Taxation Policy

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Taxation in the UK involves payments to (a minimum of) 3 different levels of govt W'pedia:

  1. Central govt (HM Revenue and Customs)
  2. Devolved govts
  3. Local govt revenues

Central Govt (HM Revenue and Customs) Revenues

Come primarily from:

  1. Income tax (~30%)
  2. National Insurance contributions (~20%)
  3. Value Added tax (~??%)
  4. Corporation tax (~??%)
  5. Fuel duty (~??%)

1. Income Tax

  • Dec.04.2018: Freelancers pushed to brink by taxman. HMRC has pursued IT contractors and NHS workers for tax avoidance but failed to investigate those who set up the schemes, according to a House of Lords economic affairs committee report. Peers say HMRC is undermining the rule of law and driving people towards bankruptcy by unfairly targeting freelance workers with aggressive new powers. Under laws introduced by George Osborne when he was chancellor in 2014, the taxman can demand swift payments of unpaid tax from those it suspects of tax avoidance, but which give the worker no right to appeal to a tax tribunal. These powers — Accelerated Payment Notices — are disproportionate, serve to limit people’s access to justice, and are “undermining the rule of law” the committee says. The peers demand that the law should be changed to include the right to appeal against an APN. David Byers, The Times.

2. National Insurance Contributions

x

3. VaT

4. Corporate Taxation

"Bandaids Won't Fix Black Holes" by The Undercurrent. Interesting and funny video. Sadly, Australian, so can't use it. But he has some interesting things to say.

  • Dec.18.2018: France goes it alone with new tax for tech giants. France will introduce a tax on large technology companies in the new year, amid difficulties in finalising a European-wide levy. France has been pushing for a “Gafa tax” — named after Google, Apple, Facebook and Amazon — to ensure that the companies pay a fair share on their business operations in Europe. Policymakers around the world have had difficulty with technology companies, which often route their revenues and profits via low-tax jurisdictions to reduce their liabilities. The low rates paid by the American companies in Europe have caused anger among voters in countries but the bloc is divided on how to tackle the issue. France has also been working with Germany to introduce a joint measure in 2021. This option would give the Organisation for Economic Co-operation and Development time to work on a proposal for a global scheme to regulate the taxation of technology firms. Britain, Spain, Italy, Singapore and India are all believed to be working on national versions of a digital tax. John Walsh, The Times.
  • Dec.12.2018: Big business pays 12% of all UK tax. The biggest companies in Britain paid a combined £84 bn in tax last year, an increase of more than £1 bn on the previous year, according to PwC. Large businesses are facing heightened scrutiny over their tax payments and strategies after a public backlash over concerns that some multinationals, such as Google, Amazon and Starbucks, have been avoiding paying tax in full on their British sales. HM Revenue & Customs has come under pressure from the Treasury to collect more revenue from business. Retailers and financial services companies, such as banks and insurers, contributed 60% of the £84 bn in tax payments, up from 46% a decade ago. Employment taxes, such as income tax and employee national insurance, accounted for the largest share of total taxes collected from the companies, about a 33% of tax payments. This was followed by fuel duty, which includes taxes paid on petrol and on fuel for heating buildings, which contributed 28% of total taxes. Tabby Kinder, The Times.
  • Nov.11.2018: Without a fair tax on tech, it could be the end of the state as we know it. Big tech companies are transforming societies – but their pitiful contributions aren’t enough to help govts adapt. In 2016, Apple paid $2bn of tax on $41bn of profits generated elsewhere, an effective rate of 4.8%. Facebook, Google, Apple, Microsoft and Cisco generated UK profits in 2017-18 of more than £6.6bn, but paid a combined tax bill of £191m – as opposed to the £1bn TaxWatch says they ought to have contributed. AirBnB paid a mere £600,000 in corporation tax, and questions have been asked (but not yet answered) about whether Uber should be charging VAT on its booking fees and paying it to HMRC. Meanwhile, the branch of Amazon that runs its UK fulfilment centres paid £1.7m in taxes, despite declared profits of £72m. The companies insist they abide by tax laws and pay the amounts due from them. John Harris, The Guardian.
  • During 2016, the govt enacted legislation reducing the UK corporate tax rate to 17% from Apr.01.2020 onwards (Finance Act 2016).
  • Good timeline in this article on corporate tax inversion (Oct.2014).

Tariffs: Import / Export Taxes

Other Taxes

Inheritance Tax
  • May.08.2018: A £10,000 handout is a short-sighted solution to millennial misery. Inheritance matters. What happens to the money swilling around from previous good times takes on a new significance. And the next generation’s fortunes will be even more starkly divided by access to the bank of mum and dad. That divide should be offensive to politicians on both left and right. For the left it’s a straightforward question of social injustice. But for the right, it represents an embarrassing ideological failure. Whatever happened to self-reliance and entrepreneurship – to the core Tory belief that anyone can get on if they work hard enough? There is a clearly a big political argument to be had about how to use the windfall resulting from any reform of inheritance tax: whether it should be dished out to individuals, or whether it’s best used to fund national programmes from which generations of millennials could potentially benefit. George Osborne’s spectacularly popular bung to older voters, pushing up the inheritance tax threshold to £1m, simply no longer looks sustainable. And if it’s not unwound by a Conservative govt, then sooner or later it’s likely to be unwound by a Labour one, swept into Downing Street on a tide of frustrated millennial votes. A society this heavily reliant on inheritance is living off past glories rather than looking to its future. Sooner or later, it will have to pay the price for such short-sightedness. Gaby Hinsliff, The Guardian.
  • Mar.17.2015: Tories’ £1m inheritance tax break aimed at wealthier households. George Osborne has drawn up plans that would allow parents to pass a main property worth up to £1m to their children without paying any inheritance tax, according to Treasury papers leaked ahead of Wednesday’s budget. The proposed measure would also reduce the inheritance tax bill on properties worth up to £2m by £140,000 and the Treasury analysis concludes that the scheme would “most likely benefit high income and wealthier households”. The scheme was advanced by the chancellor ahead of the autumn statement, but blocked by the Lib Dems. It is now thought likely to be revived by the Tories within the next fortnight as one of its central election crowd pleasers. A govt source said: “This looks like a policy to buy more Tory votes to help the wealthy and would be highly regressive in its impact on society.” The chancellor is expected to try to defuse Labour’s chief line of political attack in the budget by saying saying his plans no longer involve cutting public spending as a proportion of GDP to its lowest level since the 1930s. The inheritance tax plan, drawn up under the direct guidance of the Treasury financial secretary David Gauke, and with the agreement of the chancellor, involves the creation of a new tax-free band worth £175,000 per person on a family home. It can be transferred between married couples, making it worth a maximum of £350,000. Patrick Wintour, The Guardian.
Investment Tax
Stamp Duty
Pensions
  • Mar.10.2018: Beware the stealth tax on your savings. If your savings exceed a £1m pot, the lifetime allowance, you face a 55% tax charge if you withdraw it as a lump sum. (...) Mark Carney, governor of the Bank of England, says: "The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system". At present it is hard to envisage how the Wild West of the crypto sector could be corralled into subjugation by the Financial Conduct Authority, but it could try harder to make the companies it regulates be more open. Anne Ashworth, The Times.
  • Mar.10.2018: The taxman is earning millions more from pensions. The amount of tax the govt is collecting from pension savers who breach the lifetime limit has risen 2,100% in the past decade. Figures obtained by the adviser Old Mutual Wealth,[1] reveal that the govt collected £110m in the 2016-17 tax year from those who had breached the £1mn limit. There is also an annual limit on pension savings, which is £40,000 for most people. The lifetime allowance has proved controversial ever since its introduction by Gordon Brown. Annabelle Williams, The Times.

Stealth Taxes

Probate Fees
  • Nov.11.2018: Government’s probate plan branded a ‘stealth tax’ and ‘misuse of power’. The govt has been accused of misusing its powers after it ignored objections to its proposals to raise probate fees. In a move that has been branded a stealth tax, the fee will be banded according to an estate’s value from next April. The govt insists the rise is necessary to cover the costs of the court service. List of Probate cost bands. Holly Black, The Times.
  • Nov.11.2018: Ministers ignore charities and experts with huge hike in probate fees. Ministers ignored the protests of more than 800 charities, trade bodies and businesses before increasing probate fees by 3,771%. The Institute of Legacy Management, said: “The new fees would significantly reduce income for charities reliant on legacy gifts, to the tune of £10m a year, at a time when many charities are struggling to meet increasing demand for their services.” The Ministry of Justice said the fee rises were fair and progressive and were needed to pay for the rising costs of running the courts system. Hilly Black, The Times.
  • Nov.07.2018: Probate fees. This Commons Library briefing paper considers the Govt's proposals to reform probate fees by using a statutory power to charge fees set above cost recovery levels. House of Commons Library.

Tax Credits

How To Claim Tax Credits


Devolved Govt Revenues

x

Local Govt Revenues

Come primarily from:

  1. Grants from central govt funds
  2. Business rates in England and Wales

Council Tax

  • Nov.10.018: Holiday-let tax clampdown. A dodge in which homeowners claim that their property is available for holiday lets, so that they can avoid council tax is to be scrutinised by ministers. Properties that are rented out as furnished holiday homes can register as businesses and pay business rates rather than council tax. There are about 47,000 holiday lets registered in this way. The range of tax reliefs available, including small-business relief and rural-rate relief, mean that many of these holiday-let businesses pay very little or no tax. Carol Lewis, The Times.
  • Apr.01.2018: Tax cuts on empty homes costing cash-strapped councils millions. The owners of nearly 100,000 empty or second homes in England are paying reduced or no council tax on their properties despite the cash crisis facing local authorities, it has emerged. Almost 80,000 empty houses have been enjoying council tax deductions, with nearly 50% of the properties having no council tax applied to them at all. Owners of more than 19,000 second homes were also given money off their council tax bills. Some of the councils awarding the highest discounts are now moving to end the giveaway. Since 2013, councils have had the right to levy full council tax on second homes and empty housing, and to charge a premium on empty housing after two years. Some councils have abolished the discounts as a result. Chaminda Jayanetti, The Guardian.
  • English households face biggest council tax rises in 14 years. Average 5.1% increase on band D properties comes despite local authorities cutting services. Almost all councils that provide social care have opted to levy an average £30 charge to help meet the spiralling cost of adult care services. Lord Porter, the Conservative chair of the Local Government Association, said: “The extra income this year will help offset some of the financial pressures they face but the reality is that many councils are now beyond the point where council tax income can be expected to plug the growing funding gaps they face. This means councils will have to continue to cut back services or stop some altogether to plug funding gaps. The need for adequate funding for local government is urgent". Patrick Butler, The Guardian.
  • Mar.20.2018: Scrap 'highly regressive' council tax, says thinktank. Resolution Foundation says levy now resembles much maligned poll tax and should be replaced with more progressive system. Council tax is an outdated and regressive levy on households that should be scrapped in favour of a progressive levy on property, according to a report by the Resolution Foundation. There are eight council tax bands that determine annual charges. All the bands are based on 1991 property prices following the failure of successive govts to sanction revaluations. The Foundation said ministers should consider replicating the 2017 reforms implemented in Scotland across England and Wales, which involved increasing Council tax rates in the top four bands and generated a little over £1bn. An alternative reform would be a "mansion tax" surcharge of 1% on the value of properties worth more than £2m and 2% on the value of properties above £3m, which would also generate just over £1bn. Earlier this year, Andrew Gwynne suggested Labour could scrap Council tax and replace it with a “radical” new system for funding local govt. Sajid Javid, Communities secretary, has so far shown little appetite for reforming council tax. Critics of the current system say most reforms are blocked by households in expensive properties that live in areas of the country dominated by Conservative MPs. Phillip Inman, The Guardian.
  • Mar.01.2018: Council tax rises to boost bills by £81 in England. Households in England will pay on average an extra £81 in council tax from Apr.2018, in the steepest increases for 14 years, as cash-strapped local authorities struggle to fill gaping holes in their budgets caused by years of austerity. The financial pressures have led many councils to set what critics have called “pay more get less” budgets for 2017-18, in which children’s centres, libraries, leisure centres, parks, museums, road repairs and gritting services are cut, while extra funds are raised through council tax and parking charges. The Guardian, Patrick Butler
  1. fees and charges, eg. on-street parking.

Tax Evasion

"The Undercurrent Guide to Legal Tax Evasion". Excellently explained.

  • Mar.06.2018: Treasury bares its fangs at last with plans to hit Big Tech with big tax. Mel Stride, Financial secretary to the Treasury, said The Treasury has been looking into a "turnover tax" on technology giants. Philip Hammond is expected to unveil a formal review next week at the spring statement, with the goal of introducing the levy in the autumn budget this year. The idea is simple. Big technology groups game global tax rules to move profits from one country to more "favourable" jurisdictions. Much harder to fiddle, though, are the sales. Follow the logic, and you come up with a revenue tax. Philip Aldrick, The Times.


Articles