AIBU to ask a question about Tax paying and what is fair?

[Taxquestions]

Regular but name changed for this thread - Pom Bears, Water Gun, Penguin Date etc.

Although this is not a thread about a thread, I read a thread today which really raised my eyebrows about some people's beliefs on what tax payers should really be paying in tax. I am interested in all views.

One of the contributors seemed to believe that tax payers should be taxed so highly that their eventual income stream would be nearer an average salary i.e if you earn't 100K you should be paying 75% back in tax.

I read things like "well they don't actually pay the higher rate".....errm looking at my P60 I can assure you they (I) do "well they have accountants to lower the rate for them" how exactly would this be? HMRC are scrupulous, there are FSA rules and regulations and there isn't any way to "fudge" the system - if you are not in this system please tell me where on earth you get the opinion that everything is fraudulent.

I wonder what the general opinion is to someone like me...I earn over 100K a year, work bloody hard for it, have very little tax free allowance (in fact I think it is more like 0), don't take up a NHS space as have private medical insurance, don't take up a school space as my children are in private for non snobby reasons despite the opinion that some hold. I employ over 100 people, am a fair manager/employer who pays above the national/international average and I contribute a substantial sum of my very hard earned income every year in both Tax and NI contributions. I don't have a final salary pension scheme and will be in the same position as everyone else who has either worked without a final salary pension or those who have never worked come retirement (subject to any savings).

So mumsnet do you think I should be penalised more for loving my job, being good at it and wanting to work hence being afforded the salary I am "lucky" to earn? Should I go out to work just to put more into the tax pot?

So as not to drip feed whilst I put "lucky" - it has been far from it, I am working class through and through left school early with no qualifications and worked my way up the ladder. This makes no difference to me but just to clarify for those that might also assume I was born with a silver spoon in my mouth :)

No. That's not what she is saying. High rate tax payers create jobs. . They do.

If you taxed these people like some of you want to these jobs would not be available .

if you taxed me to the point that working was no longer viable. The cm, cleaner and gardener would lose out. Not me. Not really I would just become SAHM and do it all myself.

Yanbu.

Frankly if the tax system changed, and the higher rate was over 50% lots of people would leave the country. We would, and could easily, working for international corporations makes it possible and easy. PAYE does not mean you can avoid it.

Income tax was very high pre 1980's and many people did leave the country to avoid paying.

Be careful what you wish for....

Wow. I am at the poster who said we can't all work on supermarket checkout. Some of us have to do real jobs.

Shall try and ignore.

OP - I think you pay a reasonable amount of tax. As you say, you work hard and that combined with luck/making good choices means you are able to live a comfortable lifestyle.
However you really aren't the squeezed middle, you are up there amongst the high earners.

The problem is that there are those who earn similar amounts or much higher amounts than you who aren't paying 40% tax. There are corporations & individuals who are raking it in, paying employees minimum wage who then require state top ups & not paying their own dues in tax.
We have a huge budget defecit. If we think that NHS, state education, council services, state pensions, benefit safety net etc are important then we need to raise taxes from somewhere.

I personally don't think tax (&NI combined) should be more than 50% of income as we do need to have the incentive to create wealth. However I don't think that that 50% (overall) is unreasonable on a salary of £100k - particularly when there are so many people struggling (& working as hard) on far far less.

Income tax was very high pre 1980's and many people did leave the country to avoid paying.

Were they missed?

A lot of people in the higher tax rate bracket don't love their jobs and would do it regardless of salary. Not all jobs are vocations. Most people who earn in this bracket have to travel for work, put in long hours, do additional study etc and they do it because they earn more. If that changes because of taxation, they might as well jack it in and work in a job with less stress and responsibility.

The problem here is that basic salaries are not high enough to meet living costs and the super rich duck paying. The problem is not with those earning up to 100k.

Presumably their taxation was missed.

'It the higher rate was over 50% then people would leave the country'

Bollocks. It didn't happen when the rate was 50 before.

And anyway, www.wewilldrivethemtotheairport.co.uk

Look at what's happened in France! They're all coming to London because of the 75% tax bracket.

Where has the 26K average salary figure come from? Student Loans are paid back at 85% of average salary and that figure is currently approx 28K, making an average salary 32K.

OP I don't think you are unreasonable. There would be no incentive to move up the working ladder if you were always paid the same amount and any extra just went straight to the government. In fact, why would employers bother to ever pay more than the average salary if the rest went to the government.

It frustrates me how people also think company directors pay no tax and somehow fiddle the system.

I am a company director. Its a small company but I am a higher rate tax payer.

I don't pay tax through PAYE but I pay just as much tax.

If I was PAYE I would pay 40 per cent tax.

Instead I pay corporation tax at 20 percent. I have 80 percent left. From that 80 percent I pay dividend tax on the rest at 32.5 percent. There is a tax credit applied to this of 10 percent so I pay tax of 25 percent of the dividend.

This means for every £100 I pay £20 corporation tax and £20 income tax. i.e. I get £60. Same as PAYE. The only difference is a national insurance saving.

I think people who earn very very high salaries should be taxed more, yes

In that case you should support the government's reduction in the top rate of tax. It has resulted in the highest earners paying more tax overall. This may seem counterintuitive but it is because the higher the tax rate the more motivated people are to find ways round it, whether by moving to a country with a lower tax rate or through other approaches.

The top 1% of workers in the UK (i.e. those earning more than £164k) receive 13% of total income (i.e. 13% of all the salaries of everyone in the UK added together) and pay 28.3% of all income tax. At the other end of the scale the bottom 25% of workers receive 9.7% of total income and pay 2.3% of all income tax. Under the current government the proportion of income tax receipts from the top 1% of workers has gone up while the proportion from the bottom 25% has gone down.

Were they missed?

Yes. The richest 5% pay a much higher proportion of taxes than the rest of us and consume a much lower proportion of services. The rest of us therefore had to pay more tax to compensate for the fact that our high tax rates were driving higher earners away. The trend is even more pronounced now when an increasing number of people can work anywhere they've got an internet connection.

Bollocks. It didn't happen when the rate was 50 before.

Yes it did. There used to be regular programmes on TV and radio, items in the press etc. worrying about the brain drain. A particular concern was that our most talented engineers were going elsewhere (primarily the USA) where they would be able to keep more of their earnings, resulting in US companies benefitting from innovation by British engineers.

I think we need to ask ourselves whether we're interest in maximising tax take, so we can spend it wisely on public services or whether we're interested in punishing the rich.

If it's the former, then history shows very clearly that hiking tax rates hads a negative impact on the overall tax take, thus reducing the amount we can actually spend as a nation on public services.

Do we want what works? Or do we want what makes us feel better?

Also, economies do not run on taxes. Economies run on speading money around. The most efficient way to do this is to allow individuals to spend their own money.

The least efficient way of doing this is to take the money from them and then spend it for them at state level.

I used to think it was punitive to tax higher earners as heavily as we do but now I'm poorer turning into a communist I think it's the socially responsible thing to do

Personally (as you may have gathered!) I'm interested in what works. And I don't think it is socially responsible to set the tax rates for high earners at too high a level since we know historically the result is they pay less tax, low earners pay more tax and the economy is damaged. I would personally set the tax for high earners at the level that maximises tax take regardless of whether that means increasing or reducing the current rates. I think that is the socially responsible thing to do.

littleredsquirrel I know, this sentiment is rampant on MN. I work as a contractor & am paid through my husband's company, and we have a pretty clever accountant on board. So I've got more opportunity for tax avoidance schemes than the average UK taxpayer. And although I'm not privy to the overall tax picture for my husband's company, I can state with certainty that my tax rate is pretty much as it would be were I a straight PAYE employee.

If you are a business owner, and that business is a company, any salary that you draw from the business as a director is subject to PAYE. So you can be both the owner of the business and a PAYE employee of it.

Yes, but at no point has the OP clarified whether she is an employee or a business owner – despite being asked directly. It’s not clear to me from her OP which it is. If I have missed something, let me know.

Low paid workers genealogist go to work and go home again. They work a eight hour day and generally refuse to any more. HRT tax pastures normally work at least a12-15 how day and when the shot his the fan... The buck apps there.

I earn close to the OP’s wage and work an 8 hour day with a lunch break, annual salary, paid holiday, sickness & pension and plenty of perks & expenses. My DM is on minimum wage and is unpaid until her shift starts (despite having to get there half an hour earlier to set up, be debriefed on previous shift and put uniform on - and do the same at the end of shift) and gets lunch & breaks deducted. She is not allowed to accept gifts (box of chocolates usually, a £10 gift voucher rarely). Maybe we are the lone exception – I would be happy to consider evidence otherwise.

We cannot all work in supermarkets with no actual responsibility.

High rate tax payers create jobs.

[citation needed]

Where has the £26K average salary figure come from?

The Office of National Statistics It's a year out of date - can't find 2013.

Economies run on spreading money around. The most efficient way to do this is to allow individuals to spend their own money.

Funnily enough that argument only ever seems to apply to high earners. It’s rarely used about low ones – surely we should ensure that the lowest earners (the majority of the population) have access to reasonable levels of disposable income as well via a reasonable minimum wage and reasonable benefit levels? Low earners are far more likely to spend it in the UK for a start.

It's the seriously wealthy with off shore accounts and property held by companies apparently. That's what I was told by somebody who thinks she knows about these things! But people on PAYE can't avoid tax like those others. So poor you. It's a hard life of £100,000 per year.

Tondelayo I am an employee. However I am a fee earner and no the reports under me wouldn't necessarily keep their jobs if I were not in the role I am.

Not sure what this adds to the argument of whether I should or should not pay more tax?

Higher rate tax payers do create jobs, why on earth would people think they don't? And there is another little bit of tax I am paying....I pay my CM out of my after taxed salary, she then pays her own tax on that amount - fair?

No, it doesn't

Yes it is. I pay tax then pay tax on petrol.

It's the seriously wealthy with off shore accounts and property held by companies apparently.

True. You have to have a residence in another country in order to enter into the major leagues of tax avoidance.

We need to close the loop holes. I'm confused why it's so easy. Don't let them store their money abroad.

Truffle, we all pay tax on petrol and goods in some way. Interesting that you think it's fair to effectively pay income tax twice.

Taxquestions I think you must be thinking of another poster.