to think that we should pay more in tax?!

[MenMust]

I am wondering whether tax rates should go up rather than public services being cut. When I first started working tax rates were around 33% and now they are down to 20% and services are being cut. More tax should be raised from large companies and from the rich but I also think that if we want to keep our services including the NHS then we all maybe need to pay more in tax. any views on this?

[merrymouse]

Re the 11k and the 39k, the person on 11k will still pay a much lower percentage of their total salary in tax and NI.

Whether the tax brackets and rates are 'correct' or 'fair' is a different matter. There is no objective correct rate of tax.

One argument for people on lower incomes paying income tax is that otherwise they can be portrayed as 'scroungers' who contribute nothing by high earners.

However, anybody who buys a packet of sweets or fills their car with petrol pays tax, whether they are 54 or 6 and even if they are only visiting the UK for a day.

[Chikara]

VeryBitchyRestingFace But tax isn't payable on the 11k - for both it is payable on the amount over the personal allowance. Although I agree and I would change that.

However that is only income tax. The person on 11k will be eligible for a range of benefits including HB, WTC, exemption from certain NHS charges, Council Tax benefit. (All depending on circumstances) and may end up better off than the guy on £39k.

[Chikara]

merrymouse - that was partly what I was saying about VAT. Everyone is contributing.

[HyacinthFuckit]

You aren't necessarily eligible for benefits when you earn 11k. Depends on age and household income.

[Dapplegrey2]

smallfox: "The most successful societies, and economies are those in which inequality is low"

Smallfox - the GDR fell into that bracket. Do you think that was a successful society?

[Chikara]

HyacinthFuckit - you are right but the argument is I suppose that if you are earning 11k but your DP is earning £80k then your household income is high enough not to need benefits.

If you are 17 an living at home the argument again would be that you don't need it. ( Not saying I agree)

If DP is also earning 11k or less and you are living in rented accommodation with 2 kids you probably would be.

The two together, benefits and tax, are designed to even out the unfairness. Whether they do that successfully will always be debatable.

[smallfox2002]

• "the GDR fell into that bracket. Do you think that was a successful society?"
  

Obviously not, but that's a slippery slope argument.

[smallfox2002]

However it is true, that the countries with a lower gini coefficient have higher over all living standards. Even if you look at things like life expectancy, in those countries with high levels of inequality even those at the very top have lower life expediencies than those in countries with higher levels of equality.

In this country, and the US, where the job and income of your parents is a more important determinant of outcomes for children, rather than their own ability, I think a more progressive system would be much more beneficial.

Closing tax loopholes for all, and taxing the wealthiest is society more would be greatly beneficial, but also benefits the wealthiest more in the long run.

[mathsmum314]

smallfox2002 What do you think would happen if the owners of Amazon didn't get their massive salaries? No one would anyone take the risk of spending a decade, racking up debts, and building up a big company if there wasn't gold at the end of the rainbow. Economies would grind to a halt.

eg pharmaceutical companies don't bother with much research into new antibiotics because it takes decade of research and countries aren't willing/able to pay a decent price at the end.

So how are you going to tax these big companies that actually helps people in the UK and not cost us jobs or destroy companies?

Its anything but simple.

[smallfox2002]

I'm not saying you have to take all of their income, just what is appropriate.

For example Amazon pay no tax, yet profit out of the internet, which was invented through publicly funded research. They benefit from using emoployees that have been educated, who have health care provided, they have infrastructure which they need to use in order to be profitable etc etc.

It is absolutely disgusting that amazon pay no tax.

As to the "risk taking", people on salaries are not taking risks with their own money. Entrepreneurs tend not to pay themselves with PAYE , so large salaries don't really come into it.

The higher your salary, the more you rely on society in order to be able to do your job, so the more you should contribute. YES you should be rewarded well, but it doesn't mean that you shouldn't contribute more.

[smallfox2002]

"So how are you going to tax these big companies that actually helps people in the UK and not cost us jobs or destroy companies?"

They don't seem to avoid operating in Germany where overall corporation tax is 30-33%.

If big companies leave the country because they are being taxed too highly why don't they leave Germany, or the States? Both have corporation tax at about 30%.

It seems that something for nothing is only bad when your poor, if you've got money or are a corporation, you can pay less than your fair share and cream the benefits, its the real benefits scandal.

[mathsmum314]

smallfox2002, you dont seem to be very up on how tax works. Countries do pay what is appropriate as determined by the government of the country they are in. And companies like Amazon pay a LOT of tax, just not a lot of the corporation tax you are referring to.

If you start to just wallop companies with a big windfall tax just because you have decided you dont like them, who do you think will suffer? The poorest in society will have to pay more to cover these extra costs. Jobs will be lost to make savings, and eventually these companies will leave the UK.

As for Germany, it has done massively well out of the high value of the Euro at the expense of other countries like Greece. They have the system rigged to their advantage as well. So I would be very surprised if Amazon were paying any more tax in Germany than they are in the UK.

[merrymouse]

Companies like Starbucks can only avoid tax because countries like Ireland and Holland and Luxembourg enable them to do so.
(E.g. by having very flexible rules on where a company is based and having very low tax rates).

Otherwise many of the companies that pay low tax in the UK aren't really avoiding tax - they are just paying high tax elsewhere.

With so many multinationals tax is an international issue and reaching agreement is more about co-operation and deals than any one government's domestic policy.

[smallfox2002]

Um PhD in economics, I know exactly how tax works.

Companies like amazon if they don't pay corporation tax, pay VAT which is passed on to the customer so it's not them paying, in employment taxes like employers NI, without that they'd have to pay people more so that they could pay for their own unemployment and sickness insurance, paye taxes are paid by the employee.

So they might pay taxes but they don't pay taxes on their profits which is the bit that they should be paying it on.

The low tax economy theory which you seem to advocate has been utterly disproved, especially looking at the levels of investment in the UK as we have lowered our corporation taxes over the last 6 years, investment has not increased accordingly.

On top of that firms all benefit from government spending. Amazon themselves had theit depot and a new road built to it in Wales at the expense of the tax payer.

The "the jobs will go" argument? It's the se old.scare story, as I said why are all these companies still operating in areas of higher corporation tax?

[smallfox2002]

The point about the taxes, is that although they "pay" them it's on behalf of others that hAve generated them, it's jot the same as paying tax on profits.

[merrymouse]

why are all these companies still operating in areas of higher corporation tax?

Because even with a higher corporation tax rate, there are many advantages to operating in the US that can't be found in e.g. Ireland?

And wasn't the point also that Apple were only pretending to operate from Ireland?

Amazon don't pay low taxes in the UK because of the comparative corporation tax rate - they pay low tax because they have schemes set up to make sure they don't pay any corporation tax at all.

I think CT rates have far more of an effect on small businesses, wholly based in the UK.

[merrymouse]

theconversation.com/corporation-tax-the-progressive-case-for-getting-rid-of-it-56452

Interesting article on getting rid of CT, basically on the basis that it would be simpler and the tax would just be paid elsewhere.

[mathsmum314]

I am not advocating a low or high tax economy, I am saying the simplistic slogan of "they should pay more tax" is just ignorant. As merrymouse says it would need worldwide agreement on taxation. And that is my opinion won't be in my lifetime.
smallfox200, if you have a degree in economics why aren't you offering some sensible solutions. I for one don't believe governments are deliberately not doing their utmost to get all beneficial taxation due as possible.

[Chikara]

Interesting discussion - thank you to those who know stuff.

I do think that many people think only income tax when they talk tax. They might also include Corp tax with the claim that the big Co's are "getting away" with not paying but is is much more complex than that.

Crucial to a debate about tax is how people see their own levels of responsibility. (But maybe getting a bit off topic if not a bit theoretical)

If I am proud of my country and I think that I am benefitting from it and see it as my duty to keep it in a good state for this and future generations then tax is something I am happy to pay. If the general attitude is towards the individualistic rather than collective and I see "Others" benefiting and not paying then I am not happy to pay it.

At the moment the predominant attitude is leaning towards the individualistic. (IMHO - I actually know nothing!! )

[merrymouse]

I agree chikara - it's all very 'they pay too little tax' and 'they get too many benefits'.

Many people who are in the '1%' complain about the '1%' and many people who receive benefits complain about benefit scroungers.

[smallfox2002]

Yeah I'm so ignorant, I suggest that corporations should pay their way.

The article merry links to is little more than the assumption of tricke down economics, which as we know doesn't work.

Corporations benefit massively from givernent spending and therefore should pay their way.

Oh and btw "its only 8% of tax revenue" doesn't seem to cut the mustard when its flipped on the other side regarding benefits being a small proportion of spending.

I suggest, as do Stiglitz, Krugman Chang and many other eminent economists, that higher taxes on corportations, closing tax loopholes, and higher taxes on the wealthiest in society which could then be spent on education, infrastructure and health care would be beneficial to all.

Trickle down economics doesn't work, in fact it only works to encourage rent seeking, it doesn't encourage the wealthiest to invest more in the things that drive the economy, merely invest in assets like housing and shares, divorcing the asset prices from the reality of the economy, and eventually leading to the creation of a bubble. The problem is that in a bubble, as Minsky observes, that the government market interventions and restrictions that created the optimism in the first place are removed, and eventually the bubble bursts. Mostly leaving those in the middle and the bottom worse off, whilst those at the top continue to prosper ( the top 1% in the UK have seen their wealth quadruple since 2008).

Lower corporation tax doesn't guarantee investment either, we've had one of the lowest CT rates in the EU for 5 years, yet British firms are sitting on £700bn in cash that they are not investing, and we have had low levels of growth, yet CEO, director and top level pay has ballooned despite poor performance in share value, productivity and profits ( this led to the hoped for Shareholder spring).

So over all trickle down economics doesn't work, and this is furthered by the fact that governent subsidies, grants, tax breaks etc for corporations adds up to far more than they pay in tax, a conservative estimate puts this figure at £98 billion.

The reason they should pay, and why the wealthiest should pay too, is that without significant governent investment many of these firms would be unable to operate, they are facilitated and supported by the society that they operate in, they must contribute back.

[merrymouse]

I'm not agreeing with the article - (for one thing I don't think withholding tax on dividends would make things simpler, particularly for small businesses) - just pointing out that corporation tax is only one way to collect tax from businesses.

I don't think it is just advocating trickle down economics. There is nothing to stop a government getting rid of corporation tax and increasing income tax or ctg on shares. (Again, I think there would still inevitably be complications and therefore loopholes).

Oh and btw "its only 8% of tax revenue" doesn't seem to cut the mustard when its flipped on the other side regarding benefits being a small proportion of spending.

The two aren't related - the point is whether CT is an efficient and effective way to collect tax.

The main problem with getting the wealthy to pay more tax is that you need international agreement to stop them from simply moving their wealth.

Most companies in the UK are small businesses and they would be the people affected by increased CT rates, not the multinationals.

It's difficult to compare headline tax rates in different countries when methods of taxation and tax laws are so different and the mix of different industries and incorporated and unincorporated businesses will be different.

I know the ad used to say 'tax doesn't have to be taxing', but if you are trying to devise an effective tax system, I think, yes it does. There simply isn't loads of money just floating around waiting to go into HMRC's coffers if only they weren't so easily distracted by lunch.

[merrymouse]

And what does 'pay their way' mean when applied to either a person or a business??

[smallfox2002]

Well to be fair 17bn in VAT went uncollected, not unaknowledged, just HMRC didn't get round to getting it

Pay their way, is essentially pay a fair share of tax in proportion to thei earnings.

[merrymouse]

And what is a fair share of tax?