VAT on private school fees - ITS NOT ACTUALLY LAW THOUGH?

[BellesAndGraces]

Why is nobody reporting on the fact that the Finance Bill has still not been to the House of Lords or even been debated yet? All the reporting, eg in The Times, just says that VAT will be payable on school fees from 1st Jan but misses out the fact that this is not yet law - surely this is a key piece of information. Am I missing something??

@strawberrybubblegum

I wouldn't cite the Nordic model as being popular, our friends are finding every loophole to avoid the high taxes, high earners with substantial wealth and it's squirrelled away legally of course to minimise taxes. He reckons if I learned the relevant laws i could make a fortune as a tax avoidance adviser, everyone is doing it, a national game for the middle classes!

That is very true.

I used to hold that against David Cameron, since he was the one who called the referendum... and I was also pretty peeved that another referendum wasn't repeated once we had the full details.

But actually, although I was strongly against Brexit for both economic and 'values' reasons, I think the dissatisfaction felt by more than 50% of the population had to be addressed. It's a mistake for the Liberal Elite to think that they always know best.

And I hold Corbyn just as responsible for sitting on the fence about Brexit. Political coward. At least David Cameron and many other Tories campaigned for Remain. It was close enough that Corbyn might have made a difference.

So I don't really hold Brexit against the Conservatives. I know others do.

It's still an absolute economic disaster, and will be for another generation at least. But the EU isn't perfect either, far from it. And we have always had a fundamentally different understanding of the Union than the other countries, which has always been a fault line causing dissatisfaction on both sides. Another poster also recently explained how our different welfare model (which relies on previous contributions in the rest of the EU, but not here) causes a problem for us with free movement.

I do wish we could have stayed in, and worked on it from within - but that's done now. Hopefully we can rebuild some connections. Trade will take a while I think, but political cooperation and information sharing which benefits everyone will come back as the EU (the French in particular!) forgive us. And in a while, we may yet be glad to not be tied to free movement. Difficult changes are coming in the next 50 years, and I think the era of international cooperation as a Western value and end-goal is coming to an end. It's all going to become much more transactional (as it has been for many other countries all along).

Sorry, I don't quite understand. Are you in a Nordic country or the UK?

People often assume the Nordic model involves universally higher taxes, but I pay slightly more tax here in the UK than I would in Norway. I'm talking about the benefits of more equal taxation, with everyone contributing - not only the high earners - and everyone benefitting (fewer cut-offs for higher earners). And welfare depending on previous contributions.

I think the 'legal tax avoidance' you mention probably happens everywhere. But it's more likely where people feel they are taxed unfairly, and being taken advantage of.

So I don't really hold Brexit against the Conservatives. I know others do.

I do. Because the whole situation (and every shit decision taken since the vote, and its resulting shitty outcome) arose out of division within the Conservative party. Conservatives present themselves as the party of strong leadership, but it's their most recent twenty years of weak leadership that lead to Brexit under Cameron, then May's scorched earth mishandling of the negotiation, and then Johnson's bumbling incompetence of the implementation.

51% of voters chose leave.

48.1 chose Remain.

That's not on the Conservative government.

But this policy of envy and everyone cheering for it without a thought for the children it will affect is it for me

There's a lot of tone deaf commentary on this thread but the line above is possibly the most baffling for me.

'Without a thought for the children'?! When have private school parents given the slightest shit about collapsing classrooms, lack of equipment or lack of teachers for the vast majority of children in this country? Their answer has been to pay to opt out but now everyone else is supposed to be rioting on behalf of the very few now asked to pay more in tax.

Noone is meant to be rioting. For me, the hope is for the wider population to start thinking about the consequences of the tax on themselves clearly.

That is a great article on the consequences of changes to Non Dom taxation, @kiraric

They make it fairly clear that the low migration response to tax changes seems to be a feature of the super-rich, ie top 0.2% income.

I'd love to see similarly detailed analysis of the impact of VAT in a couple of years.

The tax will have exactly zero impact on me. My DC school is under subscribed, so more children (of which I am not anticipating many) would be very welcome.

@strawberrybubblegum I was realising also that the other thing that is a bit different about France and the wealth tax is the proximity of Francophone countries - Belgium, Luxembourg, Monaco - so moving doesn't necessarily hugely change lifestyle and you are still very near France.

The British super wealthy don't have as many options.

That is very true.

I actually think the issue isn't really migration (a few extra may go, but they were probably close to moving anyway), and it certainly isn’t the super-wealthy. The problem is changes to economic behaviour within the UK by the middle class professional parents who make up the bulk of private school parents - usually with both parents working in professional jobs.

Maybe I'm over-stating the significance. I don't think the treasury will implode.

But say 30k people (1 earner in 10% of private school families) goes/stays part time instead of putting kids in private, and so pays £30k less tax. I don't think that's unrealistic.

That comes to £0.9 billion per year. It's not the end of the world, but it does pretty much wipe out the VAT take, even without the extra cost of actually educating those children, and downstream tax loss from private schools shrinking or closing. Realistically, this policy will lose money.

And make no mistake: in the same way that farmers IHT has made lots of non-farmers seek IHT advice, this will certainly increase legal tax avoidance behaviour. So the treasury will lose even more money.

So what's the point of the harm to children and the social division? The measurably lowered standard of living for some of your citizens, with no gain to any? Why do it?

Thinking about it, language could well be significant. They mention another study in 2014 which showed much higher elasticity based on tax treatment of high income immigrants into Denmark (page 4). They attribute the difference to the Non Doms being a far more elite group in terms of both income and wealth - and conclude that super-wealth reduces migration But you're right that it could also be language. It's very hard to separate out. But it's OK because their recommendations are limited to Non Doms in the UK.

This study did benefit from great conditions to understand previous behaviour, with clear control groups. But I really love how careful and thorough they are. It's not an area I know, but their clarity and thoroughness give pretty good confidence for their recommendations. That's what a fiscal analysis paper should look like!

The assumptions about the drop in tax take from high earners going part time is erroneous. Part-timers don't exist in a vacuum, the work they used to do still needs doing. Someone will be recruited or promoted to take up that work and will pay tax on the money they are paid to do that.
If the high earner's work is so superfluous that nobody will replace any aspect of the reduced role, why on earth were they paid so much in the first place?

Have you tried recruiting in those fields?

This is true but it is likely that the new person won't pay as much tax, because the 'person going part time' may well have paid tax at a 40-45 percent rate and a newer recruit for that work would be paid less and pay tax at a lower marginal rate of tax.

It's possible that the job share will be a lower tax band, but not a given, especially for the kind of roles that pay enough for people to put children through private schooling. We're not talking NMW here.

More likely, some of the work won't be done (in a certain timeframe) because another similarly capable person can't be recruited for a similar salary, and so less will be achieved/it will take longer to deliver. The company profit will be lower than it would have been. And UK GDP and corporation tax will also go down. (Or if it's doctors, waiting lists will go up)

I do work in a shortage area, but I think that's true for all highly paid jobs. If there were other candidates lining up able to do the job, the pay would be lower.