Nick Clegg was interviewed in the Telegraph at the weekend. On the train journey to Gateshead, he covered how he wants to make the rich pay their fair share in tax, economic policy beyond the deficit, support for equal marriage and his relationships with his cabinet colleagues.
On taxing the rich he had this to say:
“It makes people so incredibly angry when you are getting up early in the morning, working really hard to try to do the right thing for your family and for your community, you are paying your taxes and then you see people literally in a different galaxy who are paying extraordinarily low rates of tax.”
You can read the whole article here.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings. You can find her on Bluesky at caronmlindsay.bsky.social
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8 Comments
Why is Lembit Öpik not the driving force behind this announcement behind the discovery of life in another galaxy? Nick must have access to some incredibly complex telescopes if he can make out the details of their tax plans all the way from the Milky Way – our nearest “another galaxy” is the Canis Major Dwarf Gallery, which is still 8,000 parsecs (26,000 light years) away!
Bah, Canis Major Dwarf Galaxy. Then again, no pedantry would be complete without its own mistake.
All excellent stuff and we should be supporting the minimum tax rate ( aka the tycoon tax)
But what evidence is there that there is widescale tax avodance?
I was honing in on “literally in a different galaxy” as well.
Silly hyperbole.
I wonder if they really “are paying extraordinarily low rates of tax”, or whether it depends which tax you count. If, for example, a person invests in a company, their profits are taxed both at the Corporation Tax and at the dividend (Income Tax) or sale (Capital Gains Tax) stage. If one only counts the IT/CGT it might appear that they are paying a lower rate than if one also counted the Corporation Tax.
This is a factor that John Stewart Mill recognised in Principles of Political Economy but which, 150 years later, we often overlook.
Tom Papworth,
The issues you highlight and John Stuart Mill before you are a major source of the disparities in effective rates of taxation on different souces of income. We have developed in this country a spohisticated and complex system of taxation on incomes, consumption and inherited wealth. A large element of legal tax avoidance revolves around exploting the differences in rates of tax that apply to personal income, capital gains and corporate profits. One potentially effective solution is the equalisation of rates i.e. a flat rate tax across the board (equivalent to the combined rate of income tax and employee national insurance), with current higher rate taxes on incomes being replaced with a wealth tax and reductions in the levels of employer national insurance borne by SME’s This measure by no means eliminates all the avenues open to mitigation of tax, but can go a long way to reducing the tax arbitrage that currently spawns a great deal of seemingly artificial tax planing schemes.
Reliefs designed to incentivise business development such as ‘entrepreneurs relief’ can still be accomodated within a flat rate tax regime.
what interests me is the total rate of tax paid, ie the marginal rate of tax. There is a lot of evidence that this is much much higher with poorer people, when the impact of VAT, council tax, TV licence fees, duty and gambling taxes are taken on board. There is also a lot of evidence that the welfare state is regressive, with middle income earners getting the most out of benefits, schooling and the NHS far in excess of benefits for poorer people. A thorough ideology free study from a think tank would be good but unlikely.
@Neil Bradbury – There is an interesting calculator on the BBC http://www.bbc.co.uk/news/uk-politics-13633966 that gives a ‘general’ idea of marginal tax gain/loss over decile incomes. Sure it’s not 100% accurate, but it made for interesting results when we input our household income 🙂
Neil – we don’t need a think tank to do it, as the ONS have done it already!
http://www.ons.gov.uk/ons/rel/household-income/the-effects-of-taxes-and-benefits-on-household-income/2009-2010/the-effects-of-taxes-and-benefits-on-household-income-2009-10.pdf
(You can also find the tables and others on the ONS website)