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UK - Tax the super-rich !

The Don

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The Don
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This could alternatively be in Non-US Politics or Economics, Business and Finance - Mods feel free to move as required.

There is a suspicion that the super rich (both individuals and companies) manage to get away with a lot when it comes to taxation. This is vehemently denied by the tax authorities but this report on the BBC website caught my eye.

The taxman's failure to get tough with the super-rich risks undermining confidence in the whole system, MPs warned in a report on Friday.

HM Revenue and Customs must avoid the impression it has "one rule for the rich and another for everyone else," the Public Accounts Committee said.

In a scathing report, PAC chairwoman Meg Hillier said HMRC's claims about its success "just don't stack up".
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Naturally, HMRC deny that this is the case, but in an era or rising income and wealth inequality where a greater and greater proportion of the nation's income and wealth is flowing into the pockets of a small group of people, I found this statistic illuminating:

Since HMRC set up a specialist unit dealing with so-called high net worth individuals in 2009, the amount of income tax they paid had fallen by £1bn, the report said. This was despite income tax receipts from the public as a whole rising by £23bn over the same period.
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Now this could represent a change in the way that the super-rich are making money, less in terms of income, more in more tax-efficient ways:

But while HMRC said this had resulted in the collection of an additional £2bn in tax. it was unable to explain why the income tax they paid fell by 20% - from £4.5bn in 2009-10 to £3.5bn in 2014-15 - when the overall income tax take rose by 9% £23bn.
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I wouldn't be shocked to find a similar story with respect to corporate taxation as well.

http://www.bbc.co.uk/news/business-38764923
 
Only the little people pay taxes.

I have no idea how you fix this problem. However, I do think that businesses should be taxed on turnover, not profit, so that tax liabilities can't be so easily shipped around the world to the cheapest regime.
 
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MikeG said:
Only the little people pay taxes.

I have no idea how you fix this problem. However, I do think that businesses should be taxed on turnover, not profit, so that tax liabilities can't be so easily shipped around the world to the cheapest regime.
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That's a tad hard to do effectively, it is bad for business with small margins and greatly favors businesses with large margins. Consequently you're forced to tax them in the way businesses with small margins can survive, and miss out on taxes from businesses with large margins.

To be honest, taking some tax avoidance as breakage is probably the lesser evil here.

McHrozni
 
McHrozni said:
That's a tad hard to do effectively, it is bad for business with small margins and greatly favors businesses with large margins. Consequently you're forced to tax them in the way businesses with small margins can survive, and miss out on taxes from businesses with large margins.

To be honest, taking some tax avoidance as breakage is probably the lesser evil here.

McHrozni
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Yeah couldn't be done with the system as is. Maybe you could look to revise what is deductable to arrive at profits - perhaps a cap on non-tangibles such as IP that can be deducted?

Of course for very large value entities it's always going to be worth paying the very best people to find a way around the rules.
 
Reserve the job of 'tax accountant' for government use only.

(No, it isn't serious, but if the government simply bought up all the excellent tax accountants, then they'd collect more money - no-one pays a tax accountant more money than they save)
 
3point14 said:
Reserve the job of 'tax accountant' for government use only.
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Humph, that's actually an interesting idea if you do take it seriously. If accounting has to be done by a state owned business with a legal monopoly, tax evasion would be next to impossible. I'm not sure how feasible it would be, you'd certainly have a problem with the lack of competition and prices that come from that, but it is still interesting to ponder :)

McHrozni
 
Don't tax them, expropriate them. Solves all the problems with the semi-solutions in this thread so far.
 
MikeG said:
Only the little people pay taxes.

I have no idea how you fix this problem. However, I do think that businesses should be taxed on turnover, not profit, so that tax liabilities can't be so easily shipped around the world to the cheapest regime.
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Instead of company tax have a large VAT or GST (same thing but different names). It will hit all businesses the same so those with a small profit will be able to raise prices and keep their margins the same.
 
rjh01 said:
Instead of company tax have a large VAT or GST (same thing but different names). It will hit all businesses the same so those with a small profit will be able to raise prices and keep their margins the same.
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That doesn't hit anything other than the buying public, and so disproportionately affects the poor. Businesses are VAT registered and so don't pay it.
 
I don't know if it's still the case, but Westminster council never used to be able to collect council tax from the residents or One Hyde Park (Which is certainly a competitor for the most expensive block of flats in the world).
 
3point14 said:
I don't know if it's still the case, but Westminster council never used to be able to collect council tax from the residents or One Hyde Park (Which is certainly a competitor for the most expensive block of flats in the world).
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How did they evade it? Or it was case of "no attempt"?
 
MikeG said:
That doesn't hit anything other than the buying public, and so disproportionately affects the poor. Businesses are VAT registered and so don't pay it.
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Just like company tax. The companies that pay it just pass it on to the consumer. If the increased GST / VAT raised the same money as company tax then there would be no net increase in inflation. About the only effect would be some prices go up and some go down to balance it. Though some politicians may try to make political capital.
 
I thought this was going to be a comical misunderstanding of income tax versus capital gains tax or some such silly thing. Upon reading the linked article, it appears to be mostly about pro footballers not paying their income tax.
 
Clear up the loopholes.

Warning: Politicians exist to hand out the loopholes to begin with. So every few decades they "get rid of them", and simplify tax codes, only to jump for joy as they get to hand the loopholes out all over again.
 
Politicians don't draw up the tax legislation in the UK, the people on loan to the government from the big accountancy firms do (warning: may be fallacious. If it is, I'll be very interested to hear why. :) )
 
Beerina said:
Clear up the loopholes.
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Easy to say, but anyone with a passing knowledge of the tax code in any developed country knows how difficult that really is.

Sure you could have a system where there were no tax-based incentives for individuals and businesses to do the things you want them to and tax-based penalties for them not to do undesirable things but in all developed economies these carrots and sticks exist.
 
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