Home—Blog—How to get rid of Britain's shadow economy
Jul 31, 2012, 01:18
Posted byMerryn Somerset Webb
Comments (86)
Is paying for goods in cash morally wrong? Clearly not. Is paying for goods in cash in order to avoid paying VAT morally wrong? I suppose so.
After all, any tax you avoid paying has to be made up somewhere. So if you don’t pay it, someone else will – or you’ll end up paying it anyway via higher income tax or some such.
But all the fuss about paying in cash (since David Gauke’s comments on it last week) seem to miss the point – that the real villains of the piece are not so much the ones paying in cash, as the ones receiving in cash, and the ones who created the system that encouraged them to do so.
This isn’t just about VAT. It’s about the huge numbers of people who operate almost entirely outside the tax system. The painter you pay in cash? Most likely everyone else pays him in cash too. So not only is no VAT paid, but no income tax is paid. And no National Insurance is paid either. That’s not tax avoidance – it is tax evasion.
The tax gap in the UK (the difference between the amount we should get in tax revenues and the amount we actually do get) is estimated to be somewhere in the region of £35bn. That’s the kind of money that could more or less make our fiscal problems go away.
In Europe things are rather the same: the black economy is estimated to be around €2trn (that’s not far off a fifth of GDP) and the lost tax from it something like €1trn.
I wouldn’t go as far as to say that the €1trn could solve Europe’s problems (probably no amount of money can). But it would surely help out.
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What’s the solution? Lower taxes overall and better enforcement of those lower taxes. For evidence that the latter will help, look here and you will see that most people aren’t really cheats at heart (or don’t admit to being anyway).
And for the former? Here’s my current favourite writer John Littlewood on the subject (and in this case in reference to the Attlee government).
“High taxation breeds an immoral psychology. It rewards connivance and spawns a tax avoidance industry that makes the honest citizen seem naïve. Worst of all, its disincentive effect reduces the appetite to work harder and drives the very ambitious into tax exile.” I’d say that pretty much sums up the problem – just as well now as it did then.
It might also be worth noting, as a letter in The Times last week pointed out, that the more straightforward and low a tax system is, the less avoidance there is. In the Isle of Man (no capital gains tax, inheritance tax or stamp duty; and income tax at 20%) there is no such thing as a tax avoidance scheme.
Published in Blog More articles by Merryn Somerset Webb
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By Matthew Lynn, May 17, 2013
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(31 July 2012, 02:18PM) Complain about this comment
http://www.thedailymash.co.uk/news/society/tradesmens-earnings-only-untaxed-until-they-get-to-the-pub-2012072435498
(31 July 2012, 02:43PM) Complain about this comment
Tax should be simple, fair and cheap to collect. AnswerIndividual1]Flat rate tax on income of 22.5%2]NI Tax at 11.5%1 & 2 on all income above 80% of min wage.3]Consumption tax [VAT] 22.5% at point of sale, paid on everything no exceptions.4]Fixed Assets or property tax at 1%.Company1]Turnover Tax @ 10% of turnover.2]Employee Tax @ 10% of total wage bill [inc wages, bonuses and pension contributions3] Tax on company assets at 1%4] Tax paid max one year in arrears, based on previous years. [no offsetting losses in previous years against this years income]
(31 July 2012, 02:52PM) Complain about this comment
I'm against an employee tax (i.e. employers NI) that companies pay as it just makes employment more expensive - costs jobs / encourages jobs to be moved overseas.Would be simpler to roll income tax and NI together and would actually close a significant (legal) loophole / benefit of directors being paid the vast majority of their 'salary' as dividends (which do not attract NI).The whole system should be massively simplified to both make it fairer, reward working more, close loopholes, reduce evasion, encourage investment and growth and almost certainly increase overall tax revenues as a result.But clamping down on people working for 'cash' is also a massive (and underestimated) problem - you may think you are 'saving the VAT' but in reality many of these traders will not be VAT registered to charge it and you pay more taxes as a result of them not.
(31 July 2012, 02:55PM) Complain about this comment
Again, the same good principle but tell me who will even talk about it in the parliament, let alone implement it ? The Brits seem love complex & hight taxes hoping they are there for their good. Even the previous comment mentioned the NI contribution which is simply the 2nd income tax on earned income, hardly simplicity (mind you, the Isle of Man has it too)...
(31 July 2012, 03:10PM) Complain about this comment
DT did a survey on whether their readers thought paying for work in cash was morally repugnant and around 75% thought it wasn't. I guess 75% would have found it morally repugnant to give a tax free income to someone who hasn't done any work for it, but the liberal media (including moneyweek nowadays) seem to think that is OK.
(31 July 2012, 03:56PM) Complain about this comment
There is no problem with paying in cash (as opposed to any other payment method) other than if it is to specifically obtain a reduced 'no VAT price' and that it makes it much easier for the trader to avoid paying the relevant income and employment taxes most other people and companies have to pay.Another issue is paying a trader in cash means they may then pay for their employees / other goods and services 'in cash' further extending the problem.People should also remember that with people paying no / less tax - you are paying more and it is going to be harder to have a guarantee / record of any work done if you have no receipt!
(31 July 2012, 06:02PM) Complain about this comment
#2Lupolco. What sort of crazy idea is that ?Flat tax at 22.5% would increase the burden by a third (currently IT takes 17% of all income). Nics at 11.5% are a 70% increase on the current 6.7%. You want a 12.5% increase in VAT. A turnover tax at 10% will triple the CT tax take.The only concession being to the rich who pay a much reduced 1% on property transactions and 18% less to employ people.#5drray. What relevance does the DT's opinion have other than to stoke your wierdly graceless morality? A "tax free income for those who have not worked"does not exist. Everyone pays tax and the poor pay relatively more.
(31 July 2012, 09:32PM) Complain about this comment
Barkingmad - As a SME its always galled me to have to pay employers NI, but - and it galls me even more to say so, without it large multinationals would contribute sweet FA to the exchequer.
(31 July 2012, 09:56PM) Complain about this comment
#8 Romford. As a car driver it galls me to pay road and fuel tax when I have to share the road with bikes and posh types on horses who pay nothing.That's just how it is. Employer's Nics are a bit of a drag on business but then why do healthy people pay for an NHS?
(31 July 2012, 11:24PM) Complain about this comment
Welcome back Boris.So: "Employer's Nics are a bit of a drag on business ..."I'd go further and state that excessive tax and regulatory burdens are choking SMEs to death. In other words: the Parasites are killing their host. It could be that the 'shadow economy' is largely some of the host fighting for survival. The Private Sector (not including the Crony Capitalist part, aka Quasi Public Sector) is not featherbedded like a lot of the Public Sector.To get rid of the 'shadow economy', first get rid of the Parasites (rich, poor and intermediate).
(01 August 2012, 12:08AM) Complain about this comment
4371037. Boris MacDonutNat Insurance is already @ 11%+ see link belowhttp://www.hmrc.gov.uk/rates/nic.htmThe flat rate tax @ 22.5% would make for a level playing field for things like Pension [Subsidy] tax relief.VAT @ 22.5% paid at point of Sale [Purchase tax] makes for simplification and cuts down on frauds. see link belowhttp://www.hmrc.gov.uk/vat/forms-rates/rates/index.htmProperty or fixed assetts tax @ 1% is instead of Council Tax.[How can someone who as paid no uk tax on is uk income afford a multi million property? + assets cannot be moved off-shore]A turn-over tax would catch companies that trade in the UK but are registered overseas, hence make their profits within the UK, but contribute nothing to the running of the UK.I could go on, but as 4. chris as good as said our Politicos are both part off and paid by the system.
(01 August 2012, 01:12AM) Complain about this comment
In France government officials actually encourage entrepreneurs to operate in the shadow economy. Difficult to believe? An English builder friend recently emigrated to France. In France you are not allowed to be a builder without papers, qualifications. So they told him to go on a government 2 year evening class course. He did. Towards the end of the course the lectures were about accounts, taxes, cotisations, TVA, taxe professionnel, and the 101 other payments made to the State. He added all the taxes up and realized that the French State would take nearly 95% of everything he earned. He was momentarily overwhelmed, and pointed this out to the lecturer... who said " Non, non, this is how you do your accounts... one payment you receive goes into the accounts, the next into your pocket, and so on". But that is illegal, said my friend!! "Oui, Oui, said the lecturer, but if you don't, you and your family die of starvation!" This is how it is in France.Same in the UK.
(01 August 2012, 09:42AM) Complain about this comment
#7, Boris MacDonut, history would suggest otherwise:http://en.wikipedia.org/wiki/Andrew_Mellon (See "Mellon Plan")If tax rates are set too high history suggests that the tax burden falls inordinately on the least well off:"The top marginal tax rate was cut from 73% to 58% in 1922, 50% in 1923, 46% in 1924, 25% in 1925, and 24% in 1929. Rates in lower brackets were also cut substantially, relieving burdens on the middle-class, working-class, and poor households.By 1926 65% of the income tax revenue came from incomes $300,000 and higher, when five years prior, less than 20% did."
(01 August 2012, 12:07PM) Complain about this comment
@Romford Dave - "without it large multinationals would contribute sweet FA to the exchequer."Well apart from creating the investment and jobs in the first place as well as creating more jobs (or at least losing fewer jobs abroad) - then all those people pay income tax and spend money (in the UK) which is taxed etc.By reducing the cost to employers it would have a mixed effect of creating jobs and increasing profits - yes I agree for some International companies those profits would move abroad but those extra profits on UK companies would be taxed or given out as dividends and taxed anyway.We have our fair share of UK based International companies bringing foreign profits home - so not sure 'overall' it's a huge problem and I'd rather see more jobs / less unemployment etc.
(01 August 2012, 12:14PM) Complain about this comment
@Boris - "Flat tax at 22.5% would increase the burden by a third" - it's not quite that linear / simple when lower taxes would reduce tax evasion and promote growth and that extra income is then spent.(As you know) I'm absolutely confident it's possible to reduce and simplify tax rates but (in the medium-longer term) increase tax revenues as a result.
(01 August 2012, 05:51PM) Complain about this comment
#15 Barking .You are wrong as almost always. Tax at 22.5% is only lower for the well off. It is 13% higher for ordinary Joes.#11 Lupolco. I am well aware that Nics rate is 12% or 10.6% contracted out. But on the average income the amount paid is only 6.7% because of the Nil rate on the first £146 a week. I am talking about the overall tax take which you seem to be trying to inflate so massively our economy would grind to a halt.I am in fact a big fan of the turnover tax,but at a rate of 3 to 5% not at 10%.
(01 August 2012, 06:13PM) Complain about this comment
I was lucky enough to have got tickets for the Olympics ( womens basketball) this morning. A little further along from us there was a full section of empty seats, about 200 and high enough up not to be picked up by the camera. I took of photo of it to show anyone who didn’t believe me. There were lots more pockets of empty seats around the arena. And I had a lucid moment where I think I could see what was happening. They were not sold because there wasn’t the need to sell them. The money wasn’t needed, the headache of selling them was not necessary. The organisers were not made hungry enough to collect. If they didn’t get exactly what they wanted on specific terms, selling them wasn’t necessary. They were happy to waste them.
(01 August 2012, 06:14PM) Complain about this comment
The Olympic ticketing scandal is just a symptom of a wider problem whether it’s the banks, mortgages, the welfare system, the public sector. The great bailer outer, the taxpayer, can always be called on to pick up the tab. The public are totally weighed down by high taxes and should be allowed to demand value for money. There is little point in going after evaders and avoiders if the money collected is going to be wasted.
(01 August 2012, 06:21PM) Complain about this comment
Abolish Corporation Tax altogether and you abolish the need for big business to find ways to avoid paying it as well as instantly making the UK a business friendly country and possibly the business capital of the world. By no longer having a tax burden, companies will have more cash to reduce prices, invest in more jobs or return money to shareholders, all good for the economy. Instead, to compensate all dividends paid by companies should be treated exactly the same as income and taxed accordingly at 20 or 40 percent. Personal Capital Gains Allowances should also be scrapped.
(01 August 2012, 08:40PM) Complain about this comment
There is always too much of political motives for answers. The top paid want a flat tax: ie less tax for them. The Left will look for direct rather than indirect taxes as poorer will benefit.But what you do not do in a recession for a consumer-based economy is exactly what this amateurish government did: raise VAT! Utterly stupid, and in a country with record levels of personal; I noticed Cameron complaining that Labour left high personal debt levels, but only started complaining 18 months into government: He never reaslied this before, utterly incompetent.My next post will include my suggestions.
(01 August 2012, 08:54PM) Complain about this comment
To get taxes paid, raise taxes that are difficult to avoid.Introduce a large land value tax. Land does not create wealth; it takes wealth from others' efforts. Tax it, and cut other taxes.Introduce £100 bn land tax for a period of at least a Parliament. Use it to: (I admit these are off the top of my head, but give an indication of general travel)VAT cut £25 bncut employer NI contributions £25 bncut standard rate tax: £25 bn.Put the other £25 bn into a mix off stamp duty cuts, and investing in house-building.
(01 August 2012, 08:57PM) Complain about this comment
VAT cut first boosts spending in a consumer economy. That should spur supply side investment.And cutting company taxes on employment (rather than just corp tax), it should spur job creation - hugely useful for economy as it causes positive feedback loop of more rising demand, as well as helping the pay down of personal debt, and reducing welfare payments.Cut standard tax as a moral move: tax land (wealth taking); cut income tax (wealth creation). Oh, despite much propaganda to the contrary, workers create wealth. That is Adam Smith. Excuses over bank holidays suggest govt knows it.The last: construction industry desperately needs help in a zombie housing market, and people need homes. This is a no-brainer. Unfortunately, no-brains defines our economists and government.
(01 August 2012, 09:39PM) Complain about this comment
@boris #7Get your aggression in first eh Boris?What planet do you live on if you think everyone pays income tax. Aren't there around 3 million people on benefits in the UK who don't pay income tax - not all on benefits because they can't work. What do you object to about the DT survey - that ordinary people were allowed to express an opinion?
(02 August 2012, 12:26AM) Complain about this comment
This 'lost' income is partly a fallacy. If more people are caught in the tax net, then they would try to pass that cost onto the consumer or go out of business. Higher costs decrease demand... So the shadow economy may prove too much effort to be worth the money. It would be fairer. Maybe we need more of that.I think we need a smaller government. While at the same time transferring wealth to the masses, so they can keep the economy pumping, by consuming the wonderful luxuries modern society provides.It's a contradiction. In the modern world we need consumers to spend but we no longer need labour to provide more and more of today's commodities. The public sector and credit has expanded to full this gap. People trade time for money while not producing anything. And as we currently see, once the consumers stop spending, the factories stop producing. The system becomes dis functional and throttles itself back.
(02 August 2012, 12:15PM) Complain about this comment
#23 drray. You are confused. Everyone,including little kiddies, pays VAT. Virtually everyone pays some excise duties, all adults are liable for gambling duty and fuel duty.Most pay community charges and insurance premium tax,road tax ,TV licenses, fees for passports and driving licenses. Benefits are only tax free income if you don't spend them.
(02 August 2012, 12:30PM) Complain about this comment
@borisI think you are trying to confuse (as usual). The discussion is about income tax. If you are now arguing total taxation is what needs to be made fairer then presumably you would advocate reducing tax on cigarettes, alcohol and KFC for the lower paid and giving them free lottery tickets every week. If you want to aggregate consumption and income taxes you should accept that my weeky shop in Tesco (including the VAT) costs me twice as much as an identical shop for someone on benefits because I have already paid 50% tax on my money.
(02 August 2012, 01:55PM) Complain about this comment
#26 drray.The article is about avoiding VAT in the shadow economy as well as employee+employer Nics as well asIT business rates etc. The way to tackle it is to give HMRC real powers. At the moment to launch an enquiry, HMRc must give 30 days notice of intent. Then another 30 days notice for the miscreant to provide documents,then a two week warning that a penalty may be levied, then a 30 day notice of penalty.Then a 30 day notice of intent to close the enquiry ,then 30 days more to appeal.Then offer a review of the appeal and 60 days to move the case to Tribunal.(Oh and offer Alternative dispute resolution too). Meanwhile any money that might be recovered is spent or moved away. Untie HMRC's hands.
(02 August 2012, 03:29PM) Complain about this comment
@ borisI think you must work for HMRC because no-one else thinks they have insufficient powers. Since merger of Inland Revenue with Customs and Excise, HMRC have the power to literally break into your home and carry out a search without a warrant and can change tax laws retrospectively to make what was a legal activity illegal. They can subject innocent people to an expensive and disruptive tax investigation often costing hundreds or thousands of £ and many hours of work and have on many occasions driven people to suicide or even familicide. On the other hand high ranking officials in HMRC have the power to let multinationals off millions of £ of tax in return for a good lunch or the promise of a job after leaving the service. And you want them to have more powers!!!
(02 August 2012, 05:34PM) Complain about this comment
People are losing sight of a key point here - the only person who can evade tax is the person who is meant to pay it in the first place. If I pay cash for a vatable service, I am entirely secure in believing that VAT is included in the price I pay - if the VAT is not paid, it is the tradesman's evasion and not mine, as it is the tradesman who is responsible for reporting and paying VAT.Equally, if a tradesman does not report my cash payment in his annual income tax/NICs returns, that is his evasion, and not mine, because I am in no way liable for someone else failing to report their income properly.
(02 August 2012, 05:42PM) Complain about this comment
#28 drray. Nonsense. Let's hope you're not a medical doctor as most of your diagnoses are way off beam. HMRC are utterly strangled by red tape. Any serious tax dodger is miles away by the time the taxman's lumbering oafs catch up with them. HMRC wipes £ billions of debt every year because by the time a debt is established there is no cash and no asset left to pay it.....and the accountants and clever lawyers know this full well.
(02 August 2012, 07:02PM) Complain about this comment
More powers for them to target those easier to target, just as all instruments of state opt for to ensure the correct box is ticked, the correct line is drawn, floppy targets easily achieved by the least line of resistance zealots.The CSA, the CPA, the NHS along with every other tax funded acronym espousing their success by making the lives of those already paying, those already registered, those already contributing, that more difficult, that more energy sapping, whilst the original targets laugh just a little bit more.Give the State sponsored bullies more power at your peril. Imagine thousands of uniformed Boris types gleefully reaching for their PCN machines, heady dreams of winning the monthly inhouse top ticket issuer competition, filling their unimaginative minds.
(02 August 2012, 09:40PM) Complain about this comment
#31 So Dave. Is your answer to the dilemma to have less regulation or a larger shadow economy?What are the other tax funded acronyms you object to paying for? Maybe the RAF, MP's or even HM Queen?Sorry to seem ignorant but what is a PCN machine and what the hey is an inhouse top ticket? Have you absorbed so much Americana it simply spills back out randomly?
(02 August 2012, 10:10PM) Complain about this comment
Boris @ #30 "Any serious tax dodger is miles away by the time the taxman's lumbering oafs catch up with them. HMRC wipes £ billions of debt every year because by the time a debt is established there is no cash and no asset left to pay it.....and the accountants and clever lawyers know this full well."Exactly. The serious tax dodgers get off and the little guy who does a bit of painting and decorating for his neighbours or sells some second hand stuff at a car boot or on ebay gets a full tax investigation and made to prove that his childrens toys were bought with taxed income (I'm not kidding -HMRC raided my brother, searched his kids rooms and recorded his kids toys as "evidence")
(02 August 2012, 10:51PM) Complain about this comment
#33 drray. Is your brother a little guy who does a bit of painting and decorating? Or perhaps he sells a few bits of tat at a car boot.What you say is a heavy handed misuse of state power and indeed it ought to be restrained and targetted to better use.
(02 August 2012, 11:21PM) Complain about this comment
@ 34. Boris. Maybe the government should focus on spending what they get wisely rather than claiming ever more of our collective wealth to enable them act like children in a sweet shop!
(02 August 2012, 11:33PM) Complain about this comment
#35 Ellen. You miss the point. Government gets £100 billion less than it needs partly because £42billion is avoided each year by the rich. To make up the shortfall it hits easy targets, instead of making it easier to catch the real rogues.
(03 August 2012, 03:56AM) Complain about this comment
There is no reason why the UK should continue to allow its citizens to become tax exiles.No American can do this. If you wish to avoid paying US taxes you have to surrender your citizenship. This is true wherever you live in the world. Indeed, in the US you cannot even avoid taxes by surrendering your citizenship, if you are surrendering your citizenship for the specific purpose of avoiding of taxes. You may disagree with this draconian policy, but it does show you that a country which is serious about collecting taxes, can collect ALL of the taxes that are due to it. The UK simply is not serious about taxation and enforcement of the tax laws when it allows people to escape paying the taxes they owe simply by living abroad.
(03 August 2012, 08:07AM) Complain about this comment
Boris @34My brother is in one of the targetted professions where some of what he is paid is in cash. Although he has always declared his income, it is HMRC policy to randomly select maybe 1 in 10 of people in such professions and put them through the wringer to act as a deterent to anyone else thinking of avoiding tax. I think the policy is called decimation after the Latin for 10 and was used by the Romans and the Nazis to terrorise the population and make them submissive. Like the police and the NHS when made to perform to targets, the HMRC would rather chase lots of small guys and get one or two easy prosecutions than spend years going after the real criminals with no certainty of a win.
(03 August 2012, 09:39AM) Complain about this comment
@36 Boris. No, You miss the point.The government need to live within its means and learn how to spend wisely. You see they need more money - but they already waste so much bankrolling idlers and crooks. They appear to be among the very worst at managing the money they do get and instead of working to put discipline on their spending, they use their citizenry as their privately owned 'golden goose'. Strict budgets need to be laid out and public sector managers who consistently overspend should be fired. There is no motivation within the public sector to manage their finances efficiently.
(03 August 2012, 12:01PM) Complain about this comment
With the examples being set by our supposed leaders is there any wonder there's a 'shadow economy'?HM Treasury would be more appropriately named HM Thievery; because the Govt treats the money extracted from the people it is supposed to be acting in the best long term interests of as, apart from appeasement token gestures such as the facade NHS, its own.Its own money to further the interests of its members; buying votes, buying Party funding, achieving selfish ambitions. And because it appears to consider 'the people' as a bottomless pit of money it spends the proceeds of HM Thievery with reckless abandon.The Govt needs to get its own house in order and set habitual exemplorary examples; if it isn't too late, if its governance of reckless abandon hasn't already ruined us beyond redemption.Then you will probably get rid of the 'shadow economy'.Mature Democracy is rotten to the core. What an example!
(03 August 2012, 01:24PM) Complain about this comment
This is one reason why Europe is failing: too much government taxation and low quality state services in exchange for the general population. Can any European explain how, over the decades, more and more increasing and diversified taxation improved the standard of living of the citizens? To pay more than 50% of the income in taxes is poverty. In exchange, the government offers "free" services. Are they actually free? How did increasing taxes over decades motivated the private sector to create jobs and how did it contribute to the overall progress of any European country?
(03 August 2012, 06:01PM) Complain about this comment
#40, Critic Al RockWhy are you surprised that the HMRC/Government uses the tax money that they collect in the manner that they do?If an organisation can take money with impunity backed by the legal threat of force, there is no incentive for them to use the money in the interests of those it has been taken from.The outcome will always be the same no matter who is in charge (every 5 years we just get to pick who mugs us next).Which is why one of the commenters previous story regarding his Brother's house being raided by HMRC for selling a few items at a car boot sale comes as no shock (nor do I understand why Boris finds it surprising).
(03 August 2012, 07:33PM) Complain about this comment
@ 42. Andrew HDo I seem surprised? I suppose you're right; reading blogs has certainly been a revelation to me.I suppose I am surprised because I have this weakness to judge others by my own standards. You see, unlike many others', my standards haven't been reduced to those of the lowest common denominator.
(04 August 2012, 10:32AM) Complain about this comment
It seems to me that individuals and businesses generally allocate capital more efficiently than governments, and that profligacy by governments explains why most of the developed world is now locked into low growth for at least a decade.Against this background I think we all have a duty to minimise the income of governments.
(04 August 2012, 11:07AM) Complain about this comment
The simplest solution would be to cut all income taxes,capital taxes,company taxes ,inheritance taxes, property taxes and vat to 10%, with no exceptions. There would be limited benefit in avoiding such taxes.If a shortfall should result hand outs should be cut accordingly.
(04 August 2012, 12:02PM) Complain about this comment
Reduce the incentive to avoid and evade tax by substantial fines to be paid personally by MP's and civil servants that waste tax payers money.
(04 August 2012, 03:15PM) Complain about this comment
#38 drray. You are guilty of job inflation. Referring to your brother as having a profession when he is either a pinter and decorator or a car boot seller.#39 Ellen.You are going all Reaganomic in your old age. Governments exist to do our bidding as citizens. To better our lives. It is nice but not imperative to balance the books. #45 A nice idea but it wouild not work. One of the most famous recent tax dodge scandals by News International involved CGT at just 12%, they still sought to avoid it.
(04 August 2012, 05:01PM) Complain about this comment
@47. Boris, did you really say it is not imperative to balance the books? I hope Doris McDonut keeps hold of the finances in your house! And is it not a little naive to say governments are there to do our bidding? We pay huge amounts to the governments so they can pay themselves and the public sector more than we get and give themselves pensions that are so good they are no longer available to private sector workers. Government and the entire public sector is too big and too expensive and we need to look at ways of curtailing government spending rather than focusing on how to expand the tax take.
(04 August 2012, 05:27PM) Complain about this comment
#48 Ellen. Did you really say that? Do you really think we should be paying our Doctors,Nurses and Firemen much less and then giving them a poverty stricken old age, all because of sour grapes in private industry re their utter failure to provide for the future?Balancing the books is not very important. We have run a national debt since 1692 at levels up to 250% of GDP. Japan has been in massive debt for 30 years. Where is the dramatic collapse in civilisation? Government debt is a rather silly preoccupation of the Daily Mail types who all think they live in a kitchen sink drama terraced house moving coppers between jam jars to find enough for the rent and the 'leccy.
(04 August 2012, 08:25PM) Complain about this comment
Paying cash ma be wrong but when you have paid ni & paye then you are asked to pay vat on top it is adding insult to injury. If the government acted more responsibly there would not be the need to raise as much tax.Stop wasting money on costly prestege projects, also stop subisdising the Indian space project via foreign aid and suporting despots in the same way
(05 August 2012, 07:57AM) Complain about this comment
@49. Boris. Debt can be repaid, defaulted on, reduced through inflation or passed on to the next generation. Whether or not you ascribe devisive Daily Mail stereotypes, repaying debt is the only course that takes personal responsibility. The other three just passes the buck onto someone else. Doctors, nurses, teachers and other public sector workers are employees of the state, not angels sent down from heaven. You argue from an emotionally manipulative platform. Their pay and pension, like the pay of any private sector worker, should be subject to scrutiny. Many people I know have had their defined benefit pensions withdrawn in the private sector and I don’t know anyone in the private sector who still has a defined benefit pension. Several years ago, a friend of mine, who refused to accept the withdrawal of his final salary pension, was simply fired and rehired. This, Boris, is the real world and it’s a world the public sector should be as much a part of as the private sector.
(05 August 2012, 08:54AM) Complain about this comment
Ah Merryn, shooting from the hip again. I really can’t stop myself commenting when you and Boris MacIdiot get together on a blog. You say “After all, any tax you avoid paying has to be made up somewhere. So if you don’t pay it, someone else will – or you’ll end up paying it anyway via higher income tax or some such” – totally ignoring the other side of the equation which is: shrink the bloated state and cut government expenditure. Is it right that in two simple steps a government can turn £1 of earned income into 41p to be spent on silly fripperies like food housing clothing and heating? (E.g. I earn £1 – government takes 31p in tax and NIC; I give the 69p to a tradesman, he pays c28p in VAT, IT and NIC. End result, Joe Public 41p government 59p). Want to stop evasion? Do what Canada did when that country was in dire straits a few years back – every Ministry had to justify why they were spending money, or it was taken away. Result – Canada is not a basket case today.
(05 August 2012, 02:57PM) Complain about this comment
A lot of comment and all very nice, but much of it rather wide of the mark, though very valid in itself. Getting back to the painter and his cash in hand, he probably pays no income tax, NI, VAT or public liability insurance, and may well be claiming job seekers allowance or social security or sickness or even incapacity benefit. Under such conditions he is living the life of Riley at our expense (not the government's) and doing very nicely---until he gets caught.
(05 August 2012, 03:16PM) Complain about this comment
#51 Ellen.You argument is dead in the water. You just want the public sector to suffer because the private one, that was so crowed about for two decades, ultimateley failed. I made my choices to acept lower salary for long term security and I have no sympathy.#52 SteveT. You comment from a selfish view point. You say the Government "takes" but it also gives in the form of schools, hospitals and roads. I'd be interested how much you think the "bloated state" should be reduced by. Should we do without firemen, surgeons or a navy? I've a terrible feeling you're the type who thinks the Olympics is a waste of money. FYI the opening ceremony cost less than one premier league footballer.
(05 August 2012, 04:04PM) Complain about this comment
I buy a sofa, I pay the tax when I buy it, it's mine. I have it and hold it and I am not penalised for owning it. That principle should apply to all assets, including land.We should not be taxed on what we have accumulated, only on transfers.
(05 August 2012, 04:39PM) Complain about this comment
Clearly nobody commenting on this topic has any reason to complain about tax, simply because if they have enough spare capacity (time) to write pieces ranging from partially correct to ill-informed bigotry to shear drivel than they have plenty of opportunity to be more productive. Most large contracts in the public sector are with private companies who consistently fail to deliver - either the product at all - or when they do - rarely to spec, on time or to cost. More robust contract procurement with monitoring of incentives to Whitehall bods would save UK-plc an absolute fortune. One last point. HMRC is chronically under-staffed. Hence if you keep your head down and avoid paperwork you are very likely to get away with it.
(05 August 2012, 10:43PM) Complain about this comment
#56 I agree with Neutron, even though I suspect he likens some of my posts to sheer drivel. He is correct about the private sector ripping off the public sector through poorly administered procurement and is doubly correct that HMRC is severely short- staffed. Funnily enough the MOD which wastes money hand over fist has more staff than HMRC now and will shortly be bigger than the Army itself.
(06 August 2012, 07:11AM) Complain about this comment
#54 Ah, Boris, being emotive once again – let’s have some hard facts shall we? 1. Useless Iraq/Afghanistan wars 2002 – 2015 £20.34bn excluding salaries/injury/healthcare payments;2. Ineffective overseas aid 2011-2015 - £47.5bn; 3. Pensions originally designed for a few years of retirement but now paid for 20-25 years at an annual cost of £138bn – so push the pension age back to 70; 4. Health care annual costs £126bn – so bring it back to basics e.g. no cosmetic work, chasing payment from health tourists etc;5. Crack down on welfare for the undeserved – the cost has doubled from £57.71bn in 2001 to £115bn in 2012. Is this really all down to inflation? I could go on, but these are government waste issues that if addressed would allow for a simple fair tax system such as the flat rate, reportedly working very well where introduced in 24 countries worldwide – most people pay if they think it fair, but evade/avoid if it is too burdensome and government waste is evident
(06 August 2012, 07:13AM) Complain about this comment
#56 Neutron Warp9 – a funny comment from a prolific blogger, you appear to have a lot of time on your hands too! I have worked every day of my productive life from the age of 18 and paid so much tax it makes my eyes water. Can you say the same? Now after 40 productive years I’m happy to take a few minutes off now and then to blog my bigoted drivel.
(06 August 2012, 01:21PM) Complain about this comment
#58 Steve T .You want the moon on a stick. You accuse me of being "emotive" for mentioning firemen etc, then use the pointless Iraq war to support your thinly veiled contempt.Of course welfare payments have doubled in 12 years, so has GDP and Government income. You take on a very difficult position in arguing that real people's lives should be put at risk by draconic cuts to healthcare, pensions and aid. You somehow know that future aid payments will be wasted and you inflate average life expectancy to over 90. Most cannot collect a pension now until aged 67 or 68, adding on 25 years is 93. Life expectancy for a UK man is 78.7. Laughable to suggest tax avoidance is due to indignation over poor administration. It is greed , pure and simple.
(06 August 2012, 01:39PM) Complain about this comment
@55 does the government repair your sofa for free? That's what the government does for landowners. A landowner pays no tax, but the government provides them with streets, lighting, police, the army, and a legalised cartel in the planning system that prevents competition by prohibiting the building of new housing.
(06 August 2012, 03:57PM) Complain about this comment
Boris #60– wrong again, face up to reality. UK cannot affords the cost of the main government budgets on health, pensions, welfare, education and defence so we MUST either increase taxation (= more avoidance/evasion, more companies and HNWI etc leaving UK jurisdiction and ceasing to pay UK tax altogether) or we reduce the outgoings. Despite what you say #49, debt really does matter as once it gets past a certain point the debt servicing costs rise past c 7% and as a result too much of a country’s revenue goes to support the debt and it’s game over. Civilization really does collapse – viz. Greece, Spain etc. UK gets by with low debt servicing costs for now because our debt is long dated (c 13 years) so we have time to sort it out, but we are on probation. Japan gets by because their debt is primarily domestic. Now their aging population is starting to draw down on their JGB holdings, leaving the Japanese government to rely on the money market to fund their enormous debt in future.
(06 August 2012, 03:59PM) Complain about this comment
#60 BorisPS what's a moon on a stick?
(06 August 2012, 04:42PM) Complain about this comment
#62 Steve T. The fact that more tax avoidance may result is not a reason not to raise taxes. It is just yet another excuse used by the greedy, the selfish and the overpaid to justify their griping.#63 Steve T. "Wanting the moon on a stick" is a popular saying pioneered by Vic Reeves. It refers to wanting something that is virtually impossible or too much to ask for. Hence it is properly employed to mock your lack of realism.
(06 August 2012, 05:17PM) Complain about this comment
It strikes me that most posts on this subject are missing the point,this being that there are wealth creators and wealth takers.The wealth creators ie.private industries and individuals are the ONLY wealth creators and the rest are wealth takers.The public sector,government etc. is a wealth taker and although it employs a miriad of people it does not create wealth and no one in the public sector pays any tax as the money is just shuffled from the wealth creators.Lets not forget that taking a wealth creators money is no different than someone taking your wealth and spending it as he likes not you.Then again they have all the big guns.
(06 August 2012, 06:04PM) Complain about this comment
#65 Roly. That is the whole point. Having all the big guns means the "wealth creators" are safe to make money protected by our army. Our publicly funded legal system protects rights to property that would be less easily enforced abroad. The Government provides an infrastructure of roads, street lights, hospitals and schools to ensure the "wealth creators " don't have to educate their own workforce or see to their gallstones.If an NHS sugeon saves the life of Richard Branson is his contribution to the nation zero because he hasn't dug up some coal? Everyone in the public sector pays tax. Not just income tax, but VAT, Excise duty, Community charges, insurance premium tax, road tax. If your theory is correct and the public sector pays no tax,then their salaries are seriously low and need ramping up by about 60%.
(07 August 2012, 06:32AM) Complain about this comment
#65 RolyB - spot on. The wealth takers proliferate, taxes are raised to support the wealth takers, and the whole edifice crumbles into the dust as the real mobile wealth makers head for another country. This leaves the wealth takers with a shrinking tax pot which they try to keep topped up with ever rising taxes for the rest, which results in more and more people (apparently all greedy & selfish) trying desperately to avoid paying to make end meet. Thank the Lord for some sensible posts! #66 Boris – I see the same old selective emotive posts. What I don’t see is you trying to justify your earlier comment that debt doesn’t matter having had the FACTS pointed out to you. This is all quite amusing, but I'm going to have to stop now, I hurt my side laughing too much.
(07 August 2012, 12:09PM) Complain about this comment
'Debt doesn't matter' or 'Theft doesn't matter' or 'It can only get better' ? Neo-Marxism and disregard for the natural order of things seem to be alive and kicking, steming from a delusion of 'social sensitivity / justice' which obviously hits the 'poor' most at the end. I told you it won't happen - blame it on the prevailing attitudes. The 'shadow' is likely to get bigger instead...
(07 August 2012, 01:25PM) Complain about this comment
Flat tax is the fairest and simplist system. Would that we had a Chancellor who would implement it. Once established the Treasury should be 'Scroogish'(not difficult for them)' in allowing any sort of deviation. It needs a specialist commission to study how to implement it, with no politicians involved (pious hope)!It would probably take 5 years to introduce and to dismantle the current ludicrous situation. The Country could then start to live within its means. We could also drag back the annual date when earning starts. While we are at it let us have an annual maximum budget that no government can exceed in peacetime, except war other dire national threats. This would stop the Socialists building up a Public Sector that becomes their voting constituency.
(07 August 2012, 02:23PM) Complain about this comment
#67 Steve T. I thought I'd already justified my comment at post 49. We have run a Government debt of between 40% and 250% of GDp since 1692. At which point in those 320 years did it really matter? Debt is a used by the likes of yourself as a surrogate bogeyman. Another excuse to exercise your contempt for the poor and needy.Frankly the language you employ, "wealth takers" and "wealth makers" sums up your myopic understanding of reality and detracts credibility from most of what you say.
(07 August 2012, 07:11PM) Complain about this comment
Boris, No, You haven't made a good justification as to why ever increasing debt without the means (or even ambition) to repay it a fine and dandy. I don't understand why you have accused Steve of being contemptuous of the poor and needy. He merely illustrated that the public sector could not exist without the production that is generated by the private sector. Regardless of you perception of what the role of the state is, there is no good reason why state employees should be treated like VIPs. The plumber or cleaner who gets paid cash in hand is not nearly as big a problem as the early and over generous retirement plans routinely handed out by the government.
(07 August 2012, 10:22PM) Complain about this comment
#71 Ellen. A problem only in the minds of those Daily Mail readers incapable of thinking for themselves. If we could readily live with debts in excess of 150% of GDP for 100 of the last 300 years why should we be in trouble now at 74%? Who says our debt is "ever increasing"? What we can say is it will never be paid off, only that it will fluctuate and at times those of a cautious disposition will fret. But it is not by any stretch a life and death matter. It is a trivial fact of economic management and as ever present as inflation, divorce, death and taxes. Stop trying to blame others and make an effort to understand how we live today.
(07 August 2012, 11:16PM) Complain about this comment
Boris, If we don't need to bother about debt, then why bother collecting tax from any of us including the 'shadow economy'. We'll all borrow whatever we can from whoever we can find to lend to us! That would solve the understaffing at HMRC referred to by WarpedNeutron at No 56.What's your fascination with the Daily Mail?
(08 August 2012, 06:48AM) Complain about this comment
#70 Boris – you really do need to get your head out of the sand. Your post at #49 simply reiterated your dogmatic view that debt doesn’t matter. Your post at #70 beggars belief, for instance do you think this country would have had to live through all those post WWII years of hardship if it wasn’t for the fact the government had no money and was drowning in debt? My post at #62 shows FACTUALLY that it does matter and I’m waiting for you to FACTUALLY disagree with what I said. As for your assertion that I am being ‘contemptuous of the poor’, as you know from our previous exchanges I come from a very poor background, but thanks to decades of hard graft I’m not poor anymore. So I’m not contemptuous of the poor, but I am very contemptuous of the cheerleaders for the ‘get something for nothing brigade’, hence this post for your consumption.
(08 August 2012, 08:52AM) Complain about this comment
PS Boris - if you think debt doesn't matter, can I suggest you have a look at the issue as it is explained on the website debtbombshell. It explains the issues in very simple language. Interesting statistic - to pay our annual £43 billion interest bill, every household will stump up an annual £1,800+ in tax. Do you still think debt doesn't matter?Am I still exibiting a myopic understanding of reality, or are you looking in a mirror?
(08 August 2012, 05:57PM) Complain about this comment
Steve T, debt doesn't matter to Boris whilever his indexed linked salary and prospective index linked pension look set to continue.IMO, the most probable divide to cause a Civil War in the UK is that which is growing by the day between the Public and Private Sectors.
(09 August 2012, 02:39PM) Complain about this comment
@ #74 Steve and #76 Critic Al RickYes, otherwise known as 'a sense of entitlement'. Greece has been defaulting on some of its public sector pension payments for months. There is no reason why that can't happen here. But ignorance is bliss I suppose.
(11 August 2012, 08:45AM) Complain about this comment
@JTFYI the UK has been defaulting on its public sector pensions too. The linkage to inflation was adjusted down reducing the value of the pension by approximately 1% pa and the pension age and contributions were increased. Furthermore, while final salary schemes may be seen as a great advantage it is not the case if final salaries are static or in decline in real or even nominal terms as they have been in much of the public sector for many years. Finally UK pensions are paid in £ - a currency that has been devalued by 25% in the last 5 years. In summary, the default on UK public sector pensions is not so different to that in Greece or Argentina. The counterarguement that private sector pensions have been plundered even more by the government and fund managers doesn't change the facts.
(11 August 2012, 02:37PM) Complain about this comment
@ 78. dr rayFact: the UK is bankrupt; the only way it is appearing not to be is via fraudulent means. The UK is a sham; it has been living way beyond its means for decades; sold-off most, if not all, of its 'family silver'; steeped itself in debt it cannot possibly repay; saddled itself with a Public Sector it cannot possibly afford.Anything the Govt has been allowed to do (e.g. marginally reducing Public Sector pensions) to alleviate the problem has merely been tinkering around the edges compared to what does need doing. Indeed, its meddling has increased inflation which is serving only to exacerbate the plight of the UK's economy by choking the Private (ex Cartel, etc) Sector (the major source of funding of the Public Sector).The Private (ex Cartel, etc) Sector, in reality, can't afford its own private pension contributions, let alone those of the Public Sector, let alone effectively subsidise the Cartels, etc.There's going to have to be a very rude awakening.
(12 August 2012, 01:51PM) Complain about this comment
@78 dr ray. It is very difficult to empathize with or give support to a public sector who continue to receive assured defined benefits, whether or not they have been reduced, when every contract given to their counterparts in the private sector have been torn up (some years ago) precisely because they were unaffordable. Why then should the taxes collected from the private sector be spent on these exact types of pensions that they no longer get themselves?
(13 August 2012, 09:37AM) Complain about this comment
To be fair, the civil service isn’t particularly highly paid. The working grade is Executive Officer, and that grade can work up to being paid around the average national wage as a maximum (more in London of course). The pay inflation has been around 4-5% over the past 25 years so not particularly excessive there either. WRT the pension, it is still a good defined benefit one but nothing like as good as it was – by 2015 reforms will see it move to being based on average of whole service pay; contribution rates have for some grades almost doubled; retirement age is moving up to 68. Before the reform the pension was based on the best salary out of the last 3 years service; there was a notional contribution set by the government actuary; retirement was 60. So the reform will I think cut the pension for new and newish employees by around 50% - that’s not tinkering around the edges.
(13 August 2012, 11:50AM) Complain about this comment
Steve; it is tinkering around the edges compared with the retraction in size of the Public Sector required to conform with realistic affordability. Absence of suitable miracle excepted.While I was struggling to keep my (truly competitive, lower end of rigged playing-field) businesses viable, those pompous asses supposedly entrusted to be running UKplc neglected to do so whilst selfishly busy 'feathering their nests'. UKplc, like many western countries, has for decades been tantamount to a 'rudderless ship'. Now we are headed for the rocks; the very rude awakening. I envisage that about half of the Public Sector may be salvaged from the wreckage.Regardless of however the 'deckchairs are re-arranged', such a catastrophe and its aftermath are unavoidable. But they may be just what is required if a bit of sanity is to be restored to the human race. Not 'if' but 'when'.
(13 August 2012, 02:26PM) Complain about this comment
Rick re #82 - I'm not disagreeing with you when you say shrink the State, as you can see from my previous posts. However it is important to differentiate between the sleazebags that supposedly govern our country, and the civil service that enacts their wishes. Shrink? Yes, definitely. Less State and fewer civil servants? Absolutely. Poorly paid civil servants? Take care. I have dealt with hundreds of civil servants in Middle East, Pakistan, India, and Africa and that invariably means a lot of feet dragging whilst waiting for the mandatory bribe. I always refuse to pay and suffer enormous frustration and additional expense as a consequence. Believe it or not, doing business that involves the State in this country is a pleasure by comparison and nobody should wish it otherwise.
(13 August 2012, 03:32PM) Complain about this comment
Steve, nice to hear about integrity.Poorly paid civil servants? I would have thought it best to retain as much of the front-line staff as prudentially possible, so as to minimise disruption of sensible services; besides, it's most cost effective to make redundant' or fire and re-hire at realistic salaries, etc. the positions of those towards the top-end of the hierarchies.I'm a firm believer that when the going gets tough the tough get going; I'm also of the impression there is a plethora of 'responsible' positions within the Public (and Cartel, etc) Sector which when the tough got going would show themselves to be superfluous. As a not so long ago retired business operator of integrity I can vouch for ever increasing State interference, especially since Labour last took office; greatly resented interference. There must be another plethora of superfluous employment harrassing a mostly respectable, but downtrodden by adverse rigging, Private (ex Cartel, etc) Sector.
(14 August 2012, 02:04PM) Complain about this comment
Jack @55Real wealth (or a sofa) is created by people exerting their labour. Land already exists regardless. What fundamental principle or natural law are you applying that suggests wealth and land should be treated as the same thing? Or is this just convention and habit? You seem happy not to be penalised for owning wealth. How about not being penalised for buying (or exchanging your labour for) it? Taxing pure land or location value is not being penalised. It is compensating society which is penalised by one's exclusive right to the use of a location. Would there not be sense in scrapping all taxes that dis-incentivise real wealth creation, (i.e. on work, mobility, exchange), and returning the excess wealth society creates through cooperation, above what the individual could create alone, back to society in the form of government spending and a citizens income? This excess isn't difficult to measure as it conveniently manifests itself in the form of land rental value.
(14 August 2012, 03:57PM) Complain about this comment
@dr ray #78 Some Greek public sector pensioners have been paid NOTHING for the last 18 months. A 1% p.a. inflation adjustment? I'd suggest those on the UK public pension payroll should be counting their blessings!
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