[petejh]

£8.2Bn profit in Q3.

But only a tiny proportion of that profit came from work carried out in the UK. And as noted, on this they paid 65% tax. The rest is elsewhere around the world, where it's taxed by the relevant nation. I presume people don't expect Shell, or any other business, to pay double taxation on profits earned in for e.g. the US?

The media love this shit because it riles people and stirs up a good moral panic. As usual the reality isn't what the media portray.

[ali k]

The media love this shit because it riles people and stirs up a good moral panic. As usual the reality isn't what the media portray.

I was also listening to the Today programme this morning and to be fair they did clearly provide the context for this - as you've repeated here. Not sure which media is portraying it unfairly?

Also worth remembering that this additional profit has come from them doing sweet FA. Investment into the UK hasn't changed at all - as they also pointed out this morning.

[Nigel]

I'm not seeing a case for wealthier people paying too little tax in the UK tbh.

Reading between the lines Pete, is this the root issue? There are a lot of questions in your earlier post, and they only go up in number as you go back and edit it!  Boiling it down, is it that you are interested in hearing a case for wealthier people paying more tax?

If not, what exactly is it you want to discuss? Comparisons with foreign countries?

[IanP]

I'm not seeing a case for wealthier people paying too little tax in the UK tbh.

Reading between the lines Pete, is this the root issue? There are a lot of questions in your earlier post, and they only go up in number as you go back and edit it!  Boiling it down, is it that you are interested in hearing a case for wealthier people paying more tax?

If not, what exactly is it you want to discuss? Comparisons with foreign countries?

There is also the question of interpretation of the data - for me the absolute minimum tax burden distribution for a modern society is that the well off pay the same percentage of their income as the less well off.  Since we are pretty close to that point there must be a least some room to argue that the well off should pay a bit more.

Where I probably do agree with Pete is that I don't believe that often stated simplistic view that we can raise all the money we need just by increasing taxes on the 'very rich (top 0.1%, top 1%?).

[petejh]

A problem with that though Ian is what are you classing as income? Because it isn't at all simple to look at someone of high net worth and say what their income is, in contrast to most middle and low earners who generally have a salary, and maybe a bit of interest or a gain on a house.

As noted above, a lot of wealth comes in the form not of a wage but in the form of dividends, capital gains, interest, pensions, annuities etc. And a large chunk of that money is quite rightly kept inside tax-free wrappers such as ISA's and SIPPS that we all use to incentivise saving for our retirement.

What you're suggesting sounds sensible, but isn't possible without completely changing the tax treatment of savings and investments for everybody, which also changes incentives for saving and investing.

[seankenny]

It’s complicated but modern developed states have a pretty high level of capacity and can work out how to do this. And if there are undesirable consequences, well we do not set tax policy once every quarter century. We can tweak it as we go!

In short it’s a political problem, not a technical one.

[IanP]

A problem with that though Ian is what are you classing as income? Because it isn't at all simple to look at someone of high net worth and say what their income is, in contrast to most middle and low earners who generally have a salary, and maybe a bit of interest or a gain on a house.

As noted above, a lot of wealth comes in the form not of a wage but in the form of dividends, capital gains, interest, pensions, annuities etc. And a large chunk of that money is quite rightly kept inside tax-free wrappers such as ISA's and SIPPS that we all use to incentivise saving for our retirement.

What you're suggesting sounds sensible, but isn't possible without completely changing the tax treatment of savings and investments for everybody, which also changes incentives for saving and investing.

According to:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/974540/SPI_National_Statistics_Commentary_tables_3_1_to_3.17_1819.pdf

significantly over 50% of income for additional rate tax payers (not a bad proxy for the top 1%) is still employment income (figure 2.5, page 10) so I'm not sure that is the main problem.  Tax relief on pensions is limited to £40k per year (and reduced as earnings increase), so there's only so much (quite legally) avoided by that route.

In the end taking more tax from the well off and rich (top 10% say) is more of political decision than a technical problem.  And part of the difficulty is that lots of rich people really don't like seeing large numbers going to the tax man - witness Adele moaning a few years ago about her £4 million tax bill, even though that meant she had earned many millions more than that.

To be clear I'm not of the 'squeeze the rich' persuasion particularly but do think if we are going to have increase the tax burden and potentially decrease benefit/pension payments in real terms we should consider spreading the pain and maybe that should include some increase on tax paid by those higher up the income scale.

[Fultonius]

Lots of good 1% info in here:  https://ifs.org.uk/publications/characteristics-and-incomes-top-1

Partnership and dividend income account for over a quarter of the total income of the top 1%, and over a third of the total income of the top 0.1%, a much higher share than for those with lower incomes. Partnership and dividend income are taxed at lower rates than normal salaries – a policy choice to tax the incomes of business owners at lower rates than employees, which therefore benefits a significant share of the top 1%.

[Nigel]

Pete you are absolutely right it isn't easy to compare across deciles. It matters what your metric is. For e.g. it is very easy to say "the top 10% pay 30% of income tax" and make it look like the rich pay way over the odds (poor lambs!).

However.... it is missing so much as to not be useful. What proportion of national income do the top 10% take? If its 30% or more (I think it is about 30%) then are they really paying over the odds? And actually is it worth calculating at all since its so narrow, only being concerned with income tax? The overall tax on someone is surely what matters and that is not just income tax, but also includes social security tax (NI in the UK), VAT on consumption, council tax, tax on dividends, tax on capital gains etc. Then you have to add in any benefits which come in the other direction.

The ONS try to capture all of the above using the unit of an "equivalised household" rather than an individual. This is useful https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021 This is my broadbrush understanding of the UK situation:

+ The UK has huge income (before taxes and benefits) inequality between the richest and the poorest ends of the scale - much much bigger than other countries apart from the US.
+ The UK is actually very highly redistributive relative to other countries - there is a big transfer from the top end to the bottom end, everything in the middle also gets brought up a bit. This happens via taxing rich to give benefits to poor.
+Once the final household income after taxes and benefits is worked out then the UK system is largely flat i.e. people pay tax in proportion to their share of income before tax. I.e. top 10% pay 30% of tax as they take 30% of income. The poor get benefits but they get rinsed by VAT.
+Our Gini coefficient (measure of inequality) after taxes and benefits is high relative to other countries - meaning even after redistribution we still have high inequality, relatively.

A few links which I think capture the above:
https://www.nature.com/articles/s41599-020-0514-4#Tab1 
https://www.resolutionfoundation.org/comment/what-share-of-tax-do-the-top-1-per-cent-pay-less-than-you-might-have-heard/ 
https://www.ft.com/content/ef265420-45e8-497b-b308-c951baa68945
https://en.wikipedia.org/wiki/List_of_countries_by_income_equality#EU27_countries

In light of the above a brief summation of a case for higher tax on th rich. For me there are two main issues - income inequality, and public services.

The UK is very high income inequality, and very highly redistributive. The two are linked. As you say the top 10% pay most tax, the bottom 50% hardly pay any. There is a transfer between the two groups via the state. If incomes were less unequal then the tax base could be more widely spread, and the rich could be soaked less. They might have to earn less though! The rich have been increasing their share of national income at the expense of others for a few decades now (needs a link, the info is out there). Having a low minimum wage and suppressing public sector wages does not help. You will have noticed that this is very close to arguments from the Tories (Johnson's high wage economy, levelling up. Truss's "better to let people keep their own money than give in handouts"). They do recognise the problem, its just that giving a tax cut to the rich, cutting benefits and keeping wages low seems an odd way to transition to it. Shock therapy rather than a managed process. Taxing the rich more, and transferring it less over time as incomes equalise seems a better system.

On public services, the state taking 33% tax as a share of GDP is low. Regardless of its position relative to 70 years ago! Its low relative to other European countries which have much better public services. Our population has aged massively since the 1950s, that requires the state / public services to be bigger to cover the costs. That was the explicit case for the rise in NI, earlier this year, billed as a health and social care levy, now cancelled. If more tax is required for public services then the way it is done elsewhere is via social security taxes. E.g. Germany has a top rate of income tax of 45%. Then you have a total of 19.3% in social security taxes (pensions, health, unemployment). And until very recently you also had 5.5% solidarity tax for reunification costs of East and West - a levelling up tax! Total 69.3%. In the UK we have 45% top rate + 2% NI = 47%. And top earners still want to pay less?! Most people pay 12% NI and for some it takes as much as income tax. If you take more income as dividends then as a top rate taxpayer you are subject to a 39.35% tax. That is less than if you actually worked for it. Capital gains tax of 20% top rate is much less than if you did a job. These are all taxes that could be tweaked upwards. What the gain (or loss!) would be I don't know, it might not amount to much or solve any problems, but top earners do OK (I think), and public services need the money.

Obviously the same info can be used to make a different case, if you wish...

[Oldmanmatt]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

[abarro81]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

Obviously there's a very big range in the top 10%, but.a household post-tax income of £70k is pretty well off IMO. That's a meaningfully higher number than my household and I would consider myself pretty well off (though perhaps not "rich")...

[Will Hunt]

I think we all know that the people who ought to be paying more tax are those earning more than ourselves.

[teestub]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

To end up with disposable income of £70k I think you'd need one earner on £120k/year or two on £50k (just going on wages, not including holdings in south american lithium or whatever), which I think would be pretty well off by most standards.

[petejh]

Nigel, that's a great reply thanks. Just a quickie as I don't have time for a proper response with links and data.

One thing you're not acknowledging in your thesis - maybe you aren't aware of the details yourself? - is what I said earlier about tax wrappers. You can't just 'tax the wealthiest more'... without significantly changing the system of tax wrappers that everybody, not just 'the wealthy', use to protect their money from taxes. The wealthy use the tax advantages of pension contributions and ISA's to full advantage. But the 'non wealthy' use these same advantages, just at lower numbers. You'd need to take away the tax-free wrappers from people who'd saved and invested large parts of their wealth into these instruments designed to be tax-free. I.e. reduce the annual ISA allowance, the maximum that could be held within an ISA, and seriously reduce the lifetime pension allowance from the current £1 million. But to what end? This would then change the incentives for all of us to build retirement stashes. As Sean says it's all doable, just a technical exercise. But any technical change is prone to also change the balance of incentives for all of us. The current system incentivises saving and investing, personally I think it would be very negative to dilute the current system of incentives.

Your view of dividends fails to account for the most important aspect of all - the risk premium inherent in the model. Think about how those dividends come about... They come about by person x placing their cash into a share. That cash has quite possibly already been taxed at source as income. The share has to do well and make profit, this is a risk and not guaranteed. A salary is guaranteed as long as you're employed. A dividend or capital gain is far from guaranteed and definitely not stable. This is reflected in the tax treatment of wages versus tax treatment of dividends and capital gains. If you dispute this then may I suggest next month you take all your wages and instead of paying for food and other bills, you place it all into a share of your choice as a means of earning income. Let me know how that risk feels to you, and whether you still think any gains you might end up making on your cash should be taxed the same as your 'safe' monthly wage. If you don't, then you believe in the risk premium (TLDR: everyone believes in risk premium, when it comes to them encountering the risk).

To my mind the biggest issue is the cost of everyday things which is obviously a real problem for the bottom 20%. It's the ratio of prices to wages that has become skewed in recent years - over the long term with housing and, recently, in the short term with just about everything, as a result of the inflationary rise following covid - supply chain disruption - war - follow on effects of energy input costs on manufacturing everything (massive simplification). But the current inflation is hopefully still 'relatively' short-lived (low single digit years rather than high single digit). Hard to know how to solve the VAT cost as a proportion of household income in this short time frame. If you do what you're talking about - raise wages in line with inflation without any resultant economic growth - then that'll ingrain high inflation for longer, which doesn't end well.

[Bradders]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

This reminds me of that Question Time exchange a little while ago

https://twitter.com/bbcquestiontime/status/1197651546940608514?t=EGPHtQMMiFb3y90APD-2Ew&s=19

[spidermonkey09]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

Someone whose salary 70k before tax, let alone disposable income(!!!) is 100% rich compared to the general population, yes. Obviously some people are richer than that, but there are significantly more people significantly poorer than that.

That QT clip is an all time classic. The gradual realisation from the audience. 

[seankenny]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

The first thing to point out is that wealth and income are not the same thing. One can have a high income and very low wealth (very recent graduate with a lot of debt but a great job) or low income and high wealth (pensioner with huge house bought decades ago). When people say “rich” it’s not often clear whether they are talking about income or wealth.

It’s also worth pointing out that wealth is not just a product of income but is also down to the returns on assets, and that a key part of wealth is the ownership of productive assets.

And yes, the top 10% of the income distribution is very wide, that does tend to be the nature of the outer extremes of a distribution. But… so what? The reality, as Nige said above, is what sort of public services do we want - because if we want a better public realm then we have to pay for it. For sure that responsibility will fall a lot further down the income distribution than just the top 10% but assuming that someone else should pay is part of the reason we are here.

[Oldmanmatt]

The top 10% of earners? This, according to the ONS means anyone with a family/household disposable income of just over £70k, right? That’s probably a fair proportion of people posting here, isn’t it? Am I rich now? Because I hadn’t fucking noticed. 🤣 Seriously, it’s a broad band and there’s a significant gap between those at the 10% margin and those at the top end.

This reminds me of that Question Time exchange a little while ago

https://twitter.com/bbcquestiontime/status/1197651546940608514?t=EGPHtQMMiFb3y90APD-2Ew&s=19

😂 yes, I actually thought the same thing after typing… It’s not that I have any disbelief in being in the “Top 10%” category, it’s the lumping in of vastly disparate income/wealth realities. Such a big difference between comfortable,  affluent, well off and rich. Most people in that band are already paying 40%, on the same allowance as someone in the bottom 10%, so of course they will view it as “unfair”, especially those who only just cross into the higher band. Are we suggesting that someone earning £50k should be paying more than 40% of that (after allowance)? Or, do you really mean those on the additional rate? The over £150k group? Because that’s a pretty big difference. I can’t see any justification for anybody paying 50% of their income in tax, sorry. If you are in the Additional rate bracket, you’re quite likely to be able to simply up and shift to a more tax efficient country of residence anyway and a huge number of “those” jobs would just disappear overseas. No, the problem is where we spend our Tax pounds, the chronic waste and corruption, endemic in our system. I mean to say, it’s the proportion of what we already take, that is allocated to the services you wish to see improved or preserved that is the issue, not the taxation rate itself. That’s in reply to Sean, by the by. Simply raising taxes, doesn’t mean any more funding will find it’s way to the NHS for example. Removing the Tories from power, would save several Billion from the public purse, for instance, since they seem intent on giving their mates Billions for sweet FA and a meaningless contract…

[Fultonius]

Stats show that people *rarely* move for tax benefits, even in America where you can just jump state boundaries. If tax goes up 5% for £150k earners, my feeling is companies generally just nudge up pay to match in the long term...

[Oldmanmatt]

Stats show that people *rarely* move for tax benefits, even in America where you can just jump state boundaries. If tax goes up 5% for £150k earners, my feeling is companies generally just nudge up pay to match in the long term...

I don’t know.
However, I live and work with a lot of people who have done just that, from many, many, different countries (and at every income level, too). Possibly this makes me biased.

[teestub]

Most people in that band are already paying 40%, on the same allowance as someone in the bottom 10%, so of course they will view it as “unfair”, especially those who only just cross into the higher band. Are we suggesting that someone earning £50k should be paying more than 40% of that (after allowance)?

I don't know if it's just the way you've written this, but someone earning £50k wouldn't be paying anything at 40% (ish dependent on whether you have a company car or whatever taking from your allowance, up to £50k earnings would be at 20%), and someone earning £55k would only be paying the 40% rate on that last 5k right?

[duncan]

Stats show that people *rarely* move for tax benefits, even in America where you can just jump state boundaries. If tax goes up 5% for £150k earners, my feeling is companies generally just nudge up pay to match in the long term...

I don’t know.
However, I live and work with a lot of people who have done just that, from many, many, different countries (and at every income level, too). Possibly this makes me biased.

I guess most people don't move for climbing, but if you asked the question in Llanberis you might get a different answer to if you asked it in London!

[petejh]

I don't know if it's just the way you've written this, but someone earning £50k wouldn't be paying anything at 40% (ish dependent on whether you have a company car or whatever taking from your allowance, up to £50k earnings would be at 20%), and someone earning £55k would only be paying the 40% rate on that last 5k right?

Yes this. Tax doesn't work like that as I'm sure Matt knows. Someone on £70k is paying 40% on the last £20k (approx., depending on other benefits and allowances).

What happens in reality is people on £100k+, if they're smart and if they're at risk of slipping into the additional rate, can avoid much tax by instruments such as salary sacrifice into their pension instead of taking the wage. This can drop them back down under the additional rate band for income tax.
Also anyone on a wage much over £40k who receives a windfall can top up their pension using the annual allowance of £40k backdated for three years at 100% of the annual wage, and receive 20% tax relief. Those are just two simple and well-known methods for the highly-paid, but not 'super-rich', to not get stung for additional rate or for dealing tax-efficiently with windfalls. They encourage investing and saving for the future.       

[TobyD]

Diversion from tax discussion; I'd wondered if the appointment of Braverman was cunning, as a lightning rod for criticism and distraction from the awful economic situation. It's starting to look like she has been so incompetent that it might have been an error anyway, even if that was true. You can't have a home secretary who's actually a security risk. Got to wonder how much longer she's going to last really. Out before Christmas? Or is the criticism going to die down?

[Dac]

I suspect the appointment of Cruella Braverman was for the most part simply a measure to generate some support from the far right of the Conservative party.

However I would not be surprised if to some degree the decision was taken knowing that it's just a matter of time before she once again messes up and will be forced to resign. At which point a more competent replacement can be appointed and Sunak can say to the far right 'well I said I would make Braverman Home Sec in exchange for your support, it's not my fault she's incompetent, so the deal still stands'.