I think it is a small minority of people who can tax plan in such a way they drastically reduce their tax bill. They tend to be seriously rich though.

I think it is because you hear of people like Jimmy Carr having been part of tax avoidance schemes, which leads to an assumption that employing an accountant = trying to avoid paying tax
And then idiots like Duncan Bannatyne pop up trying to get more attention for himself by taking a pop at non-doms, without having a clue what it actually means, and further gives this myth that everyone at the top of the tree is doing their best to find ways to wriggle out of paying their fair share.

Plus I'm sure very rich people moan about paying tax, and this occasionally gets reported (Adele comments for example) which further adds to the impression that people with loads of money resent paying tax and try to do their damnest not to, which people with no money think the rich should be paying more because they don't pay enough.

It isn't just here though - during the US elections last year, both candidates had to publish their tax returns to refute allegations they were avoiding tax

It's the politics of envy, nothing more.

eurochick

" I'm not saying £100k is not a lot of money, but most people earning such a sum are paying their taxes like everyone else, so I'm not sure why HMRC singles them out."

Its because investment income is usually taxed at the basic rate (bank and building society interest, for example) and has to have an additional slice of leviedfor higher rate tax payers.

Sorry only just got back online.

I have enjoyed reading the replies and they make a lot of sense.

Mintyy I will trying and find some examples but I find it hard to believe that you have not noticed in debates as soon as the rich are mentioned in regard to paying large amounts of tax several posters will claim the rich don't pay tax because they can afford to pay people to avoid it.

Mintyy

I have just advanced searched "rich" and "tax" and the site is littered with posts generalising and condemning the rich for not paying enough tax. I haven't cut and paste because I don't want to take something out of context and equally don't want to cut a whole thread.

Most tax evasion I come across is committed by owner managed businesses and consultants. Not necessarily making masses of money each year. I work in tax investigations acting for clients who are suspected of serious tax fraud.

The tax interest and penalty bill is high enough for the cases I deal with to be generally classed as serious fraud and dealt with through code of practice 9 but often this is the cumulation of many years of evasion and not masses of income being diverted in any one year.

I should add that isn't to say all consultant structures are evasive in nature at all - just that this type of set up is open to abuse and diversions ( many of which are investigated by hmrc) much more easily.

I should add that isn't to say all consultant structures are evasive in nature at all - just that this type of set up is open to abuse and diversions ( many of which are investigated by hmrc) much more easily.

So much so I added it twice. Apologies.

interesting ch1a

dudes..ponder this. .. a percentage salary increase s ounds fair yes?

say everyone's salary goes up 1% a year? fair?

sounds 'fair' but when 1% is a hundred quid and another's 1% is 1000.. think about what happens after 10 years and how much more money those at the top have.

well if you look at it pr op erly that means that inequity is magnified every year.

so when salaries at the top are going up many times faster than that..sometimes tripling when junior salaries are going up 2% PLUS the sheer numbers.. 1, 000k = city bonus on top of salary means 100 people can be employed annually on that persons 'spare' money..or toput it another way one yyear's increase on big salaries can pay for 100 years of increase for someone on a low income.

so paying 50% tax is not even scratching the issue of 'fairness' downwards..

notdead

But salaries for the vast majority of the top 1% of earners have gone down not up.
I am not talking about the super rich here, just people on £160'000 bracket. many of their salaries have been cut.

btw its not envy its powerlessness. people with a lot of spare money and economic power can influence t h e game to give them more freedom..without realising thatthe best economic outcomes are achieved with opportunity maximised in the whole system.. which means less inequity. .. but when selfishness is rewarded.. and the 'most selfish' are also the policymakers tasked with managing the game..um you end up with a 'maxselfish' game rather that a 'maxoutput' game..ie an economy where x is much richer than y in britain, but both x and y slip economically against the global picture.. This is why inequity always destroys empires..the more content the empire..the more passive the population and the greater the advantage taken by maxselfish policymakers... it hapoened in rome, french, british empire and holding on to those behaviours led to the US empire... and so forth.. chinese and indian economies are spreading opportunity downwards at the moment...

But as a proportion of their income how much tax do they pay? Paying £5 million pounds tax is not that much if you have another £100 million to play with.

And to them road tax, TV licence, council tax and VAT on food and suchlike will be water off a ducks back.

But if you are a family on £30k year these things take up a massive proportion of your income.

It's the proportion of the income, not the amount.

Also as that figure is actually about those who pay tax it doesn't take into account those who've avoided it.