Liz Truss and the Conservative Party.

[DynamicSpirit]

Probably did, sorry. However, I saw the comment suggesting tax cuts for those on £100,000+ and that rang alarm bells to me, as why would people earning that kind of money need any cuts at all?

It's not about whether they (at a personal level) need tax cuts at all. Clearly, someone earning that much probably doesn't need more money. It's about whether giving those tax cuts actually benefits the economy by stimulating more growth. (And there's also a subsidiary argument about: Seeing as tax amounts to forcibly depriving someone of money they have already earned, what level of tax is it ethically right to charge people).

There are arguments on both sides there, and I think the answer is that, sometimes it does benefit the economy to a level that more than offsets the loss in revenue. As an example (and I appreciate this is speculative): I see there are already reports that, as a result of the higher rate tax cuts and the lifting of the financial services bonus cap, some financial companies are talking about maintaining more staff in the UK

 

[takno]

It's not about whether they (at a personal level) need tax cuts at all. Clearly, someone earning that much probably doesn't need more money. It's about whether giving those tax cuts actually benefits the economy by stimulating more growth. (And there's also a subsidiary argument about: Seeing as tax amounts to forcibly depriving someone of money they have already earned, what level of tax is it ethically right to charge people).

There are arguments on both sides there, and I think the answer is that, sometimes it does benefit the economy to a level that more than offsets the loss in revenue. As an example (and I appreciate this is speculative): I see there are already reports that, as a result of the higher rate tax cuts and the lifting of the financial services bonus cap, some financial companies are talking about maintaining more staff in the UK

FWIW in the unlikely event that ScotGov makes the same reductions in taxes, I have absolutely no plans to spend or invest my tax windfall in the UK economy, so wherever it trickles it won't be down that particular tree.

 

[Yew]

It's not about whether they (at a personal level) need tax cuts at all. Clearly, someone earning that much probably doesn't need more money. It's about whether giving those tax cuts actually benefits the economy by stimulating more growth.

How much of these savings will be spent on British products, and how much will be squirrelled away in savings, bonds and investments or spent on imported goods and foreign holidays?

In general high earners have a much lower propensity to consume than lower earners. I'd imagine there would be more economic stimulus from a similar value of tax cuts aimed at lower earners, than we will see as a result of this.

I'm increasingly treating the Lizards talk of "growing the economy" as I saw Camerons "efficiency savings" - a politically acceptable dressing for unpalatable idealogical decisions to shrink the state.

== Doublepost prevention - post automatically merged: 25 Sep 2022 ==

FWIW in the unlikely event that ScotGov makes the same reductions in taxes, I have absolutely no plans to spend or invest my tax windfall in the UK economy, so wherever it trickles it won't be down that particular tree.

I'd recommend the Maldives, with global warming they're going to need to tax revenue to pay the Chinese to build their islands up for them.

 

[DynamicSpirit]

How much of these savings will be spent on British products, and how much will be squirrelled away in savings, bonds and investments or spent on imported goods and foreign holidays?

In general high earners have a much lower propensity to consume than lower earners. I'd imagine there would be more economic stimulus from a similar value of tax cuts aimed at lower earners, than we will see as a result of this.

I think you're making the mistake of only seeing it in terms of how individual high earners spend their money. The argument isn't primarily about personal spending, it's more about, if higher tax rates are lower, then entrepreneurs and businesses are more likely to want to grow businesses and employ more people in the UK (mainly because they don't lose so much of the profits they will make by doing so). That's where the real potential gain comes from.

This thing about 'trickle-down' that people on the left keep bringing up is a complete strawman: It's not what anyone on the right is arguing, and it's not at all the main reasoning behind cutting higher tax rates.

 

[yorksrob]

I think you're making the mistake of only seeing it in terms of how individual high earners spend their money. The argument isn't primarily about personal spending, it's more about, if higher tax rates are lower, then entrepreneurs and businesses are more likely to want to grow businesses and employ more people in the UK (mainly because they don't lose so much of the profits they will make by doing so). That's where the real potential gain comes from.

This thing about 'trickle-down' that people on the left keep bringing up is a complete strawman: It's not what anyone on the right is arguing, and it's not at all the main reasoning behind cutting higher tax rates.

And has any analysis been made of how much of this borrowed money, being distributed through higher rate tax cuts, is going to be spent on starting up new business ?

It seems a very inefficient and wasteful way to create some economic gain. The Government would be better off directly spending the money on infrastructure, setting up some sort of investment bank for new businesses, or even directly distributing it to existing small businesses.

 

[Typhoon]

I don't know whether it has been mentioned, but there is an interesting take on it from Paul Johnson (Institute for Fiscal Studies)

“Today, the Chancellor announced the biggest package of tax cuts in 50 years without even a semblance of an effort to make the public finance numbers add up. Instead, the plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth. This marks such a dramatic change in the direction of economic policy-making that some of the longer-serving cabinet ministers might be worried about getting whiplash.

Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts. He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. And he has avoided scrutiny by presenting a Budget in all but name without accompanying forecasts from the Office for Budget Responsibility.

Injecting demand into this high-inflation economy leaves the government pulling in the exact opposite direction to the Bank of England, who are likely to raise rates in response. Early signs are that the markets – who will have to lend the money required to plug the gap in the government’s fiscal plans – aren’t impressed. This is worrying. Government borrowing is set on an upward path. It will reach its third-highest peak since the war, and remain at well over £100 billion, even once the energy support package is withdrawn.

And we heard nothing on public spending. It seems almost inconceivable that plans made last year, when inflation was expected to peak around 3%, will not need topping up at some point, unless the government is willing to allow a (further) deterioration in the range and quality of public services. Presumably this government would borrow for that also.

Mr Kwarteng is not just gambling on a new strategy, he is betting the house.”

A fair summary I would have thought.

https://ifs.org.uk/articles/mini-budget-response

 

[yorksrob]

This budget is quite simply a turd that can't be polished.

 

[DynamicSpirit]

It seems a very inefficient and wasteful way to create some economic gain. The Government would be better off directly spending the money on infrastructure, setting up some sort of investment bank for new businesses, or even directly distributing it to existing small businesses.

Yes I'm inclined to agree on the tax rates (although I do think moves to reduce regulation are potentially welcome, depending a bit on how it's done). I think the budget is fiscally reckless, and reducing tax to encourage more businesses to the UK makes almost no sense when our main problem is not lack of jobs, but prices being driven up because of lack of energy / homes / productivity. On the other hand, as a wider principle, I do understand the rationale for tax cutting in order to drive investment, and I think some of the stuff people are posting (the 'they don't care' / 'they're just trying to help their friends' stuff) is just plain wrong.

 

[SynthD]

I do understand the rationale for tax cutting in order to drive investment

I understand the theory, but it’s been widely and repeatedly disproven.

'they're just trying to help their friends' stuff

Odey employs Kwarteng.
Odey bankrolls Brexit.
Brexit destabilises UK.
Kwarteng becomes Chancellor.
Odey bets against GBP.
Kwarteng destabilises GBP.
Odey reaps enormous rewards.

Do you see how it works yet? And this is just one example, of many.

Odey's hedge fund soars 145% on bets against UK bonds

Crispin Odey, one of Britain's best-known hedge fund managers, has made a killing this year by wagering against British government bonds, with his firm's main fund up 145% in 2022 after shorting long-dated UK debt, sources said on Thursday.

www.reuters.com

 

[Yew]

I think you're making the mistake of only seeing it in terms of how individual high earners spend their money. The argument isn't primarily about personal spending, it's more about, if higher tax rates are lower, then entrepreneurs and businesses are more likely to want to grow businesses and employ more people in the UK (mainly because they don't lose so much of the profits they will make by doing so). That's where the real potential gain comes from.

Businesses do not pay income tax.

 

[Perthsaint]

Businesses do not pay income tax.

Unincorporated ones do.

 

[Busaholic]

In other news it sounds like Liz Truss' Chief of Staff (who was questioned by the FBI as a witness in an alleged bribery case) is essentially a lobbyist masquerading as Chief of Staff, according to The Sunday Times:

https://twitter.com/Gabriel_Pogrund/status/1573720354555678720

That fades into insignificance compared to the alleged bribery case, though. which has been featured for two or three weeks now in The Times and Sunday Times, though, perhaps understandably, not in prominent parts of the paper given other events. The alleged bribery case has seen five people facing charges, in addition to two who have pled guilty. It centres on the then Governor of Puerto Rico accepting a sum of money for her re-election campaign in return for her government dropping criminal charges relating to an international bank HQd in that country. The owner and founder of that bank is Julio Velutini, a Venezuelan/Italian resident in London and a significant Tory party donor. One of the two pleading guilty is the President of that bank. Fullbrook did a lot of lobbying for Velutini and his bank.

Two very salient questions:-
1) How did Fullbrook get Security Clearance for his new role?
2) Was Elizabeth Trump aware of the FBI investigation relating to Fullbrook, and, if not, why not? She has refused to answer this question.

Fullbrook did not accompany the PM to the USA - perhaps he shares Prince Andrew's reluctance to be confronted by any of their officials at the airport on arrival.

 

[Yew]

Unincorporated ones do.

If an unincorporated business was looking to make significant investment in the UK, pretty much the first thing it would do it become a limited company. You are technically correct, but that fact it irrelevant to the main point of my argument.

 

[Busaholic]

Businesses do not pay income tax.

I must write to HMRC to reclaim the five figure sum I paid to them over thirty years then on my business!!

 

[Yew]

I must write to HMRC to reclaim the five figure sum I paid to them over thirty years then on my business!!

Exactly, you paid on your business, not "that the business paid". The taxable trading profits of an unincorporated business are paid directly by the owner, and not the business itself. If you had been looking to expand, it is highly likely that you would seek to become a Limited Company, and income tax would be a matter for your employees.

 

[Perthsaint]

If an unincorporated business was looking to make significant investment in the UK, pretty much the first thing it would do it become a limited company. You are technically correct, but that fact it irrelevant to the main point of my argument.

Your first sentence is rather presumptuous. A lot of overseas investment into the UK is via unincorporated businesses. Whether that is a good thing or not is not for me to say.

Your claim that "businesses do not pay Income Tax" is simply wrong.

 

[Yew]

Your first sentence is rather presumptuous. A lot of overseas investment into the UK is via unincorporated businesses. Whether that is a good thing or not is not for me to say.

Your claim that "businesses do not pay Income Tax" is simply wrong.

Incorporation or Non Incorporation

The taxable trading profits of a business run by an individual as a sole trader are taxed directly on the owner, irrespective of whether the owner draws the money from the business for personal use. The same applies to the profit share of a general partner in a partnership (including a member of a Limited Liability Partnership).

 

[Perthsaint]

Thanks for proving my point.

 

[Yew]

Thanks for proving my point.

I have not, the owner of the business pays income tax, not the business itself.

 

[Busaholic]

Exactly, you paid on your business, not "that the business paid". The taxable trading profits of an unincorporated business are paid directly by the owner, and not the business itself.

I was joint owner of the business with my wife, and each year we had to fill in three tax forms, one for each of us individually and a joint one in our names relating to the business. My accountant then used to aggregate the sums and (assuming they were agreed by the Revenue, which they usually were) then that was paid. I remember that three separate cheques were issued, though all debited to the business account, so that three different I.R. reference numbers could be written on their backs and sent with three pay-in slips. I admit it's been a few years since I had to do this, but that was how it was, so I would argue the business did pay, literally, in addition to ourselves.

 

[Perthsaint]

I have not, the owner of the business pays income tax, not the business itself.

There are unincorporated organisations in the UK which employ tens of thousands and turnover tens of billions making profits of hundreds of millions which are charged to Income Tax. Are you seriously arguing they aren't businesses?

 

[Yew]

There are unincorporated organisations in the UK which employ tens of thousands and turnover tens of billions making profits of hundreds of millions which are charged to Income Tax. Are you seriously arguing they aren't businesses?

I'm asking you to provide some names of them and how many people they employ.

 

[Perthsaint]

I'm asking you to provide some names of them and how many people they employ.

The issue is whether they are businesses and pay Income Tax. The answers are yes and yes.

Your claim that businesses don't pay Income Tax is nonsense.

 

[Yew]

I was joint owner of the business with my wife, and each year we had to fill in three tax forms, one for each of us individually and a joint one in our names relating to the business. My accountant then used to aggregate the sums and (assuming they were agreed by the Revenue, which they usually were) then that was paid. I remember that three separate cheques were issued, though all debited to the business account, so that three different I.R. reference numbers could be written on their backs and sent with three pay-in slips. I admit it's been a few years since I had to do this, but that was how it was, so I would argue the business did pay, literally, in addition to ourselves.

The law is clear that a sole trader (or the partners in a joint enterprise) are the ones legally liable for servicing the tax on the business's profits. The minutia of which bank account the money comes out of in a specific case does not change this.

== Doublepost prevention - post automatically merged: 25 Sep 2022 ==

The issue is whether they are businesses and pay Income Tax. The answers are yes and yes.

Your claim that businesses don't pay Income Tax is nonsense.

Could you please answer the question and back up your assertion that "There are unincorporated organisations in the UK which employ tens of thousands and turnover tens of billions making profits of hundreds of millions which are charged to Income Tax."

 

[Busaholic]

The law is clear that a sole trader (or the partners in a joint enterprise) are the ones legally liable for servicing the tax on the business's profits. The minutia of which bank account the money comes out of in a specific case does not change this.

It's irrelevant, as you say, which bank account(s) it comes out of but the fact remains that a proportion of that tax was owed by the business. All businesses are run by people, so it is they who pay the tax owed by the business. I don't intend to get any further involved in the semantics of this.

 

[XAM2175]

Presumably the rich must be really struggling, how on earth can they be elected to survive on only 100K?

In what I'm sure is an incredible co-incidence, it just so happens that as a result of the MP's pay-rise back in April this financial year is the first one in which members of cabinet will be paid enough to go over the £150,000 top-rate threshold even without other earnings.

 

[najaB]

On the other hand, as a wider principle, I do understand the rationale for tax cutting in order to drive investment, and I think some of the stuff people are posting (the 'they don't care' / 'they're just trying to help their friends' stuff) is just plain wrong.

This ignores the fact that very few corporations or wealthy individuals pay anything close to the actual rate of tax in the first place. So cutting the nominal rate from, say, 25% to 19% makes almost no difference when the company is paying an effective rate of 0.4%. (Yes, Amazon, I'm looking at you).

 

[Perthsaint]

This ignores the fact that very few corporations or wealthy individuals pay anything close to the actual rate of tax in the first place.

Please cease this nonsense.

 

[Nicholas Lewis]

This ignores the fact that very few corporations or wealthy individuals pay anything close to the actual rate of tax in the first place. So cutting the nominal rate from, say, 25% to 19% makes almost no difference when the company is paying an effective rate of 0.4%. (Yes, Amazon, I'm looking at you).

Indeed there needs to be more changes to the tax code to stop the likes of Amazon taking over £20B for services/goods rendered last year and paying no tax although in part they are just exploiting all the loopholes that just exist in the system which govts of all hues like as it means they can employ lots of low paid workers and make unemployment look good.

 

[najaB]

Please cease this nonsense.

What nonsense? It is a documented fact that large corporations and wealthy individuals indulge in tax avoidance. Using the example of Amazon above, they paid an effective tax rate of 0.37% on their UK sales in 2020.

Uncovered: How much tax Amazon pays in the UK

Jeff Bezos is the world's richest man and operates one of its largest companies, but both are constantly under attacked for their tax dealings.

www.walesonline.co.uk

And have you ever heard of the Panama Papers?